VFQ Session Book - Why Change v2.2

Value, Flow, Quality®
WHY CHANGE?
VALUE, FLOW, QUALITY
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Created For Gabriela (gabriela.toma@endava.com) on December 9th 2016

WHY CHANGE? VALUE, FLOW, QUALITY
Contents
Introduction  1
1 How do we perform today? 4

1.1. The challenge 4
1.2. Lacking in innovation 4
1.3. Slow and expensive 6
1.4. Multiple failures 7
1.5. Coming full circle 9
2 Doing it better 14
2.1. The rise of the knowledge worker 15
2.2. Learning from software 17
2.3. We think we’re rational, but we’re not 20
3 Why creative knowledge work rarely suits System 1 thinking  23

3.1. The ‘rules of thumb’ we use 24
3.2. Where our rules of thumb originated 27
3.3. Complicated or complex? 28
4 The negative consequences of key rules of thumb  31

4.1. Breaking the triangle 32
4.2. The three new guiding principles 33
5 Using VFQ to change 34

5.1. Reasons for change 36
5.2. Consider the marketplace 36
6 Conclusion 40
Bibliography  44

INTRODUCTION
All organisations – you might say all organisms – need to change in order to survive.
The world around us changes, our competition changes, and we must change too.
The rise of technology in the last few decades has generated enormous disruption
and significantly increased the rate of change. Just as the invention of the printing
press spelt the end of the once-flourishing industry in manuscript creation and
illumination, so the internet has thrust enormous change on businesses as diverse
as travel agents, music retailers and publishers. Those who are unable to adapt their
business models will face stronger challenges in the next few years.
There have been many famous examples over the last few years – but consider
book retailing in particular. When Amazon began offering books online in 1995, it
was a tiny operation. Even though it grew swiftly, it famously did not turn a profit
until 2001. Many thought that such a business model was unsustainable. Traditional
book retailers recognised Amazon as a threat, but dealt with the problem in
different ways. Barnes and Noble tried suing over Amazon’s claim to be the ‘world’s
largest bookstore’. In 2001, Borders handed over the online portion of their business
for Amazon to host and run; Waterstones followed suit – two retailers effectively
handing control of a growing sales channel to their main competitor.
Figure 1. A traditional book retailer
The move seems bizarre – but of course, to the two companies, it didn’t seem that
they were doing anything peculiar at the time. Online retailing was seen as being
a ‘non-core competency’. The companies were in the business of selling books, it
was easy to convince themselves that Amazon was merely a logistics and fulfilment
house, not a credible rival. They never undertook the changes that would have
made software a core competency and they fatally underestimated what impact
on customer habits this new distribution channel might have. Customer behaviour,
it turned out, could change quite easily. In 2010, 32% of frequent book buyers
purchased books by browsing in physical stores; by 2012 this had reduced to 20%.
Emergn Education 1
VALUE, FLOW, QUALITY WHY CHANGE?
At the same time, those who bought books by browsing online hardly moved
from 6.2% to 6.6%. It was clear that customers were happy to make purchases
without browsing the physical book. Alternatives in online retailing could take their
place: peer-to-peer reviews; bestseller lists; promotions; ‘other customers bought’
recommendations and reading extracts. In 2007 Amazon launched the Kindle
e-reader and once again revolutionised
the retailing of books. In 2014 Neilson
reported that 70,000 books were
purchased globally in a digital format -
twice the number purchased in 2011!
By the time e-readers and the growing
opportunity for selling books themselves
in a digital form took off, Borders and Figure 2. Amazon’s Kindle e-readers
Waterstones had back-pedalled furiously,
taking back control of online selling, albeit without notable success. Borders
partnered with Kobo, while Waterstones eventually agreed to sell Amazon’s Kindle,
and Barnes and Noble created the Nook.
You may already know part of the end to this story. Borders filed for bankruptcy in
2011. Barnes and Noble is struggling with declining market share and disappointing
sales of its e-reader. Waterstones has also struggled; closing stores and repeatedly
issuing profit warnings. Whether physical booksellers can survive outside of highly
specialised niches remains to be seen.
Booksellers often point to the problems with online retailing of books – the lack of
a social aspect to browsing, the difficulty of getting trustworthy recommendations,
or finding something amongst the endless possibilities. But while the problems are
there, the answers are likely to come from new software companies, not a return to
traditional retail. Netgalley permits pre-publication sampling for reviewers while still
keeping control of digital content; Goodreads (purchased by Amazon) and Rabble
provide more effective peer-to-peer recommendations, and sites like Bookish offer
better-informed curation of books, helping select books more intelligently than
through crude ‘also bought’ data.
You can trace the same story for numerous other industries – for much of retail,
photography, gaming, entertainment, marketing, recruitment, financial services,
telecoms… As Marc Andreessen, the co-founder of Netscape, entitled his influential
article for the Wall Street Journal: ‘Software Is Eating The World’.
Rapidly changing markets, fuelled by disruptive technology, are forcing businesses to
change direction quickly whether they want to or not. This doesn’t just effect what
they build or how they market it, but in the people and technology processes that
support the business.
Now compare that truth to the way most transformation initiatives are run.
Working to multi-year plans in excess of two years means that many ideas risk
being redundant before they are even launched… At a time when the ability to
respond to change is more highly prized than ever, many projects are characterised
by inflexibility, long lead times and a cost that magnifies the risk of failure.
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“If you are not moving at the speed of the marketplace you’re
already dead – you just haven’t stopped breathing yet.”
Jack Welch
The last decade has seen attempts to deliver projects faster, in a more flexible way
that can cope with change. This education programme will discuss exactly how this
has been done and how your business could do the same. But before we consider
the ways in which we can improve, we need to look at why changing the way we
develop products and services is imperative. Perhaps even more importantly, we
need to ask ourselves why we find change so hard.
By the end of this session you will:
1. Recognise the scale of issues in how we deliver products and services.
2. Understand the challenges of using projects as a mechanism for delivering
change and meeting customer expectations.
3. Identify flaws in focusing on an iron triangle of cost, time and scope.
4. Have a brief overview of the history and philosophy behind ‘Agile’ development.
5. Understand how people’s intuitive ways of thinking create rules of thumb.
6. Appreciate the negative impact of rules of thumb in the way we deliver today.
7. Realise how new initiatives can be developed through faster feedback.
8. Discover and use three new guiding principles to break the iron triangle.
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1 HOW DO WE PERFORM TODAY?

If you talk to any business leader – no matter how diverse their business – you will
find that they all have very similar fears and the ambition to work better, faster,
cheaper. They are all too aware that in order to beat the competition they must first
win the hearts and minds of the customer, and more quickly than anybody else. The
problem is that we think we are doing all the right things to achieve our goals, when
in reality; we might be stuck in a redundant mind-set.
1.1. The challenge

The choices for our customer are increasing and changing on a regular basis and
not always in a like-for-like way. In that deciding moment when someone plans to
make a purchase, who’s really to know what they will choose or the reason why?
Our challenge is getting the right products and services out there to win over the
customer. If we want to remain competitive in an evolving marketplace, then
that process depends upon adopting new strategies that help us to collaborate
and engage with customers quicker than we have done in the past. Countless
departments and minds power a business; how well they work together will
determine their success.
1.2. Lacking in innovation

All the great management thinkers – from Jack Welch whom we quoted in the
introduction to Peter Drucker, ‘the founder of modern management’ – stress that
innovation is the engine that keeps business running. Without it, we die. Yet for
some reason, many of our projects and initiatives are run in a way that removes
the necessary conditions that allow us to constantly collaborate and innovate.
Innovation does not just happen. Nor does it only happen hived off in an isolated
‘creative lab’.
Technology departments are often cited as the key area for innovation within
a business and we are quick to believe that our dependency on it is unique to
the 21st century. Yet, if you investigate, you’ll see that technology has powered
our industries for many past centuries. For instance, back in 1455 Gutenberg
invented the print press and created the first ever hard copy of the Bible – Ancient
Egypt provided us with early evidence of chemical manufacturing to form paint
pigments. Fast-forward 5000 years to today and we arrive at the age of satellites
and smartphones. The difference now is that technology is so pervasive that some
form of it underpins almost everything we do – publishing a magazine, designing
a building, curating a fashion show, developing a marketing campaign, producing
4 Emergn Education
a video game. Since technology and creative work are becoming increasingly
intertwined, we go into a range of examples of this throughout the course of VFQ
learning.
Eric Lundquist interviewed a mix of IT and non-IT professionals and discovered a
divide between how IT people thought of their department, and how they were
viewed by everyone else. When asked if business users were happy with the quality,
timeliness and cost of IT projects, two-thirds of the IT professionals said yes, but
only half of non-IT professionals agreed. But, is the issue here about the divide
between business and IT or, is it more symptomatic of how complex projects
perform?
We can’t blame all of our mistakes on technology. It is an easy scapegoat but
we must admit that failure is often down to people and how we interact – poor
management, miscommunication, lack of direction, weak marketing strategies,
design flaws. The list goes on. Projects failed not because of technological changes,
but because of challenges in the way we work.
In fact we could best sum it up as ‘all issues are people issues’ and a lot of these are
exposed in the way we run projects. Even calling them projects suggests they have
a finite timespan, when in fact, once most products and services are launched, they
still benefit from continuous improvement. For instance, in 2011 the department
store chain JCPenney appointed a new CEO to combat years of poor financial
results. They chose none other than Ron Johnson, the executive responsible for the
huge success of the Apple retail stores – a company famous for their ‘no discount’
strategy.
Johnson set out to fix JCPenney in the same
way, removing the discount coupons and
clearance sales that had kept loyal customers
coming back, and replaced them with static
‘every day’ price tags. Customers were
outraged by the disruption to their strategy
of bargain hunting and planning purchases
around sale times. The result was immediate
– a net loss of $1 billion and a devastating
28% drop in revenue for 2012. It will come
as no surprise that poor decisions cost the
CEO his job. We empathise with Johnson
under the realisation that he was acting on
past experience, but unfortunately his first
great success did not follow with another.
Innovation was simply applied in the wrong
way. Figure 3. JCPenney department store
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1.3. Slow and expensive

At some point we will all feel the tremors of a project obliterated beyond repair
so we need to prepare ourselves and understand the impact this can have on our
businesses. Some blunt measures below provide an illuminating snapshot of our
current performance. The Standish Group’s CHAOS Report judged projects as:
• successful – those which complete their agreed scope on time and on budget
• failed – those which were either cancelled, abandoned or failed to meet any real
objectives
• challenged – projects that suffered either a major overspend, lateness or failed
to deliver agreed functionality.
60%
50%
40%
SUCCESSFUL
30% CHALLENGED
FAILED
20%
10%
0%
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Figure 4. The Standish Group’s CHAOS Report results from 1994 to 2012
As you can see from the graph, the CHAOS Report paints a fairly miserable picture.
Through over a decade of learning, we appear to be making gradual improvements,
but the fact remains that around one-fifth of our projects are still failing. It’s true
that we could argue with some of these measures. After all, if you find out that
a project isn’t going to do what you hoped it would, then cancelling it should
probably count as a ‘success’ not a failure – depending on how quickly you make
the call. If you decide half way through to add more features, for example, then
you would expect the project to take longer and cost more. The very definition of
success – on time, on budget and on scope – is one we’ll go on to challenge later.
Of course these are only statistics, but who hasn’t seen failures of this scale first
hand and felt the pain that comes with them? We continue to miss the opportunity
to increase value. Why would we settle for any less than the results we are capable
of?
The CHAOS Report isn’t the only study to paint this picture. A 2012 Mercer report
damningly judged that 72% of projects cost more than they returned in value.
The 2013 PMI report confirmed that success rates have been falling since 2008
with less than two-thirds of projects meeting their goals and about 17% failing
outright. Furthermore, Gartner claimed that 50% of IT projects are rolled back out
of production.
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Just to give you an idea of the financial impact of these problems: Forrester
Research put the annual cost of project failure to US business at $30 billion.
The global cost is mind-boggling. IT is supposed to account for 50% of capital
expenditure – that’s $2 trillion a year. Given the value of capital expenditure and
the possibilities of what businesses could do with the money, it’s pretty devastating
that, according to Mercer, only 28% of that delivers value. Can you think of many
businesses that are happy with only 28% of their work delivering any value at all?
Its not just IT projects that incur these costs, the age old saying ‘time is money’,
used by Benjamin Franklin to pull up a labour worker during his fifth tea break of
the day, is a mantra for business of any sort. The Channel Tunnel was built below
sea level to create an express train link between the UK and France. It took 20%
longer to build than estimated, sending costs soaring 80% above budget. The
English and French ‘tunnelled’ from opposite ends of the channel, which made clear
communication rather difficult. This, plus changes to the original design to follow
regulations (who knew air conditioning would be a necessity under water?), plagued
the project. Wembley Stadium in London was finished a staggering five years after
the planned completion date. The steel arch, destined to be the iconic trademark
of the home of English football, was also ironically its downfall. Cramming a highly
innovative piece of engineering into a regular build timescale caused complications,
so time pushed on and higher costs ran with it.
So regardless of the industry, technology-based or otherwise, it’s evident that
outcomes typically remain hard to predict and projects are increasingly difficult to
manage. The effect of errors, however, remains the same – delivery time is slowed
down whilst costs appear to increase twice as quickly.
1.4. Multiple failures

Rather than being made visible so that we can learn from them, most of these
project failures are hidden – carefully swept under the carpet to avoid retribution
from managers inside and shareholders outside the company. Indeed, if most of us
examined our career history, we would have to admit that there are more failed
projects scattered along the way than we would like. Occasionally, however, they
can be made very public – either because the money lost mounted to the point
where companies were forced to inform investors, or because there was a direct
impact on customer service that attracted significant attention.
Among these misfortunates are some of the biggest names in business – names
with significant financial backing and a competent workforce, yet whose
innovations failed dramatically. Infamous examples include Gap’s re-brand, which
cost an estimated $100 million, only to revert back to the original logo six days later
following a storm of negative reactions; the development of the Boeing 787 aircraft
fleet that came in three years late with a $12 billion overspend or the Taurus
system for the London Stock Exchange, which took 10 years, cost £500 million and
delivered no value.
Emergn Education 7
In 2014 Spider-Man: Turn Off The Dark entered the spotlight as Broadway’s biggest
overspend. The show directed by Julie Taymor (famous for her box office smash hit
The Lion King) and music by rock legend Bono sent expectations soaring. Broadway
explored new realms of technicality in the ‘comic book, rock opera circus’, causing
the rehearsal and preview periods to go on for much longer than planned. During
this time, Taymor reported ‘a tremendous amount of creative commotion behind
the scenes’ involving frequent changes to the script, score and cast. The complexity
of the stunts caused several broken bones and concussed superheroes from failed
safety harnesses and tumbling equipment – ending with a fine of $12,600 for safety
violations.
When previews began in November 2010, the show became the brunt of media
jokes. Actress and comedian Joan Rivers began her stand-up act with a ‘moment of
silence’ for ‘those Americans risking their lives daily – in ‘Spider-Man’ the musical’.
Host Conan O’Brien suggested they use ‘Silly String’ for web-slinging stunts to cut
costs. The Simpsons even paid homage with an episode featuring ‘Radioactive Man’
and his many disasters in a musical performance. Furthermore, critics sunk their
claws into the plot, where new characters were chaotically grafted into the original
storyline. The creators responded to the backlash with a second version of the show.
The New York Times described the re-release as a leap from ‘jaw-dropping badness’
to ‘mere mediocrity’.
Mounting pressures and the time overrun pushed Taymor and two of the leading
cast members to resign in March 2011, calling for last minute replacements. Despite
the turbulence and criticism, the show finally opened to the public with strong
sales in June 2011. By January 2014, sales had declined and the cast were refused
any further injury insurance, so the show closed its doors. In the end, the cost of
producing such an overly ambitious spectacle totalled $75 million, with a $60
million loss to investors.
From Broadway to blue chip, another disaster
was Coca-Cola’s launch of ‘new Coke’. In
1985 the US nation’s favourite fizzy drink was
replaced by a ‘new’ version, only to receive
40,000 angry letters and infinite phone calls
in protest. Underestimating their customers’
sentimental attachment to the soda, Coca-Cola
were forced to bring back Coca-Cola ‘classic’
within three months of the launch date. Does
Ford’s 1958 ‘Edsel’ car spark a memory? It was
one of the most hyped marketing efforts of its
time and had the public eagerly anticipating
for the grand unveiling. The result was
underwhelming to say the least. Every feature
was slated – from the name to its poor quality
workmanship. Ford sold only 64,000 units and Figure 5. New Coke – it lasted 79
made a loss of $250 million in 1958, comparable days before returning to
to a massive $2.25 billion today. the original formula, now
Coca-Cola Classic
(© Derek Bruff)
8 Emergn Education
In isolation, Ford produced an impressive advertising campaign and a semi-decent

car – but when combined, the result was less than compelling for the customer
and the launch was a flop. The real test was with actual paying customers and
unfortunately it failed.
Whether its during the planning, analysis or development stages of a project,
organisations suffer immediate costs in fixing problems, intangible costs in terms of
lost consumer confidence and negative publicity, and finally, future costs to try to
improve the product and create more robust back-up plans.
We have to come to terms with the irrefutable fact that things change over time,
and projects don’t tend to cater for change very well, no matter how well we
plan them out in advance. Part of the problem is that while we focus on scope (a
requirement for a business objective), how much it costs and how long it takes,
quality remains little understood and effectively becomes squeezed by the other
three. A lack of quality is often the key reason behind the problems that later
bedevil our products and processes. If features are insufficiently tested, there is not
enough attention to detail and the customer is not fully considered, then we must
expect future problems. Unfortunately, few companies give all of these aspects the
consideration they need. It is also, predictably, easily sacrificed when organisations
outsource work and rely on contracts to enforce quality standards.
1.5. Coming full circle

We all want to prevent this fate. Getting our best ideas into the hands of our
customers is the priority – we just need to work out the best approach for our own
businesses, first by finding the real root cause of our problems.
We are determined not to be seen as slow, expensive and unreliable, so we spend
lots of time trying to think of solutions. To try and control being slow, we estimate
how long things will take us in great detail and create schedules with deadlines
and motivate everyone with a series of measures. We do the same to control cost,
while we try and control risk by creating detailed plans and signing off on scope
in advance, locking down ideas to ensure we are not destabilised by last minute
changes.
Does any of that reaction sound familiar? It is the way we have learned to tackle
these problems. After years of seeing this scenario play out over and over again, it is
clear that our perseverance and planning alone is not enough.
The problem is that most of it doesn’t work. The evidence suggests that in spite of
managing to be ‘on time’; some departments are still regarded as slow. In spite of
hitting a budget, we are still perceived as expensive. This suggests our real measures
should be something rather different. We’ll go on to discuss these later, but before
we do, we need to acknowledge the fact that we are using measures that no longer
work – and in turn these are driving negative behaviours.
Emergn Education 9
Activity 1 – Do you need to change?
We suggest doing this activity first on your own. Ask a couple of colleagues
from your team to do it as well. Then get together to compare and discuss your
answers. It can take several days to complete this activity, depending on how
much time you devote to digging out information. We genuinely believe that
an understanding of where your organisation is now, and how well you deliver
projects, will help you greatly in the rest of the course.
1. Speed
Is the process of delivering new ideas to market slower than it should be?
Think of a few examples, from small change requests to large projects. How do
you measure this? Are you working to an ‘on time’ metric or do you measure
lead or cycle time?
Don’t hide behind a ‘service level agreement’! Do you know how fast the
sponsor or customer of a particular change wanted it and why? Try and find
someone and ask exactly when they really needed the change delivered, when
they actually got it and what the consequence was of any difference in the two
dates. If you can, try and actually quantify this difference. Ask what costs or
sales might have been different if the project had arrived early. Such questions
can be a helpful way to flesh out the value of speed or the cost of delay.
10 Emergn Education
2. Cost
Is delivering projects or products more expensive than it should be?
This can be tricky to answer because most of us would like things to be cheaper!
Some other questions can help clarify this.
How much value does your department deliver? Again, you want to try and
quantify this. Find a recent product and sit down with someone who regularly
uses or oversees it. Work together to try and come up with a figure for what
the product saves the company, or by how much it boosts or protects revenue.
If this is still difficult, think of how much it would cost to deliver the same value
by some other means: a manual workaround, a third party… Sometimes it is
especially worth investigating a couple of projects – one trumpeted as a success,
one acknowledged a failure. Try to look up the original business plan and
assumptions before comparing them with reality. What sales and costs were
projected? What actually happened?
How much of your budget is devoted to ‘keeping the lights on’ – the part that
might be seen as part of the cost of doing business?
The truth is that few organisations are good at establishing whether or how
much value they deliver from their departments or through their projects.
Naturally, this makes it much easier to focus on the figure of which we are all
certain – how much it costs. Quantifying the benefits of a product in order to
justify expenditure is an essential part of our business.
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3. Risk
How often do things go wrong? Or what is the risk of them doing so?
Is there a technical element to your business? If so, what kinds of technical
glitches could disrupt your organisation? How severe would the disruption
be? What workarounds exist or could be implemented to limit the damage?
Consider the example of Sainsbury’s supermarkets. When their logistics system
developed faults at 4 warehouses, stores suffered major out-of-stocks and
manual ordering and shelf-stocking were implemented in the short-term. Costs
consisted of the extra staffing, lost sales and the cost of fixing the underlying
problem.
Think also about the stability of your services. What level of debt are you
carrying because of poor quality components being delivered? How stable are
your processes that serve customers, how well are they understood by a number
of staff and how quickly do people uncover problems to get to a root cause?
When you have made an initial list of the key risks, find out how many have
been previously identified and are being tracked and/or managed. To do this,
you will probably need to talk to several people outside your immediate team.
Ask if there is an associated probability of the risk occurring, on what this is
based and how frequently it is reviewed.
12 Emergn Education
4. Discussion
Now you should be in a position to answer more honestly the question with
which we began this section: what is the state of business today – but in your
organisation. Do you think that business leaders see you as slow, expensive,
lacking in innovation and risky?
Commentary:
No-one can consider change or improvement unless they have a clear idea of
where they are now. It may be that your company delivers value far faster than
anyone expected and without significant risk. We’d still recommend reading
on, because you want to make sure you keep on doing that. But for some
of us, a look at the department’s true record can reveal why that gap exists
between how we think of ourselves, and the way others sometimes call us ‘slow,
expensive and unresponsive’.
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2 DOING IT BETTER
“The dominant paradigm for managing product development is
wrong. Not just a little wrong, but wrong to its very core.”
Don Reinertsen, The Principles of Product Development Flow
When the leading thinker on the subject tells us that the way we do things isn’t just
wrong, but ‘wrong to its very core’, we have to sit up and take notice.
There are plenty of books and thinkers with good ideas. And by ideas, we don’t
mean vague theory, but specific practical actions whose success has been proved
within their industry.
Eric Ries, a pioneer in the ‘Lean Startup’ method, has reinvented the formula we
relied on for centuries to boost our profitability. This scientific approach attempts
to minimise uncertainty and advocates ‘working smarter rather than working
harder’. The only way to succeed in a world of uncertainty is to learn faster than
your competition, he writes. Ries, amongst others helps companies to move from ‘if
you cannot fail, you cannot learn’ to learn fast, learn often. Dropbox is one of many
companies following these principles, and went from 100,000 registered users to
over 4,000,000 in 15 months using Lean Startup method.
Ries is not the only one branding failure as a positive. Tim Harford’s bestseller,
Adapt – Why Success Always Starts With Failure, even advocates this in the title. It is
almost impossible to imagine yourself openly embracing failure, particularly when
success depends on our precious time and restricted funds. But it’s true that most
great ideas and companies have risen from previous failures.
Figure 6. Giving up before you even start
14 Emergn Education
In his best-selling book The Checklist Manifesto, surgeon, writer and public health
researcher Atul Gawande reveals that the issues in modern medicine and the bugs
plaguing virtually every profession today are largely one and the same. Surgery and
medicine are complex subjects and it is often unclear what a surgeon is going to
find when they operate on a patient. But today the same can be said for most of us
in our nine to five jobs – who really knows what’s around the corner? Along with
retaining libraries of knowledge, the real challenge in medicine is getting teams to
work together effectively without wasting precious resources.
Gawande’s faith in checklists does not stem from the satisfaction of ticking a box
or following a manual. In fact, the list acts as a catalyst for communication – it
encourages collaborative working and alignment, and urges users of the checklist to
engage with the subject matter. The list frees capacity so we can think ahead and
ultimately minimise failure. There are basic points on the list such as ‘make sure an
antibiotic is given’ or ‘make sure blood is available for a risky case’. There are also
many personal points rather than medical. One is getting members of the operating
team to introduce themselves before surgery. Gawande explains that if a person
has said their name, then they are more likely to speak up during the surgery when
they have a problem or any doubts. The checklist method has been implemented in
20% of US hospitals. Complications have dropped by 36% and number of deaths by
50%.
You’ll find that all of the industry specialists advocating new ways of working
have had their fair share of successes and failures, discovering what works by
experimenting in their own context. Following their methods step by step, may
help, but the real value will come in the way you adapt and apply these practices
within your own context.
2.1. The rise of the knowledge worker

In 1959, Peter Drucker stated that: ‘The most valuable asset of a 21st century
institution, whether business or non-business, will be its knowledge workers and
their productivity.’
Say you work as a magazine publisher and come across a change method that
appears to focus on a software development environment – it’s likely that you will
stop reading into it. It is logical to want to focus on teachings around your area of
work and expertise, but the problem is that this may reduce your chances of finding
the process that will work best for your organisation. We need to realise that we all
have the same traits and so a method we apply to one field can be reframed to suit
another.
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The theory of Human Interaction Management states that there are five principles
characterising effective knowledge work:
• Build effective teams
• Communicate in a structured way
• Share and maintain knowledge
• Align your time with strategic goals
• Negotiate next steps as you work
Anything from product development, to writing a play, to developing a closing
speech as a barrister involves these actions and so they all constitute knowledge
work. In fact, so does anything that warrants a project team.
As knowledge workers we bring benefits to organisations in many important ways;
we create and modify strategies and assess input to evaluate complex or conflicting
priorities. We have the ability to think both convergently and divergently. We
understand cause and effect – the key to solving problems. These are all rich assets,
but the overarching value we derive from knowledge work is in the relationships
that are formed and the ideas that are inspired through communication and
collaboration.
Projects are created as a way to develop ideas into parts that are useful to our
business. They are the standard method for turning ‘concept in to cash’, which
means that they are knowledge-working environments. However, they may not be
the best vehicles for transforming great ideas into value as the complexity of these
environments increases with every new product and person that comes into it.
Organisational theorist, Ikujiro Nonaka put it nicely, describing companies as
‘growing organisms’ rather than ‘controlled machines’. He predicts that the issues
we face are due to the fact that most have been viewing knowledge as a ‘static
input to the corporate machine’. This links well with Steve Johnson’s idea in Where
Good Ideas Come From that we need two or more ‘half ideas’ to collide in order
to be genuinely innovative. The cross-pollination of ideas from one discipline to
another is becoming more and more common as people realise that knowledge
work occurs in many walks of life. So in order to realise true value, we need to
accept a creative way of thinking and learn from other fields.
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2.2. Learning from software

Software is an area that has given rise to lots of innovation over the last few years.
This isn’t entirely unexpected given the sheer amount of investment in technology
and software across all industries. Many of these ideas have been collected up into
methodologies – some might even go as far to say, philosophies – and given names
like Scrum, Agile, Lean, XP, Systems Thinking and Kanban. You might have heard of
some of these and you may even have tried them out or attended training courses
on them. Perhaps you’ve seen some good results, but also probably some failures
and disappointments.
The Agile Manifesto was first signed in 2001 by a group of 17 developers to define
an improved way of developing software using more lightweight methods that
are still followed today. The manifesto was written with software in mind, but it
undoubtedly illustrates strong principles for every industry to follow. The opening
statement was:
THE AGILE MANIFESTO

We are uncovering better ways of developing software by doing it and
helping others do it.
Through this work we have come to value:
Individuals and interactions over processes and tools 
Working software over comprehensive documentation 
Customer collaboration over contract negotiation 
Responding to change over following a plan
That is, while there is value in the items on the right, we value the
items on the left more.
It is a philosophy with a great deal of appeal – improvement through practical

experience. It’s followed by 12 principles that go on to enshrine delivering value
early and often, using feedback to respond to change, focusing on quality, and
understanding that people with good communication skills and the ability to
collaborate are required as much as excellence of engineering and structure.
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PRINCIPLES BEHIND THE AGILE MANIFESTO
We follow these principles:

• Our highest priority is to satisfy the customer through early and
continuous delivery of valuable software.
• Welcome changing requirements, even late in development. Agile
processes harness change for the customer’s competitive advantage.
• Deliver working software frequently, from a couple of weeks to a couple
of months, with a preference to the shorter timescale.
• Business people and developers must work together daily throughout
the project.
• Build projects around motivated individuals.
• Give them the environment and support they need, and trust them to
get the job done.
• The most efficient and effective method of conveying information to
and within a development team is face-to-face conversation.
• Working software is the primary measure of progress.
• Agile processes promote sustainable development.
• The sponsors, developers, and users should be able to maintain a
constant pace indefinitely.
• Continuous attention to technical excellence and good design enhances
agility.
• Simplicity – the art of maximizing the amount of work not done – is
essential.
• The best architectures, requirements, and designs emerge from self-
organizing teams.
• At regular intervals, the team reflects on how to become more effective,
then tunes and adjusts its behavior accordingly.
The Agile Manifesto itself never set out to prescribe how any of this should
be achieved, offering no actual practices that pin down how to demonstrate
a preference for collaboration over negotiation, for instance. You can see how
the philosophy might lead to preferring a ‘user story’ that can be discussed to a
specification that should be adhered to, but the Manifesto left such practicalities to
interpretation.
Others were prepared to define them further. Scrum, for example, had its genesis
in an idea that a single cross-functional team should develop a product over several
overlapping processes. This was developed by Jeff Sutherland and Ken Schwaber
into a defined framework for iterative and incremental development. Today, Scrum
is one of the most popular of the so-called Agile development methods. Schwaber
18 Emergn Education
himself, however, predicted that only 25% of organisations adopting Scrum would
actually fully benefit from it.
If most of us can see the problems in the domain of software development, as it
is currently managed, and if practitioners have established sensible principles and
developed practices and tools whose success has been proven, what could still be
wrong? For a long time, a debate raged where a convinced core of self-proclaimed
‘Agilistas’ insisted that if only all organisations became ‘Agile’ then the ills of
software development would vanish.
Today, few people hold such an evangelical view. But given that a 2013 poll by
Gallup suggested that over 70% of organisational change projects failed, it seems
fair to ask what might be holding us back. Is there something wrong with the
theories? Or is there something wrong with the way we implement them? Is there
something wrong… with us?
The answer – predictably – is probably a mixture of all three.
Sometimes problems are so difficult that even the most brilliant theory cannot
untangle them. Sometimes we cannot force our organisations to take the necessary
steps to change. And finally, change is difficult because we don’t respond to it in the
open, rational way we like to think we do.
Activity 2 – Change in your organisation
A common ‘change’ logic, sometimes known as the ‘iceberg of change’ is as

follows:
Change policy to change actions,
Change actions to change behaviour,
Change behaviour to change habits,
Change habits to change attitudes.
Consider a change that your organisation attempted to implement recently. Ask
yourself where it fits within this flow of change. Were changes made to policy
or to actions? Have the changes reached as far as habit and attitude within the
organisation? If not, consider where the changes petered out.
Commentary:
We tend to make changes to concrete aspects of our work – such as process
or action – forgetting that the ability of these changes to last depends on
attitudes and habits. Traditionally, we see making changes to these as outside
of our direct control, and indeed impossible to influence. In fact, without being
convinced at this emotional level, the rational logic behind a change will often
fail to effect any difference.
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2.3. We think we’re rational, but we’re not

Until very recently, much of economics depended upon the idea that people are
essentially rational beings.
Let’s take a popular thought experiment. I am
given £10 to share with you. I decide on what
the split will be, and you decide whether to
accept the deal or not. If you accept it, we both
get the money. If you say no, neither of us
gets anything. If I offer you £5 and keep £5 for
myself, you’ll probably accept. If I offer you £1
and keep £9 for myself, you may not. Why? In Figure 7. A £10 bank note
theory, you still ought to accept the deal. After
all you’ll be £1 better off.
But people don’t quite work like that. You might be annoyed, you might want to
punish me for greedily grabbing so much more – in short, you may act in a way that
pure rational economics doesn’t predict – but which makes perfect sense to you.
How we make decisions depends upon an entire way of thinking that is not always
completely rational. Many influences cause us to behave in ways that are non-
rational. These range from prejudices that lead us to make incorrect judgements to
a difficulty in assessing probabilities, so that we allow ourselves to be influenced
more heavily by something else. For example, we might buy shares because we
read about the company in yesterday’s paper, or we might bet on black because
the roulette ball landed on red the last five times in a row. We call these ‘cognitive
biases’ and they grow out of a kind of judgement shortcut, officially known as a
‘heuristic’, but which we have chosen to call the slightly more conversational ‘rule
of thumb’. Collectively, these rules of thumb lead to what we might call ‘intuition’
or our ‘gut feeling’ about something.
Daniel Kahneman and his colleague Amos Tversky, worked extensively on
understanding how people make decisions, judgements and errors. Their work led to
the development of behavioural economics, which helps explain why people might
work and vote against their rational and economic self-interest. Indeed, so powerful
was the work that in 2002 it earned Kahneman a Nobel Prize in Economics (Tversky
had died in 1996 and so did not share the prize).
In the course of his work, Kahneman described two methods of thinking that people
use when making judgements: System 1 and System 2.
System 2 thinking is the kind of thinking that many of us pride ourselves on. It
is rational and logical, it questions assumptions, digs into biases and searches
out objective evidence in order to make a careful analysis and decision. System
2 thinking often feels hard – we are aware of it and it takes conscious effort to
perform. It requires complex thought, sometimes computations, and we associate
it with choice, control and agency. Despite this, System 2 is fed by the impressions
and feelings that originate in System 1 – a fact of which we are often unaware.
20 Emergn Education
Activity 3 – Exposing System 1
Solve the following questions, designed to expose some of our internal ‘rules of
thumb’:
1. A man and his son are in a car crash and they are taken to hospital in
separate ambulances. The son is prepped for surgery when the lead surgeon
enters and cries out: ‘I can’t operate on my own son!’ How can this be?
2. Paul is a quiet, shy man with little interest in people or the real world. He
likes to have structure and order around him, and all his actions show an
attention to detail and neatness. Is Paul more likely to be a librarian or a
farmer?
3. A psychologist wrote thumbnail descriptions of a sample of 500 participants
consisting of 495 females and 5 males. The following description was
chosen at random. “Sam is 23 years old and is finishing a degree in
engineering. On Friday nights, Sam likes to go out cruising with friends
while listening to loud music and drinking beer.” Which one of the following
two statements is most likely? a. Sam is a man b. Sam is a woman.
Answers:
1. Most lead surgeons are male – we know this as a rule of thumb and the
assumption gets in the way of our realisation that this lead surgeon is
female and therefore the child’s mother.
2. Paul fits our social stereotype of a librarian. Nonetheless there are far more
farmers in the world than librarians. Thus in terms of probability, it is more
likely that Paul is a farmer.
3. The description fits a stereotype of masculinity, but the question tells us
495 of the sample are female descriptions. Thus it is more likely that Sam is
female.
System 1 thinking operates automatically, quickly and with little awareness. Many
of us would call it intuition – a ‘supra-logic that cuts out all the routine processes
of thought and leaps straight from the problem to the answer’, as the poet and
classicist Robert Graves put it. It is powerful stuff – presenting us with a seemingly
complete and perfect solution. But sometimes the solution turns out to be wrong,
because our unconscious assumptions and judgements have had an effect. Take
a bias known as the ‘halo effect’: when a politician is confident, good-looking,
tall and radiating health, we are more likely to listen to his ideas. That means we
might reject a good idea and accept a bad idea, simply because of the speaker’s
attractiveness.
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Let’s be quite clear – this way of thinking evolved for important reasons. It’s very
fast and easy. It enables us to bypass the more cumbersome System 2 thinking. If
you had to sit down and really think before you made any decision, you’d get very
little done.
Activity 4 – System 2 in action
6914 – 18 = ??
Once you have the answer, subtract 18 again. Repeat as quickly as possible.
In order to calculate the answer the first time you rely on System 2 thinking.
However, as you continue with the subtractions you soon spot a pattern. As you
repeat the subtraction your brain establishes a mental model for how to do the
calculation. In doing so and with the pattern established, the calculation can be
handed off to System 1 thinking – it becomes fast and effortless again.
Kahneman and other writers provide some

fascinating examples of the ‘magical’ use of expert
intuition – firefighters running from a house just
seconds before the floor collapsed, neo-natal nurses
identifying a baby with a dangerous infection before
blood results come back from the lab, chess masters
who glance at a board and declare that white can
win in three moves.
Rules of thumb typically stem from System 1
thinking, and we will have developed many of them
for good reasons: employ intelligent people; listen to
what your customer wants; don’t trust the salesman
who won’t look you in the eye… The problem is that Figure 8. Scene from 1991
while System 1 thinking is eminently suited to some film Backdraft
(Universal Pictures)
types of decision – issues within a creative industry
are not among them.
22 Emergn Education
WHY CHANGE? WHY CHANGE?
3 WHY CREATIVE KNOWLEDGE WORK

RARELY SUITS SYSTEM 1 THINKING
There are many areas in which intuitive thinking is extremely valuable: human
beings are naturally superb at picking up on body language and vocal tones – you
probably know within a fraction of a second if your partner is annoyed with you.
That is why rules of thumb and intuition that are based on personal relationships
are often very good. Yet there are other situations, where intuition is a terrible
guide. In statistics, for example, even trained statisticians cannot rely on their
intuition. In tests, a group of experts from the Society of Mathematical Psychology
greatly exaggerated the likelihood that the original result of an experiment would
be replicated.
Environments where intuition is very valuable share certain characteristics:
• They are familiar (developing good intuition takes time – over 10 years for a
chess player).
• There is a great deal of fast feedback.
• The feedback provides a good indication of what will happen next.
In most realms of knowledge work as they are frequently managed and executed,
the environment rarely has these characteristics. Often time is conspicuously
absent; high variation in the type of work our teams do makes it harder to spot
patterns, while few teams are kept together for long enough to develop shared
experience. For example, in software, the length of time it often takes to implement
any IT change means it is hard to get immediate feedback and the separation
between design and use means actual feedback comes after the project is finished.
Finally, much of the work is intangible and because we find it hard to manage, we
attempt to make it more tangible and predictable with reports or project plans that
give us the illusion of control.
RAG reports, for example, are a favourite tool
for tracking project performance – yet the
traffic light symbols are misleading because
it isn’t predictive, like actual traffic lights. If a
project step is amber, what is actually likely
to happen next? We don’t know – and yet
we use the report as if it might tell us.
Figure 9. Example RAG Report
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3.1. The ‘rules of thumb’ we use
Rules of thumb
Minimising cost is good
Focus on efficiency
Doing it once costs less – doing one big job all together will be more efficient
than doing lots of little jobs
Delivering on time is always good – when you’ve agreed to a delivery date you
must do everything possible to keep that promise
Detailed plans allow us to monitor progress and stay on track
When the goal is important enough there is a way of making it happen
People who say ‘something can’t be done’ aren’t thinking creatively
If the customer needs something, then it must be done
You shouldn’t release something until it’s right
You need to minimise risk
The best way to minimise risk is to create controls and processes
A standard process makes things easier and more efficient
We should identify and implement best practices
Probably as you read through the list above, your suspicious mind was working out
all the times where the rules of thumb would prove unhelpful. But even if you know
the ‘rules’ are flawed, in times of stress most of us revert to rule of thumb thinking.
And the reason we revert to them is that – to a certain extent – they work! We
developed them in experiences where they were excellent guides to behaviour. That
makes it really hard to throw them out, because they feel like common sense.
There are two main problems with rules based on ‘common sense’:
1. We don’t even consider choices that run counter to our rule of thumb.
2. Rules of thumb can have unintended consequences driving negative behaviours.
Imagine a manager who is planning a department’s work. A really urgent project is
being worked on. Her two members of staff can’t get started until a piece of work
is finished. She wonders whether she should bring forward another project, knowing
that they will only be able to do a bit, before she needs them to switch back, or
whether they should do a minor peice of work that is unimportant but that they
could definitely finish off in a couple of days. She worries about value versus time
and the cost of switching… What should she do?
24 Emergn Education
Have you noticed that both options are based on a rule of thumb?
Everyone must be busy to be efficient.
What happens if the minor piece of work takes longer than expected, delaying their
work on the project? What happens if in starting the ‘big project’, they make some
assumptions that later cause delays? The manager has not even considered another
possibility – letting the two staff do nothing at all. The very idea probably makes
you feel uncomfortable. But that’s so wasteful! Her boss might get angry! It would
set a terrible example!
And yet actually, the risk of the two staff members not being able to work on the
urgent project the minute it is possible, might well be higher than the waste of
them sitting idle for two days. We just don’t know, because we are unlikely to do
the calculation because our rules of thumb blind us to the existence of the very
idea.
Would your organisation consider a solution that ran so directly counter to a
natural rule of thumb? Would you?
Emergn Education 25
Activity 5 – Are these your rules of thumbs too?
Take the list of rules of thumb to your team meeting and discuss.
How many of them do you agree with or believe to be true?
Rules of thumb True/False?

Minimising cost is good
Focus on efficiency
Doing it once costs less – doing one big job all together
will be more efficient than doing lots of little jobs
Delivering on time is always good – when you’ve agreed
to a delivery date you must do everything possible to
keep that promise
Detailed plans allow us to monitor progress and stay on
track
When the goal is important enough there is a way of
making it happen
People who say ‘something can’t be done’ aren’t thinking
creatively
If the customer needs something, then it must be done
You shouldn’t release something until it’s right
You need to minimise risk
The best way to minimise risk is to create controls and
processes
A standard process makes things easier and more efficient
We should identify and implement best practices
Now take a recent decision which made an impact on your work and test the
decision against each of the rules of thumb. How many does it agree with?

3.2. Where our rules of thumb originated

If rules of thumb didn’t work at all, they wouldn’t exist. We use them because we
have experience of them working. But because the end product is often rather
different from the environments in which they were developed, they often have
unintended consequences – like a manager devoted to efficiency who actually
causes delays, or a focus on driving down costs that impact on our ability to deliver
value.
Many of our modern methods come from those which helped power the industrial
revolution and mass production. It is hard to appreciate how brilliantly creative the
ideas were at the time. Taylor’s Scientific Management Theory is an example you
may be familiar with. Before mass production, most complicated goods required
craftsmen to make them, which was expensive and took time. A master hand
weaver could weave two pieces of 24-yard (about 22 metres) long cloth per week,
but a steam loom weaver could weave seven similar pieces during that same week.
Two steam looms, moreover, could be worked by a single unskilled worker. The
quality improved and became reliable and not dependent on the individual skill of
the weaver. The cost of cloth fell dramatically and much more could be produced
which created a global industry with major benefits.
Figure 10. Steam powered looms weaving cloth
The same concepts were applied and refined in numerous industries, from Cadbury’s
chocolate bars to Henry Ford’s motor cars. It was the age of manufacturing:
standardise the process; remove variability; drive down costs; increase efficiency and
productivity. This was how to produce more, faster, cheaper and better.
No wonder we borrowed these ideas – not only do they work, but they feel highly
applicable. Most companies aim to work at scale whilst being cost efficient and
following a well-defined process.
The problem is that today’s evolving market and work places are not the same as
early 20th century manufacturing or other repetitive production industries. In fact,
they are very different.
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Manufacturing: Knowledge work:

Output of tasks is repetitive Output of tasks is unique
Output of tasks is predictable Output of tasks is unpredictable
Requirements are fixed Requirements evolve
Work is bounded Work is unbounded
Inventory is visible Inventory is invisible
Complicated Complex
Of course – the process of manufacturing has evolved in the past 30 years since
it has had to respond to constant change in market demands. Innovations have
been employed such as the Japanese management principles of just-in-time
production, which supports the challenges of a manufacturing environment. Even
with our customer’s increasing desires, the fact remains that production systems are
essentially repetitive and have a scope with clear sets of parameters. Unfortunately,
the process of bringing ideas to life and developing new products and services
does not have the same level of repetition or bounding of scope. It is much more
uncertain than that.
We’re going to introduce a model which has proved very helpful in explaining the
different ways of approaching work. We’re using the Cynefin model, developed
by David Snowden, although you may have come across very similar ideas in the
‘Stacey matrix’.
3.3. Complicated or complex?
COMPLEX COMPLICATED
Probe Sense
Sense Analyse
Respond Respond
Emergent Good
Practice Practice
DISORDER
CHAOTIC OBVIOUS
Act Sense
Sense Categorise
Respond Respond
Novel Best
Practice Practice
Figure 11. Cynefin model
28 Emergn Education
Obvious systems are fairly easy. Here, cause and effect are clearly linked.
Directives are straightforward, decisions can be easily delegated, and functions are
automated. Adhering to best practices or process reengineering makes sense. If you
put your key into the car door and it doesn’t open you are probably easily able to
diagnose the trouble. Most likely you used your house key, but if not, something
is wrong with the lock. The approach to this sort of system is ‘sense, categorise,
respond’.
Complicated systems can be very difficult to work out, but there is a link between
cause and effect that can be uncovered if we search for it hard enough. This is the
domain of the expert and there may well be several right answers, but you need
to find the best. In this system the correct approach to diagnosis is ‘sense, analyse,
respond’. To use our car analogy – here the car engine might start, but make a
strange noise. There are many components that could be at fault and so most
people will take the car to an expert mechanic to diagnose the problem.
Complex systems may feel like complicated ones, but here the link between cause
and effect is not only hard to discern, but one may affect the other. Think of traffic
– the behaviour of the drivers impacts on how much traffic there is, which will in
turn impact on the drivers’ behaviour. In this case, there may be no ‘right answer’
identifiable in advance. Instead, complex situations call for what Snowden calls:
‘probe, sense, respond’ – the emergent nature of complex situations calls for an
essentially experimental approach.
Chaotic systems shift constantly. It is impossible to predict a link between cause
and effect because that relationship is constantly changing. Snowden suggests that
you must ‘act, sense, respond’. Here the only option is to act in order to establish
some kind of order and then work out the next move. Crises tend to be ‘chaotic’
in nature, as do highly innovative or disruptive technologies. These are ‘unknown
unknowns’, or ‘black swan events’. Of course, these can be both good and bad.
The rules of thumb that work with complicated systems fall apart in creative
fields, but because they are poorly suited as an environment for intuitive decision-
making, we often don’t recognise the negative consequences of our rules of thumb
for quite a long time. Think of the development of a pharmaceutical product. It
takes specialised skill and many instances of trial and error before it may reach the
shelves. But once there, it is possible to duplicate these exact products again and
again. If something goes wrong during production or even if a patient experiences
an adverse reaction, it is difficult, but possible to find the cause and effect. This
stage of production is in the domain of the expert; therefore it’s a complicated
system. On the other hand, creating a pharmaceutical product from scratch to serve
a whole new set of criteria is a complex system. We are starting from a much lower
level of knowledge and it will almost certainly take numerous attempts to find the
solution.
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Moreover, the ways in which industries operate today verges on the chaotic. And we
don’t mean that everyone’s desks are a mess. Disruptive technology now threatens
even the most traditional industries, while markets shift so quickly that the links
between cause and effect break and reform dynamically. Thus, using ‘probe, sense,
respond’ to act in complex systems is helpful to all industries today. Following this
series of steps actually makes product development more appropriate to System
1 thinking. By experimenting, we gain fast feedback on what we’re doing. Fast
feedback provides greater predictability, and also helps us build our familiarity with
the system so that we can develop and refine our intuition.
30 Emergn Education
WHY CHANGE?
WHY CHANGE? VALUE, FLOW,VALUE,
QUALITYFLOW, QUALITY
4 THE NEGATIVE CONSEQUENCES OF

KEY RULES OF THUMB
This section is deliberately brief. We could go through the entire list of rules of
thumb from Activity 5, but we won’t – partly because we cover many of the
existing rules of thumb that are wrong in the appropriate VFQ sessions. Instead,
we’ll look at the macro problem of the way we manage any project: the impact of
attempting to fix three outcomes in advance.
We quoted the Standish Group’s CHAOS Report’s definition of a successful
project – one which delivered on time, on budget and to a pre-set scope – and we
said we would go on to critique this definition further. This definition of success
illustrates what is often called the iron triangle or the ‘triple constraint’ of project
management.
COST
TIME SCOPE
Figure 12. The project management ‘iron triangle’
All design projects struggle with the same issue from architects to filmmakers.
In every case where cost, time and scope are fixed, what is normally squeezed is
the space in the middle of the triangle – quality. Of course, as our catalogue of
disasters above made clear, ‘constraints’ often turn out to be not that securely fixed
in any case. Numerous projects DO go over budget and over schedule, producing
disappointing functionality of poor quality (of course, there are projects that will
still deliver value despite time and cost overruns). And yet, rather than learning that
the model is broken, organisation after organisation seems to believe that if they
simply fix the deadline, budget and requirements in greater detail and more firmly,
that this time it will be different. Time and time again, they are proved wrong.
Knowledge work is poorly suited to having these three elements fixed in advance.
Fixing scope ignores the fact that in any truly innovative project, it is almost
impossible to know in advance what will be useful or successful. And if scope cannot
be fixed, then estimates of time and cost become equally uncertain.
It’s very important that we stress that complaining about the impossibility of fixing
constraints doesn’t mean that we suggest ignoring them. Not knowing how much
something will cost is not the same as suggesting money should be unlimited. Not
knowing how long something will take in advance does not mean we can just keep
going forever… The trick is to set the constraints in a different way – to break the
iron triangle, and achieve better results along the way.
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4.1. Breaking the triangle
Focusing on cost obscures value

Do you give to charity? If so, do you donate a set amount of money by direct debit
from your bank, or do you prefer to pop money into a collecting tin shaken under
your nose? There was an enormous furore a few years ago when it was discovered
that people on the streets asking for donations were not volunteers, but actually
paid by the number of gifts they signed up. These paid fundraisers gained far more
donations than volunteers with collecting tins. Charities justified the higher costs
because of the increased value they received. We understand the logic, and yet in
many organisations, a short-term focus on cost blinds us to value.
Even worse, a focus on cost can actually make us more expensive. How often have
you worked on a project with a ‘contingency’ fund? It’s designed to take care of all
the little unforeseen expenses that can crop up. Now think about how often that
contingency was used up! We’re willing to bet it was more often than not!
Of course, there are various points at which cash flow becomes a constraint, or at
which our ‘value’ estimate is so speculative that we are unwilling to commit much
cost to realise it. But in general the new guiding principle we need to substitute is:
DELIVER VALUE EARLY AND OFTEN
Focusing on time makes us slower

We are very used to deadlines and schedules – delivering ‘on time’ is a measure
that most of us have used in our work. But what does ‘on time’ actually mean?
Who created the deadline? What happens if we miss it? And if missing it has
consequences, what do we do in order to hit the deadline?
If you have ever been asked to provide an estimate for anything, then you will
recognise the answer. In order to guarantee a delivery date, we add a certain
amount of contingency. In other words we ‘pad’ our estimates. And this padding
tends to get used – not on unexpected emergencies, but on low value activities. This
is partly because we often set up our processes so that there’s little benefit in going
faster than the estimate. Even if there is a very real commercial benefit of being
early, we’re often unable to take advantage of it.
We go through such questions in more depth in the Optimising Flow session. But
the surprising truth is that our internal rule of thumb that we must deliver on time
leads to a counter-productive reality: a focus on delivering on time actually makes
us slower.
So the new guiding principle is:
OPTIMISE FLOW TO DELIVER FASTER
32 Emergn Education
Focusing on scope increases waste and risk

Just as with the other two rules of thumb, this feels thoroughly counter-intuitive.
Everything in normal life tells us that we ought to focus on scope as a way of
avoiding waste and risk. If you were having a suit hand-tailored for you in Savile
Row, you wouldn’t tell the tailor ‘do whatever you fancy’. You’d tell him what
colour you liked, what material, what style you desire… Otherwise there’s a risk the
tailor might produce a huge baggy orange clown suit, which you would reject – a
hugely wasteful proceeding. So it seems to make sense that in creative knowledge
work you set up what you want the project to deliver and then measure how well
the project performs against those requirements.
The problem is that the rule of thumb makes sense only as long as we know at the
beginning what it is that we want. If we don’t know, then the logic falls apart.
We tend not to know what we want, we find it hard to communicate what we
might want, and as the project progresses we often change our minds. Because of
this, we try to do lots of work up front to pin down exactly what we want. This work
represents both time and money – and since things are still quite likely to change,
it is often pure waste. Plus the more time and money you expend, then the risk of it
being wrong increases: getting it wrong when you’ve spent £5 is not too worrying;
getting it wrong after £50,000 is more serious.
So rather than pretending to know what we want in advance – scope; we need to
focus on quality, which we can define as ‘the right thing’. We can’t know what the
right thing is in advance, we find out as we work, through feedback. Thus, we break
the final constraint with a new guiding principle:
USE FAST FEEDBACK TO DRIVE QUALITY
4.2. The three new guiding principles

The three we’ve explored above are:
• Deliver value early and often
• Optimise flow to deliver faster
• Use fast feedback to drive quality
These guiding principles are designed to result in the outcomes of increased Value,
improved Flow and enhanced Quality.
That’s the rationale, quite simply, behind the name of this education programme:
Value, Flow, Quality. Or because we’re an industry that loves acronyms: VFQ.
Emergn Education 33
VALUE, FLOW, QUALITY WHY CHANGE? WHY CHANGE?
5 USING VFQ TO CHANGE

Let us imagine that having read this session, and a few other books as well, it
becomes clear to you that your organisation needs to change.
On Monday morning you gather everyone together. ‘We’re managing our projects
badly!’ you announce. ‘I have lots of ideas about how to do things better!’
What happens?
1. The crowd erupts into prolonged cheers and applause.
2. A stunned silence while the executives weep gratefully into their coffee-mugs.
3. Everyone makes a face that suggests you should have taken a longer shower
this morning, and politely pretends not to have heard.
Let us tell you a story.
Galileo believed that the earth revolved around the sun, and he attempted to
explain this in a book snappily entitled Dialogue between the Two Chief World
Systems. To the Pope and the Inquisition, this suggestion was a violation of
accepted ideas and religious beliefs at the time; and so they ordered that Galileo
retract his statement that the earth moved—or else be burned at the stake. Galileo
gave way, although he supposedly muttered ‘E pur si muove’ (and yet it moves)
afterwards.
Figure 13. Galileo’s Dialogue Concerning the Two Chief World Systems
Your team probably won’t haul you up before the Inquisition, threaten you with
burning, etc… but don’t expect too much gratitude.
34 Emergn EducationEmergn Education

Belief is tough to shake, not least because an interconnected system of great

complexity has been built up on just those ‘rules of thumb’, which you are trying
to replace with thoroughly counter-intuitive arguments. Reinertsen put it very
neatly: ‘Today’s orthodoxy has institutionalised a set of internally consistent but
dysfunctional beliefs. This has created a tightly interlocking and self-reinforcing
system, a system from which it is very difficult to break free.’
Flow is all about interconnectivity. Your organisation functions as it is. If you
change just one part of it, it is likely to function less well. Your change will be
instantly undone, branded a failure, and the status quo resumed. There may be
many different entrenched systems working against your change. Bonuses, metrics
or other types of motivation may promote individual rather than team goals, or
departmental rather than organisational success. Other processes may have built
strong dependencies on things being done a certain way – changing your own part
of the process might cause serious upheaval in how they want to work.
Often what we long for is the complete replacement of an entire product. When
Toyota developed lean manufacturing in post war Japan, they didn’t run a standard
production line but scaled down in order to avoid ‘over-production’. Instead they
embraced an entirely different concept – one of ‘pull’ and ‘just in time’ production
which carried zero inventory. It was a very daring and drastic idea; one that might
never have been accepted were it not so obvious that Toyota faced a stark choice
between certain failure and uncertain survival. You don’t want your organisation
to be facing such a stark choice. Instead you want them to change before change is
forced upon them.
This is not an easy nut to crack.
You can do a huge top-down mandatory change. If you are the CEO and we’ve
convinced you – great. Off you go.
If you’re not the CEO, you’re going to have to do things rather differently.
You’ll need to persuade others, not just your immediate team, but a broad range of
people across the business. You will have to make small changes, learn from failures
and publicise successes.
In fact, you need to start working through the VFQ session books. We wrote them
in a particular way because we know change is hard. We know that theory is not
the only thing and that slavishly following a process can backfire. You need to test
out what we’re saying. You need to prove that the ideas really work. You need to be
able to collaborate and demonstrate success.
The good news is that companies do improve; culture does shift. Change is hard but
people do it.
Emergn Education 35
5.1. Reasons for change

We’ve been through the issues with projects and the way we manage work and
we’ve balanced them with rationales for a new approach. Unfortunately this does
not do away with the fact that change is hard. Every management book you read
will ask you to consider your own reasons to change. What immediately pops into
your head when faced with this question? Do you consider your team first – maybe
a shared goal or mission, or something just as grand? If so then you are forgetting
a major factor – it is also about what matters to you. The real question of ‘Why
Change?’ must align the reasons for change as an organisation and the motives of
an individual.
Humans are becoming increasingly overloaded with information, initiatives and new
ideas. The demand for our attention has exceeded our capacity to fulfil these asks.
In his book The Power of Full Engagement, Jim Loehr tells us that we need to make
expedient choices in order to survive and maintain our sanity. Furthermore, we need
to consider what energy is really available to drive change – after all, as the saying
goes, ‘one volunteer is worth ten pressed men’.
We will look at the intrinsic motivators for individuals in more detail during the
Motivation session, but the main point is that reasons vary between personalities
and circumstances. Change is what some people live for; they might enjoy
challenging the market with new technology, or happily battle the status quo every
day. The marketplace and external world excites and drives them. But for others,
their reason for change is to simply be home on time to read their children a
bedtime story. Whatever it is, it must also align to the wider environment of work.
5.2. Consider the marketplace

Looking at the world around us, we find a fast-paced dynamic marketplace
dominated by change. As described previously this is a complex environment
– verging on the chaotic. Much of this is driven by the Internet and the Digital
Revolution. We must understand what is happening to our customers, competitors
and within our own organisation before we can determine rational reasons for
change.
Most of us look back now and
chuckle but if you were in fact, the
proud owner of one of Motorola’s
‘brick-style’ mobile phones –
almost requiring two hands to use
and a briefcase to carry it in – then
you were also among the first to
trial one of the greatest ‘disruptive
innovations’ in history.
Figure 14. Martin Cooper of Motorola with a
modern phone and the one he used
to make the first publicised handheld
mobile phone call in 1973
36 Emergn Education
The term ‘disruptive innovation’, first coined by Clayton Christensen, refers to a

process that causes the existing marketplace to change. Often it’s in the form of a
simple product or service that starts at the bottom serving some low profit sector
or market, and then relentlessly moves up until it competes with, or even replaces
the established market leaders. Just as discount retailers disrupted the market for
full-service department stores, Motorola did so with a new product – a product that
appeared unexpectedly and improved the existing market.
Christensen also presented the term ‘job-to-be-done’. He analysed how disruption
occurred by exploring the way that one product or service achieves almost the same
outcome or ‘job-to-be-done’ as another. Christensen’s theory enforces that we
are all susceptible to disruption – people are always creating new ways to achieve
the same outcomes, and competing on a different level to previous paradigms. If
we actively investigate the market around us then we should never have to face
the fate of the landline telephone business. But if we do then at least we’ll have a
fighting chance of contesting in the new world.
Models such as Porter’s Five Forces Analysis and the PEST analysis enable us to
examine our own macro-environments. Collecting knowledge of the markets
attached to our domains means we can build a better understanding of the
dynamics. We can’t expect to reach our goals as an organisation if we do not have a
clear idea of why we are chasing it.
The travelling circus is probably not an industry you think about too often, but it
is competitive like any other. When seals balancing beach balls on their noses and
contortionists folding neatly in to a goldfish bowl became standard practice, we
thought we’d seen it all. Then Cirque du Soleil came along. They were crowned
world’s best theatrical show as soon as audiences witnessed their blend of circus,
opera and ballet. The creators of Cirque du Soleil had discovered a ‘blue ocean’. The
authors of The Blue Ocean Strategy, W. Chan Kim and Renée Mauborgne, refer to
red and blue oceans as different types of marketplaces. Red being the industries
that are in existence today where the rules of competition are known, and there
aren’t many distinctions between the players, and blue are those that are not yet in
existence. The first to discover will own the space. It is a guide on how to identify
potential gaps in the market through strategies, frameworks and tools.
It doesn’t matter which model you use. Just remember that with every one,
you must examine the competition and understand how customer perceptions
are changing and what might be their driving force. Remember to consider the
competitors who exist today and also the ones you haven’t yet discovered. The
ones you need to watch out for are those that can deliver the same outcome or
complete the same ‘job-to-be-done’ as you, but in an entirely different way. These
are the disruptors who have the potential to radically change your market. You need
to examine these in the context of what your organisation excels at and possibly
what needs to be improved on. In order to compete in a marketplace where you
have no competitors, you need to study the social, technological, environmental,
political and competitive trends to help better understand what you need to focus
on to achieve future success.
Emergn Education 37
Activity 5 – Why should you want to change?
You can do this activity by yourself or you can discuss it in a group. We are
going to take you through some steps to think about your own company. First,
consider the example below.
Public libraries have existed for centuries as a place for people to search for
information. This is their ‘job-to-be-done’ – making information available to
access or borrow. The Internet (which introduced Amazon and many others)
came along and created the ability to do this in radically different ways,
eliminating the need for people to leave their homes. This progressed to entire
books becoming available digitally, meaning that students would no longer need
to carry a heavy stack to university each day, nor would they have to spend the
extra time going back and forth – returning them within a time limit. Extracting
information from the Internet was easier. It simply required copy and paste. It
has been acknowledged that libraries need to improve the services offered if
they want to compete with the Internet. Libraries have already attempted to
leverage their services by providing more computers with Internet access and
it has been suggested that staff be trained so they are more IT literate. To be
successful, these services must be financially supported which is problematic if
libraries are publicly funded. However, their survival could rely on this.
1. For your own organisation consider what is your ‘job-to-be-done’? There
may be more than one, so list them out and discuss them with your
colleagues. It isn’t always easy or as straightforward as you think.
2. Now look at the competitive landscape of your industry – who are the
direct competitors? Who supplies services to you and which companies
do you provide services to? Could they move into your space? What other
substitutes exist to deliver the same outcome of your company’s ‘job-to-
be-done’? Who are the new entrants or the disruptors?
3. Look at the external influences happening in the world that might create
an opportunity for disruption. Examine the political, environmental, social
and technological changes that you might see and discuss how these might
affect your organisation. This is known as a PEST analysis.
4. Finally, consider what your organisation is good at. What could you do
better? What needs to change to be ready to capitalise on the changes you
see and the ever-changing market landscape.
How do you see these things impacting you? Are there aspects here that excite
you?
38 Emergn Education
Emergn Education 39
Case study – IBM Software Group

IBM is one of the world’s biggest companies. It employs over
430,000 staff at locations all around the world and works on
products and services, including software, hardware and systems.
After steering to near disaster in the early 1990s, IBM had
recovered commercially, not least through heavy investment in software. IBM
Software Group had a total of 25,100 developers spread over 19 countries. They
mostly used a combination of Waterfall and iterative development processes.
Various teams had set themselves challenges, including reduction of cycle time,
improved customer satisfaction, reduction of defect resolution time, and improved
predictability. In order to achieve these goals, they knew they needed to improve
their ability to collaborate. They had some real challenges including very large
projects with correspondingly big teams. These teams were often geographically
dispersed or crossed organisational barriers and had different existing approaches to
building software.
In 2007, several teams began using Agile and Lean development methods, selecting
key projects that would act as ‘proof points’. These projects would be developed
using short, time-boxed iterations with stakeholder feedback.
In setting up the experiment, the organisation ensured that the team had: strong
support from senior management; an experienced leader; necessary education, tools
and governance; an expectation of learning and change. The experiment was not set
up to succeed or fail but to test and adapt.
Here’s an example of one specific team (Sametime 7.5) and their major steps:
• frequent, short code iterations with regular demonstrations
• self-organised around feature teams to increase code sharing and review
• lightweight specs and outlines
• combined teams across the organisation
• invited contribution and participation from internal people on early versions
• tested beta version with external customers
• continuous prototyping
• frequent or automated code reviews
• focus on the necessary, eliminate any ‘nice-to-haves’.
Those who went through the transformation acknowledged how difficult it was –
partly because of the challenges already discussed, but partly because of a more
emotional response to change, what they called ‘the trough of disillusionment’.
IBM Rational made an insightful comment: “we often wished we could achieve
our goals by simply adopting new processes or tool sets… [but] there is no one-
size-fits-all, out-of-the-box suite of tools that can move any team or project from
entrenched systems and processes into an agile, measured environment”.
40 Emergn Education
6 CONCLUSION
The start of any change is self-awareness. Dan Ariely, author of Predictably
Irrational suggests, ‘Armed with the knowledge that human beings are motivated
by cognitive biases of which they are largely unaware, businesses can start to better
defend against foolishness and waste.’
Every VFQ session examines the rules of thumb frequently used, the problems that
result and examines the rationale behind changes. This means that everyone should
appreciate from first principles why change is needed. This in-depth understanding
is important. Although the sessions go on to detail practical changes – tools,
practices, processes and methods – often it’s not possible to tell you exactly what
you need. After all, we don’t know the exact circumstances of your organisation.
That’s why VFQ sessions focus on the ability to think critically about the problems
and potential solutions to decide on the specific approach that will work for you.
This isn’t enough. You need to practice using new tools – often in a way that won’t
risk upsetting existing processes. You also need to demonstrate your reasoning and
ideas so that you bring colleagues along with you.
Our session booklets embody the idea of ‘probe, sense, respond’ in the way they
are written. Just as important as the concepts or the case studies, is the series of
activities set throughout the booklets. These range from fun demonstrations of
principles to planning and implementation sessions in which you work with your
team to test out ideas and quickly refine them based on real results.
This is called work-based learning. Modern educational theory stresses that the
best way to really absorb knowledge is through doing. You’ve probably experienced
for yourself how true this is. If you need to put up a shelf then you could read
an instruction manual. Even better you could watch an instruction video or have
someone demonstrate it to you. But only by doing it yourself several times will you
really become an expert DIY shelf-builder.
Actually – this is hardly new. Xunzi, the Confucian scholar, wrote:
‘if I hear, I forget;

if I see, I remember;
if I do, I understand.’
Emergn Education 41
Your experience and learning go far beyond the VFQ education programme. You
know that you work in a complex environment – so the most important piece of
learning is the way you deal with that: probe, sense, respond. We can’t know your
problems or second-guess what you will learn in tackling them.
It’s possible that you’ll find yourself disagreeing with things we have written. That’s
fine. We’ve analysed the issues we see in product development as practitioners
ourselves. We’ve provided a thorough grounding in the best theory available. Finally,
we’ve recommended tools that we’ve seen work, with case studies demonstrating
where they have succeeded and failed. We cannot promise that the tools will
always work, or that the answers are always applicable to your situation. Instead,
this course aims to develop your personal expertise through experience based on
sound foundations of critical thinking.
We wish you the very best of luck on that journey and we welcome your feedback,
comments and stories of how things go.
Learning outcomes
Now that you have completed this session, you should be able to:
Recognise the scale of issues in how we deliver products and services
• A perception of business as slow and expensive
• The number, cost and impact of project failures and the increasing reliance of
organisations on technology
Identify flaws in focusing on an iron triangle of cost, time and scope
• Despite stringent controls on cost, time and scope – product and service
development remains slower and more expensive than we want
• Few organisations have a clear idea on the value they receive in return for
expenditure
• Few quantify the cost of poor quality or technical risk
Have a brief overview of the history and philosophy behind ‘Agile’
development
• Agile confines itself to principles rather than spelling out practices or tools
• A plethora of methods are linked to Agile, including Scrum, Kanban and XP
• Although many organisations have tried Agile, a significant number have
struggled with implementation
• Three main problems block success: difficulty in knowing how to adapt Agile
to unique situations; organisational resistance to change, and our individual
reliance on unexamined rules of thumb
42 Emergn Education
Understand how people’s intuitive ways of thinking create rules of thumb

• People are not rational, we often act against our self interest
• Use of System 1 and System 2 thinking in the way we make decisions
• Much of our rational System 2 thinking is based on unacknowledged System 1
rules of thumb
Appreciate the negative impact of rules of thumb in the way we deliver today
• Product development as most commonly managed does not provide
opportunities for familiarity, fast feedback or predictability of outcome
• Creative knowledge work is complex while many rules of thumb originated in
‘complicated’ manufacturing systems
• Our rules of thumb often have counter-intuitive consequences which actually
drive the negative results we want to avoid
• Focusing on cost often makes us more expensive
• Focusing on time often makes us slower
• Focusing on scope increases waste and risk
Discover and use three new guiding principles to break the iron triangle
• Deliver value early and often
• Optimise flow to deliver faster
• Use fast feedback to drive quality
Use the VFQ course to inspire and implement changes in your organisation
• Change rarely happens as a top-down directive
• Pointing out problems can often be difficult, leading to a ‘shoot the messenger’
approach or jumping to a new solution, any solution, rather than thinking
through what is required
• Practical activities structured around your day-to-day work mean you can
introduce practices safely and prove their success by consensus
• Follow the suggestion of ‘probe-sense-respond’ and apply critical thinking to
your unique situation
Emergn Education 43
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Emergn Education 47
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Value, Flow, Quality®

Emergn Ltd. Emergn Inc.

Created For Gabriela (gabriela.toma@endava.com) on December 9th 2016

1 How do we perform today? 4

1.2. Lacking in innovation 4

1.3. Slow and expensive 6

1.4. Multiple failures 7

1.5. Coming full circle 9

2.2. Learning from software 17

2.3. We think we’re rational, but we’re not 20

3 Why creative knowledge work rarely suits System 1 thinking 23

3.2. Where our rules of thumb originated 27

3.3. Complicated or complex? 28

4 The negative consequences of key rules of thumb 31

4.2. The three new guiding principles 33

5 Using VFQ to change 34

5.2. Consider the marketplace 36

Created For Gabriela (gabriela.toma@endava.com) on December 9th 2016

Figure 1. A traditional book retailer

1 HOW DO WE PERFORM TODAY?

1.1. The challenge

1.2. Lacking in innovation

1.3. Slow and expensive

1.4. Multiple failures

In isolation, Ford produced an impressive advertising campaign and a semi-decent

1.5. Coming full circle

Activity 1 – Do you need to change?

Figure 6. Giving up before you even start

2.1. The rise of the knowledge worker

2.2. Learning from software

THE AGILE MANIFESTO

It is a philosophy with a great deal of appeal – improvement through practical

PRINCIPLES BEHIND THE AGILE MANIFESTO

We follow these principles:

Activity 2 – Change in your organisation

A common ‘change’ logic, sometimes known as the ‘iceberg of change’ is as

2.3. We think we’re rational, but we’re not

Activity 3 – Exposing System 1

Activity 4 – System 2 in action

Kahneman and other writers provide some

3 WHY CREATIVE KNOWLEDGE WORK

Figure 9. Example RAG Report

3.1. The ‘rules of thumb’ we use

Minimising cost is good

Detailed plans allow us to monitor progress and stay on track

When the goal is important enough there is a way of making it happen

People who say ‘something can’t be done’ aren’t thinking creatively

If the customer needs something, then it must be done

You shouldn’t release something until it’s right

You need to minimise risk

The best way to minimise risk is to create controls and processes

A standard process makes things easier and more efficient

We should identify and implement best practices

Rules of thumb True/False?

Created For Gabriela (gabriela.toma@endava.com) on December 9th 2016

3.2. Where our rules of thumb originated

Figure 10. Steam powered looms weaving cloth

Manufacturing: Knowledge work:

3.3. Complicated or complex?

4 THE NEGATIVE CONSEQUENCES OF

3 Why creative knowledge work rarely suits System 1 thinking  23

4 The negative consequences of key rules of thumb  31