Balancing forces: Translating efficiency between differentiation and scale

Balancing forces: Translating efficiency between differentiation and scale

This is the written version (with some additions) of my presentation I delivered at the IDC Multi Cloud event on November 19, 2020. A recording of the session is available here on YouTube (Apologize for fiddling with the mic during the session):

Please let me know your thoughts, questions, feedback, remarks, etc. in the comments. This is very much appreciated!

Focus is often too much in the area of just technology. A change in behaviors throughout the organization should be aspired.

Focus is often way too much in the area of just technology. A change in behaviours throughout the organisation should be aspired meaning a change in the area of people, process as well as technology.

To measure is to know!

To measure is to know and it all starts with having the right metrics…

Metrics should inform work practices, practices create culture, and a generative culture unlocks transformation.

Metrics should inform work practices. Otherwise, how do you know you’re working on the right thing?

Executives can’t mandate cultural change. Practices create culture.

As organisations, we are what we do!

Culture is the missing piece for countless failed transformation efforts.

A generative culture unlocks transformation, keeps you on top of market disruption, and leads to higher levels of business performance.

My name is Stefan van Oirschot and as Chief Digital Advisor at Red Hat I’m a strategic advisor and sparring partner for CIO’s and CTO’s.

Meaningful change can never be accomplished unilaterally — Jabe Bloom, Red Hat

One of the most difficult parts of transformation is resistance to change but where is that resistance coming from?

Meaningful change is difficult because it can never be one-sided. Transformation is not a solo operation performed by a single person on their own.

Instead change causes friction between people and teams as they realise there are new technologies and new ways of working.

Introducing the economies of differentiation and scale at play in your organization.

I want to start by introducing the economies at play in your organisation.

On the one hand we have the economy of differentiation focussing on the accelerated differentiation and the creation of value.

On the other hand we have the economy of scale focussing on operational excellence and efficiency.

Both economies have different ways of creating value.

The two governing theories; speed without safety versus safety without speed.

In the differentiation economy we focus on innovation excellence.

Flexibility is paramount, new markets are prioritised and one offs are considered most important.

In the scale economy we consider standardisation above all, focus on established markets, and consider repeatable processes as critically important.

Speed without safety versus safety without speed, two governing theories.

Squeezing the tube; removing variations and focussing on your unfair advantage.

Are you consider removing variation?

Your competition is definitely considering working smarter by lowering complexity.

Working smarter gives you more time to focus on your unfair advantage and increase the number of strategies you can execute.

What is your unfair advantage?

A revisit of the wall of confusion, a result of the core conflict between the differentiation and scale economy.

Your unfair advantage is not only in the economy of differentiation. It’s actually to make the entire ecosystem work!

As already pointed out by my colleague Andrew Clay Shafer back in 2008 a frequent result of this core conflict is the creation of a wall of confusion.

Communication between developers and operators is limited to a ticketing system. The system is slow and there are many silos that are leading to multiple dependencies.

It’s difficult to get anything done because of friction by processes slowing the system down. Poor quality resulting in unhappy customers and too high support costs.

Low engagement by employees eventually resulting in higher levels of absenteeism and even people burning out because of the inability of seeing value being created by their work.

The empathy and understanding that arises from working with each other on shared problems is lost and results in a confusion of balance.

Problems are simply thrown over the wall.

The confusion is not understanding the other game. …and not understanding the connection — Jabe Bloom, Red Hat

This isn’t the only source of confusion. Each side of the wall of confusion fails to understand how the other side creates value.

They do not understand the other side’s way to “win”.

It is important to understand how these 2 sides are connected to understand how both sides can win.

Shared understanding is critical, without it both sides resort to attempts to optimise for their own concerns.

These local optimisations don’t result in efficient or effective systems. Instead they create friction, misunderstanding, confusion, hand offs and knowledge gaps.

The trick is to look at the system through a third economic logic.

The 3rd economic logic, introduction of the scope economy and introduction of the value of reusability of shared resources.

This 3rd economy is the scope economy.

Value is created by increasing the adoption of shareable resources that are not consumed in use.

A shared resource which is not consumed in use but instead gains value when it is used.

Examples of these types of resources include shared data, functions, and cloud native patterns.

Recommoning, the practice of increasing value of resources by making them widely available and easily accessible.

The implication is that some resources currently being managed in differentiation would be more valuable being managed in the scope economy.

As an example think of product teams distracted from their customer focus attempting to manage shared resources used by other teams in the organisation.

Instead we want to observe when resources initially developed by product teams mature, and cross team demand emerges and then shift these resources into a scope economy.

On the other hand in many organisations services that would benefit from being managed collaboratively in a scope economy are actually being managed by processes primarily suited to prevent overconsumption.

By identifying and shifting these resources out of scale based governance, organisations can unleash the value, reduce the toil and create a shared responsibility for continuous improvement.

An example of data where recommoning offers reusability and value increases through shared use.

Organisations often sub optimally manage these shared resources.

In the scope economy attempts to limit consumption do not preserve value. Instead they increase friction, reduce adoption and destroy value!

Think about your data. When more teams have access to the same data does that data get used up?

No, the data instead becomes more and more valuable to both your teams and for customers.

In scope adaptability is paramount. Repeatable change is most important and an innovative culture provides our advantage.

Giving people insights into how their work delivers value for the business, results in lower levels of absenteeism.

We want to move away from pushing tickets and confusing policy walls to recommoning of resources into a shared platform. This results in a platform that acts as an interface between differentiation and scale economies.

The platform decouples the market driven cycle times from each other, enabling developers and operators to act in ways that are timely and allow for maximum impact.

When these 3 economies begin working together in harmony the mentioned core conflict dissipates and friction in the organisation is reduced.

Furthermore; giving people insights into how their work delivers value for the business, results in lower absenteeism and a smaller chance of people burning out.

Introduction of the 5 elements; failures as well as opportunities.

Essential to transformation is the understanding of the 5 elements.

Let’s start by introducing them and identify the 5 failures as well as the 5 opportunities!

Leadership prevents change instead of enabling peer level conversations and setting direction with ambition.

Product management building things that customers do not value. Time which would be better spent working with teams to create strategies for creating differentiated value.

Development building the wrong things, doing unnecessary rework and having long feedback loops instead of high quality execution.

Architecture artificially constraining the organisation by focussing on old processes, old ways of thinking, and an inability to leverage new technologies. Instead architecture has an opportunity to focus on accelerating product development and ensuring long term quality by creating enterprise wide patterns and frameworks.

And finally operations, moving away from just putting out fires, and focussing on incidents and outages, to establishing a foundation of resilience.

Balancing the elements across the 2 dimensions; change<->stability and tactical<->strategic.

The 5 elements can be balanced across 2 dimensions.

The first dimension we discussed earlier as well as the effect of investing in variety where it creates the most value and creates an efficient and effective system.

The second dimension is the timespan from tactical to strategic where tactical concerns need to be balanced against the strategic efforts.

Over focus on individual capabilities will create an organisational mis-balance between these dimensions.

Locally optimising the system for development and the organisation ends up tipping towards the upper left being too much focused on rapid, short term change and therefore sacrificing long term stability and options.

Elements are not roles, they are capabilities.

Elements are not roles, they are capabilities.

Within an organisation, an organisational unit, for example a department, a team, all these elements should be in place.

The elements should be in balance & interacting to reinforce each other!

Create the conditions that make transformation inevitable. — Jabe Bloom, Red Hat

Transformation requires leadership at all levels to continuously balance investment across each of these capabilities.

Establishing a balance across the economies creates the conditions for transformation while enabling both efficiency and innovation.

Organisations that begin to see the results of this balance begin to grasp the potential of transformation at the organisational level.

Interested to hear more? Feel free to reach out and let’s discuss in more detail!

Thank you very much for your time!

Chief Digital Advisor at Red Hat | Creating organizational impact through Open Transformation

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