From Dr. Domenico Lepore

Dear Bob,

You have asked me to guide you now that you have become the leader of your IT organization. You deserve this position, but the challenges are great. This is not because you are any less qualified than the best of your peers. It’s because the complexity that governs our world today requires a different kind of knowledge and new skills. I appreciate your courage and I want to reassure you that everything you need already exists. In this letter, I would like to offer an analysis of your current reality. What you then decide to do with this knowledge is ultimately your choice.

First, narrative helps. Let’s frame your situation as a story.

Phil is the CEO of a large financial conglomerate and Bob is the group CIO, with hundreds of people in different countries reporting to him. Phil wants to see a Strategy in place to ensure that the megabucks the company is spending in technology will bear fruit. Phil is convinced that Big Name Consulting Firms have the solution… well, he hopes they have it, and asks Bob to summon Big Name Firm and, er…. Strategize. He is the Boss, He demands results.

Bob is perplexed; not that he would ever dare to contradict Phil, he believes in CYA, but he knows, deep inside, that Big Name Firm will only rehash old platitudes whereas his own team, instead, has all the answers. He just does not know how to fish them out, how to harness the professional and intellectual power of his people. Team building exercises have only got him so far….

And why should he know? He ain’t no visionary leader, no strategist, no shrink. He is a guy with a Ph.D. in Engineering, a knack for science and technology, works hard and toes the party line. This is all new to him.

My message to you and all the Bobs, big and small out there is: Guys, there is light at the end of the tunnel. There is a why and there is a how.

Let’s start with the why

Bob, your life as CIO is captured by what in the Theory of Constraints (TOC) is called an “inherent conflict”, in other words, a situation of blockage. This blockage is determined by the dilemma generated by attempting to simultaneously satisfy two fundamental needs. Let’s take a look at the CIO dilemma.

On one side, your legacy role is to ensure the subordination of the IT infrastructure to the business; as such, you should not interfere with how business processes are designed and operated. Your job is to support them. The need you are protecting here is one of “stability” and it is driven, essentially, by fear (in this case, “fear” of not being compliant with your role).

On the other hand, you are asked by Phil to provide an input with clearly measurable business results; in other words, Phil wants you to be accountable for company performance, not tech mumbo jumbo. You know that many of the current business processes are either poorly designed by their leaders or, well… borderline lunacy. Hence, you feel you should act on them decisively. In doing so, besides being responsive to your Boss’s request, you are addressing a very legitimate need for “growth”, driven, more often than not, by desire (in this case, “desire” to see your company succeed).

What is common to these two needs, one connected with “stability” and the other with “desire”, is a genuine, attainable goal, NOT slogans –

Let’s map it out:

(See also short article ‘Building the Core Conflict)

Now, Bob you have been asked to call in a Big Name Firm, to strategize. For guys who live their lives trapped in this conflict, what the heck does “Strategy” mean? Please, bear with me.

One of the many mistakes that Big Name Pundits make is to purport that a Strategy can exist in isolation; it is something that can be designed behind closed doors and then handed off to a team of implementers. Such strategies are normally based on some ill-defined set of benchmarks, blessed by subject matter experts, and sanctified on the shrine of Best Practices.

Despite the glaring and systematic failure of this Paleo-Newtonian, mechanistic, clockwork view of the world, Big Name Firms remain unflappable and Teflon-sealed to any form of understanding. And, for the most part, they get away with it because CEOs do not often know any better and, in their world, are mostly concerned with even less knowledgeable Board Members and the intricacies of corporate governance. Simply, CEOs do not know which question to ask their CIOs, are ill-equipped to understand the answer and their MBA education does not help.

So, this is the situation many “Bobs” are in: a tech guy/gal, very happy to pull all-nighters but not very adept in the vagaries of human behavior, who needs to develop a “Strategy” that impacts, measurably, business results. Oivey!

Let’s go back to the conflict, there is some solace in robust thinking.

Mental models (assumptions)

What is this conflict underpinned by? Why do we believe in the alleged, unsolvable duality of this conflict? You know, there are things we say and things we don’t; and just because we don’t say something doesn’t mean that we don’t subliminally believe in it. Well, these spoken and unspoken beliefs have a name, they are called “assumptions” or, in contemporary PsychoSpeak, “Mental Models”.

Assumptions are “images”; world-views that shape how we perceive what we experience. They are a lens through which we see the world and, for the most part, they are the result of past experiences and our genetic neural endowment. Thank goodness we have them; without them we would have to re-invent ourselves every day, just like Drew Barrymore in “50 first dates”.

What is critical here is to understand that these images sometimes can produce misleading, dysfunctional perceptions. They can be, and often represent, a “Cognitive Constraint”, an inability to translate what we know is valid into coherent actions. They are what keeps us stuck and make “change” complicated. If you need a tragic reminder of where these altered perceptions can lead to, look no further than any of the violent conflicts taking place in the world right now.

So, which assumptions are sustaining this conflict and why do we need to unveil them? Because, wittingly or unwittingly, they represent the cognitive cage that keeps us trapped and forces us to reiterate well documented mistakes. By taking a hard look at them we can begin to understand how to challenge them. Yes, we all live in the Yellow Submarine of our mental models and sooner or later we need to resurface and breathe fresh air.

Three categories of assumptions keep this CIO conflict alive and kicking and provide a source of ever-multiplying assignments for Big Name Pundits:

Organizational design is separate from IT
Business strategy does not require input from IT
Organizational design and information flows are independent of each other

The full schematic including assumptions is then the following – you can read it through by following the numbers in red:

Yes: we experience the duality of this dilemma because we believe these assumptions are “true” (or, at least “valid”, a big difference…) and hence our life as CIOs can only unfold in its present misery and be driven by the platitudes of the Pundits.

Alternatively, we can decide that we are better than dolphins and horses (wonderful Godly creatures but with a limited development of their prefrontal cortex and bound to non-modifiable instincts). In the words of Al Pacino in ‘Any given Sunday’: “This is the most important battle of our professional life and it all comes down to today; we can get the shit kicked out of us OR we can fight our way back, into the light, one inch at a time”. (It is NFL Draft time, I could not resist…).

In light of this conflict and the blocking power of its assumptions, what does “Strategy” mean for a CIO?

A Strategy (aimed at a well-defined goal) links a thought process to coherent and implementable actions.

If the thought process is flawed, the ensuing actions will not achieve the goal. And the thought process is driven by the assumptions in the conflict.

So, let’s look at the assumptions. Do we really believe they are valid? Of course not! They are just the remnants of a totally outdated silo-view of the world, the cultural dregs of the first industrial revolution, the last bastion of the all human tendency to avoid the pain of challenging deeply rooted yet completely outdated paradigms.

Reality is that “every organization is a technology organization” and the role of the CIO is to imbue this awareness into the life of the business. CIOs MUST become the engine that propels the business, NOT its butler. Every CIO knows it.

How can he/she do that?

Oh, well, let’s ask the relevant question then, one that far too often CIOs refuse to address: “What the heck is technology for? Why do we use cutlery and plates instead of biting meat off a bone?”

Technology’s only purpose, my dear friend, is to remove limitations, to facilitate tasks, to ease our efforts….. towards a Goal; and of course, in the realm of this conversation, what we are talking about is the Goal of the organization.

And what kind of limitations is our organization experiencing? Not enough sales? Too much inventory? Limited resources? Lack of human capital? Whatever the limitation is, the only meaningful “Strategy” is to gear our technology investments so they remove/alleviate that limitation. Anything else is (almost) irrelevant, and soon the role of the CIO will be irrelevant unless this concept is clearly understood. Bob -if you think this is too harsh, unfair or simply not true stop reading and go back to your router. But if you don’t, keep reading and listen up.

Let’s Get to the HOW: Above and Beyond Technology

A CIO MUST have the abilities necessary to accomplish the transformation from a silo-based Hierarchy to whole system optimization. Without this ability, CIOs will very soon become a relic, something that can be easily disposed of. (By the way, in case you have not paid attention, the Silo Worldview has already conceived your replacement, a new Sheriff in town for the new millennium, they’re called Chief Digital Officer. Suck it up)

And it all starts with the domain under your responsibility. Before CIOs can become the CEO’s vessel for a long-overdue organizational redesign, they must learn the ropes. CIOs need to understand how to organize and manage their (often limited) resources in ways that have the most impact on the business.

Let’s ask the right question, then: What is an organization and how can I build one with my people? Also, how should CIOs lead such an organization? Maybe a few words on “leadership” are in order.

Leadership and CIOs

We are not fighting a war here and professional extinction is more the norm than it is the exception in this day-and-age; however, it is important to have some fundamentals in place before you cough up top dollars and walk into one of the many seminars on “Leadership” that seem to be blossoming everywhere in the academic world.

Two things must be absolutely clear to prevent the hype-induced leadership hysteria:

Once this is clear, much of what leadership should mean for a CIO is…

A leader owns a Theory: a set of well-tested assumptions within a well-defined realm of validity.

Without Theory, Management – that activity we do to achieve our vision – becomes a “whack-a-mole” game and finger pointing becomes the rule.

A leader is capable of communicating effectively inside and outside the organization why they believe the Theory will produce the desired results.

In other words, the role of the leader is to create predictability of outcomefor the efforts he/she requires from their people as well as constancy of purpose among them.

A leader is selfless and relentless in elevating everyone’s abilities through continuous teaching and mentoring.

If we are game with the above points, then the next question is: “What are the elements that determine the success of an organization, so CIOs can focus on those and design it? Bob, remember, we are talking about the people you have to lead. It is up to you how you want to make them work. Understanding what triggers success is critical. Bob, we are looking at the fundamentals of sustainability, NOT Corporate crap. Listen up.

Digital: The elephant in the room

One of things that never ceases to amaze me is the speed at which idiocy infiltrates important conversations, how easily we surrender to our mental laziness and give in to nonsense. So, while we are all trying to understand how new digital technologies can help business succeed, and that is a conversation that should be promoted by wise CEOs and chaired by competent CIOs, all of a sudden the debate shifts to “The rise of the CDOs”. Yeah, all we need is another silo, right, Bob?

Digital, for a long time largely misunderstood and overlooked by CIOs, has the opportunity today to accomplish what Quality could not in the 80s: Unveil the process/project nature of work.

Digital is forcing us to rethink the way we can accomplish anything in light of what is technologically possible. Digital flies in the face of any last attempt to justify Hierarchies based on Business functions and local optima; it brushes away the lethal gunk of silo-thinking and holds leaders and managers accountable for any unnecessary, convoluted decision process.

Digital is where you as a CIO decide whether you want to be an evolutionarily justifiable creature or you want to fade into the pantheon of the past. To avoid the latter, CIOs like you must understand what drives the success of an organization, starting from the IT organization they are called upon to manage.

Building an organization fit for complexity

Organizations are human-based systems; they are networks of interdependent components (namely people, processes and projects) all aimed at a common goal. We learned this way back in the 1950s from Dr. W. Edwards Deming, the father of the Quality movement.

Building such a system is the only viable strategy for a CIO and, yes, don’t fret, technology is in the picture.

As a CIO, you have the unique opportunity to build your organization without perpetrating the same mistakes as Corporate; you do not need to recreate silos in the management of the resources under your responsibility. You can, instead, focus on the intrinsic nature of the work and shape the management of it accordingly.

The essence of any sensible managerial action is the pursuit of Quality through people’s involvement in order to accelerate the flow of products and services that improve customers’ lives. A new Systemic Organization Design is needed to accomplish that; one that overcomes the inherent limitations of the conventional hierarchies, that truly unleashes the potential of the competencies available, promotes structured collaboration beyond the blablabla of “Team Building exercises” (you’ve done enough of those) does not rob people of their pride in workmanship and gives them back joy in work. We call the cartoon of the new Systemic Organization Design that depicts this “the chocked tube”.

In essence: this is a system with well laid out interdependencies (internal and external) and “unbalanced” around a finite element of the system that we call Constraint – a true leverage-point that can be exploited to drive performance and must be protected by the statistical fluctuations in the system by a time-buffer. This constraint (a pool of physical or human resources) becomes the element that dictates the pace at which the system can deliver on its promises to the market. ‘The Goal’ (1982) is only the first of the books that Dr. Goldratt wrote to illustrate this point; since then a wealth of knowledge has been produced to expand and evolve ‘The Goal’ and Yours Truly and his team have been writing abundantly on this subject with the aim of elevating the transformational knowledge of TOC into a coherent and consistent way of designing and managing organizations.

The skinny is what follows.

Freedom from the Trap of Silos through a Network of Projects

Many organizations, just like your own, Bob, still have traditional hierarchies and silo their people into functions. But the complexity of today’s reality needs something different. With the exponential growth of interconnections and interdependencies, a traditional organizational design can undermine productivity and sustainable growth. So here is a summary of the organizational design I’m proposing, based on two decades of international work, specifically applied to organizations with a well-defined goal. It is a “systemic” approach. We don’t throw hierarchy out of the window. Traditional hierarchy is replaced by a different kind of hierarchy, driven by the goal of the system and governed by a new design of the organization as a “Network of Projects”.

Seeing the system

As stated before, a System is a network of interdependent people working in processes and projects all aimed at a common goal. Without a goal, there is no system, as Dr. Deming has taught us. When we introduce a systemic approach to organizations, we must derive that goal organically from the current reality and it is NOT a mission statement (don’t listen to the Pundits). We can do that very effectively by starting from the identification of the Core Conflict of the organization. This is a systemic method for analyzing an organization. This provides a kind of cognitive snapshot that depicts the situation of “blockage” the system is experiencing.

We will begin in your organization, Bob, by identifying all the Undesirable Effects that everyone inside the system experiences (as Dr. Goldratt pointed out, everyone likes to bitch and moan), and this will allow us to capture all of those various symptoms in a precisely verbalized conflict. This conflict exists because of all the unchallenged assumptions (mental models) that you and your people have about your reality.

Allowing the solution of the Network of Projects to emerge

The way out of this conflict is through the identification of a set of “injections” or solutions (statements invalidating the weakest assumptions) that solve or “evaporate” the conflict.

In the approach we have developed at Intelligent Management over the last decade, this set of “injections” becomes the core of a systemic organizational design that we call the network of projects.

We build the network starting from each ‘injection’ that invalidates the set of assumptions or limiting beliefs that currently keep your organization trapped in an unsatisfactory current reality. These injections are then split into simpler Intermediate Objectives, sequenced according to a prerequisite logic, and each Intermediate Objective is then split into simpler actions. For every simple action, we can then assign resources (actually, we assign “competencies”; a resource normally has several competencies, possibly at different level but all potentially useful in different contexts) and a timeframe in order to create a scheduled project. Each project is scheduled according to a very precise algorithm called Critical Chain. The set of projects emerging from the core conflict is the Network of Projects. Each project is monitored (and acted upon when necessary) in terms of buffer consumption and the way these projects proceed towards their goal will dictate the pace at which the organization is achieving its goal. Yes Bob, this is your job: ensuring that all the competencies you have available are used realistically (at finite capacity) and proficiently (used for what they can do in the context of a project) towards a well understood goal. Doesn’t it sound to you like a Strategy?

Variation and the network

When we looked at Leadership earlier, we mentioned “predictability of outcome”. Every organization is affected by variation in all its processes, both mechanical and human. We can monitor and manage variation inside the organization using Statistical Process Control (SPC). We identify critical points, where the impact of variation is more important (i.e. before the constraint), working to keep every process stable (in statistical control) in order to reduce variation (where and if possible).

Don’t be fooled into thinking that SPC is just a tool and a software can take care of it. Rather, it is a way of thinking, a mindset. Understanding variation is the most important part of the task, because the risk of tampering with the system is extremely high. The habit of reacting instead of thinking is very common. SPC is a sophisticated support that helps leaders and managers to understand how the system is behaving and to take the right decisions. You need to be able to base your decisions, Bob, on real knowledge of how your system is behaving and that’s what SPC provides.

Variation and intelligent emotions

Variation is not only associated to processes. An important part of the “noise” in the work environment is caused by the interactions among people. Collaboration is never straightforward. Managers have to deal with problems every day: dilemmas (personal or not), conflicts between people, conflicts with the “rules” of the organization (policies). Using the Thinking Processes from the Theory of Constraints has proved to be an effective way to overcome these problems. The ‘Conflict Cloud’ allows us to find solutions to conflicts and dilemmas in a win-win framework, abandoning, once and for all, the prevalent “zero sum” logic (I win you lose). We don’t have to stay stuck with our biases and inability to collaborate effectively. You will find that recurrent use of the Thinking Processes helps managers and co-workers develop intelligent emotions.

Coping with the change

Let me be clear with you, Bob. The transition to this new organizational model is not straightforward. It provides a shift from command and control to managing the interdependencies that characterize complexity. Changing the way people operate in the system entails a profound change in their behaviors and their habits simply because:

The role of the “boss” is replaced by the concept of subordination to the constraint;
The traditional “functions”, the hierarchical organization designed by “silos”, are not present;
Project Managers play a crucial role in the correct functioning of the system, even more than managers responsible for the processes;
The way performances of people and processes are assessed is totally overturned (no local goals);
The very common prevalent logic “I win you lose” is no more in place;
Variation is monitored and managed instead of the common habit of “aiming at the target, keeping the process on target”.

And so on.

People are simply brought out of their “comfort zone”. Transformation is only possible if people are willing to change. However, even if we believe, as Dr. Deming did, in continuous improvement and that people are keen to learn, investing in human resources is the right direction to take. Choosing the right people and giving them the support they need for change is the key for a successful transformation.

Thinking Processes for Change

The support you give to your people doesn’t have to be improvised. The Thinking Processes from the Theory of Constraints (TOC) first appeared in Dr. Goldratt’s novel ‘It’s Not Luck’ (1994), although a preliminary sketch of the Conflict Cloud had been published in the essay ‘What is this thing called TOC’ that Dr. Goldratt wrote in 1991. Since then, dozens of books and publications have become available, each of which claiming to provide further insight into the way the processes should be used. Oded Cohen and myself dedicated nearly 40 pages of our book ‘Deming and Goldratt: the Decalogue’ (1999) to that end.

The Thinking Processes were devised to sustain and focus the change process underpinned by a process of ongoing improvement advocated by TOC. The three phases of change are:

What to change
What to change to
How to make the change happen

Each phase is supported and facilitated by a purposefully designed Thinking Process. You will discover that all together, the Thinking Processes provide a very comprehensive and powerful mechanism that can ensure effective supervision and guidance over the change process. They also represent an ideal companion to the development of a project plan.

Learning can be very destabilizing on an emotional level because it continuously pushes forward the boundary of our cognition and, with it, the gap between what we know and what we feel we can do with what we know.

In order to leverage in a positive way the tension originated by this gap, we must get a handle on our emotions, understand them and refine them; in other words, we must transform their potentially destructive power into a positive force that sustains change.

This is precisely the role of the Thinking Processes: to help us manage the blend of intellect and emotion in the change process. In this way, “change” loses the somewhat ill-defined feature of a corporate exercise and becomes that transformational effort which is at the very heart of the success of every individual and organization alike.

RECAP: Building and implementing the cycle of transformation

So to recap, Bob, our business world is changing rapidly. Complexity dominates and old solutions no longer work. Your task ahead is daunting but, as I said before, everything you need for the challenges ahead already exists.

Through our journey together, you will acquire the knowledge and skills to become a leader that contributes to the business success of your company. You will be able to shape the way your resources collaborate so that you optimize your IT organization as a whole system. In this way, you will avoid the silo-creating mistakes that inevitably lead to sub-optimization of resources and frustrate your ability to achieve the goal.

You will be learning through a “new curriculum” what it takes to manage for complexity.

You will start by learning how to see the big picture of the current reality of your organization and how to make emerge the systemic solutions to achieve your overall goal.

You will learn to see your organization for what it is – a system – and that includes your customers so you will learn how to serve them better.

You will learn how variation affects every process within your organization and how to manage and reduce that variation.

You will learn that by identifying your constraint youcanradicallyfocus and simplify your efforts.

You and your people will acquire the ability to “connect dots” you would otherwise not even see and you can achieve this through thinking, analyzing and acting systemically.

You will learn how to cultivate and reinforce intelligent emotions for continuous change and innovation by using the Thinking Processes.

You will learn to operate and synchronize your organization as a Network of Projects, using Critical Chain, a systemic and highly robust approach to Project Management.

Your choice

Ultimately, you will acquire a new level of awareness; in every moment of your working and personal life, you are presented with a series of choices, dilemmas, “conflicts” if you will. As a leader, it is your responsibility to identify these choices and make the most informed decisions possible for your organization. As Dr. Deming has famously said, learning is not compulsory, but neither is survival. I hope and trust that your choice will always be not simply to survive but to thrive.