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Tag: agile organizations

  • Decentralized Autonomous Organizations (DAOs): Org-as-Code

    Decentralized Autonomous Organizations (DAOs): Org-as-Code

    We are all familiar with ‘everything-as-code’—a pattern that started with infrastructure-as-code and has now extended to other areas such as architecture-as-code,  security-as-code and more. However, all the incarnations we have seen so far have been less than ambitious! The dawn of cryptocurrencies and the underlying blockchain technology is moving us firmly toward organization-as-code. Org-as-code is the most disruptive evolution we have seen so far. The crypto world uses a different term for it: decentralized autonomous organization (DAO).

    Before you freak out because, “OMG crypto!” let me assure you that I am not trying to sell you any of the 9,000 (at last count) cryptocurrencies. Undoubtedly, crypto has polarized public opinion. There are crypto maximalists who believe that crypto is the solution to everything. You often hear, “Bitcoin solves it!” Then, there are the crypto skeptics who dismiss the movement as simply digital tulips—a Ponzi scheme at scale for the internet age. Only time will tell if they are right.

    Now, my opinion falls in the gray area in between, where some groundbreaking new ways of working are evolving. People across the globe are collaborating in decentralized, efficient, democratic and non-hierarchical ways in the world of crypto. Radical new constructs for the internet age are being piloted—DAOs, smart contracts, pseudonymous identities, tokenomics, etc. just to name a few.

    This post is firmly focused on DAOs.

    So, What is a DAO?

    A DAO is a way to work with like-minded folks around the globe where the business (the org) is owned and managed by its members in a democratic way.

    “In traditional organisations, people are at the core and automation is at the edge; whereas in DAOs, automation is the core and people are at the edge.” – Vitalik Buterin

    As opposed to traditional organizations that are structured in a top-down hierarchy, with many layers of management and bureaucratic coordination, DAOs provide an operating model for people and institutions that do not know nor trust each other, who might live in different geographical areas, speak different languages and, therefore, are subject to different jurisdictions. Instead of legal contracts managing the relationships between people, computer code enforces the rules.

    Some of the key features of a DAO are:

    1. An organizational setup based on rules and policies that are encoded as computer code.
    2. The rules are transparent and controlled by members, not a central authority; usually, on a public blockchain.
    3. Rules are executed by a set of smart contracts independent of human (not even the creators!) involvement.
    4. Built-in treasury that no one has the authority to access without the approval of the group/community.
    5. Decisions and ideas are governed and funded by proposals that are voted on and managed through voting by token holders.

    Colony.io is one startup that helps set up DAOs. A screenshot below from their site gives you an idea of the elements of organizational design that can be (re)defined in the radical new DAO world.

    DAOs features

    Do We Really Need DAOs ?

    Here are a few challenges that DAO attempts to resolve that you often see in conventional centralized organizations:

    • Good ideas struggle to reach the top.
    • The system incentivizes authoritarian leadership.
    • Failure to tap into the wisdom of the crowd.
    • There is a higher probability of spectacular failures driven by the greed of a few, as evident from examples such as Enron or the 2008 financial crisis.
    • There is usually a lack of transparency in decision-making.
    • Good policies exist—usually on paper or hidden away in by-laws—but are not executable.
    • Single points of failure are natural due to the asymmetry in organizational structure.

    Examples of DAOs

    Before you dismiss this as utopian and unrealistic, here are a few real-world of examples of DAOs in play

    1. Nexus Mutual—A decentralized ‘people-powered’ alternative to insurance which operates as a DAO. It is run entirely by its members. Only members can decide which claims are valid. All member decisions are recorded and enforced by smart contracts on the Ethereum public blockchain.
    2. DAI and MKR—A stable decentralized currency (DAI) and platform for decentralized finance apps (with a market cap of about $5 billion).
    3. The DAO ( Đ)—A form of venture capital that started as a crowd-funded token sale. There was no conventional management structure or board of directors. But it got hacked in 2016, and a third of funds were siphoned off. (This is a key example to remind ourselves that if the org is code, then security issues can be near-fatal.)
    4. DASH —A digital cryptocurrency. A DAO run by a subset of users called masternodes, which perform standard node functions like hosting a copy of the blockchain, relaying messages and validating transactions on the network, and which, in addition, act as shareholders, voting on proposals for improving DASH’s ecosystem.
    5. Flamingo DAO—A DAO that deals in digital art via NFTs. NFTs are non-fungible tokens, not non-functional testing!
    6. Gitcoin —Uses DAO to fund digital public good projects ( $24 million funded so far using a quadratic funding model)

    These are just a few examples. Adoption is exploding, and stretching into areas like charities, freelancer networks, venture funds, investment clubs and more.

    DAOs are still emerging, and there are many aspects that are yet to be fully explored, especially around legal status, regulatory frameworks and compliance. It is, however, only a matter of time before the DAO way of working becomes mainstream.

    In my view, it is not a binary question between DAOs and conventional organizations. Adopting many of the practices of DAOs will strengthen traditional organizations and reduce some of the weaknesses we touched on earlier.

     

  • Collaboration Inside and Out for Innovation

    Collaboration Inside and Out for Innovation

    Across all industries today, organizations increasingly are migrating their infrastructures to the cloud in a bid to boost agility, lower the cost of IT ownership and reduce the risk of outages.

    Firms are under more pressure than ever before to innovate new products to keep up with newer, more agile firms. But before they can reap the benefits that come with going totally serverless, organizations must deal with the immediate challenge of meeting the ever-growing expectations of today’s digital-first customer.

    For newer firms, this is arguably a much easier undertaking, as their IT infrastructures will have been built using modern programming languages, technologies and software development practices. They also will most likely have adopted an agile approach and be highly adaptable to changing business needs. Conversely, older firms typically have a large body of IT that lives in an entirely different world. With infrastructures made up of a patchwork of interdependent legacy applications, built on top of monolithic architectures, these firms struggle to innovate customer-facing applications at pace. But if they are to compete, established players must adopt a similar approach to their more agile counterparts.

    Don’t Hate the Players

    It is completely natural for technology to evolve. The problem faced by many organizations that were pioneering in their use of technology is that they have now become victims of their own success. Take the world of financial services as an example. Banks that began building out their IT infrastructure decades ago have had to adapt gradually to new technologies. But it’s only in recent years that digital transformation has become a key business objective. In the not-so-distant past, banks may have been able to get away with taking their customers for granted, as the competitive landscape lacked any real diversity. But today competition abounds, with challenger banks and fintechs bringing innovative new products and services to markets traditionally owned by the banks.

    If the banks are to compete, they must seek to collaborate with the fintechs. Cloud-based open platforms that focus on open APIs are the most effective means of achieving this. By providing fintech partners with access to core systems via open APIs, the banks get to concentrate on their core operations while innovation from the outside helps them to deliver new applications to their customers.

    Historically, the banks would have been fiercely protective of their IP and core systems, but in collaborative environments, it is exactly this IP that can be used to create value in a safe and secure way. This is why banks increasingly are seeing fintechs as partners rather than poachers, as they are above all technology providers that are eager to have their services leveraged by large financial institutions. Similarly, banks understand that they must become more agile and entrepreneurial to deliver what their customers want. So, working with third parties that embody these characteristics is the most effective means of doing so.

    Embrace Internal Collaboration

    As well as overcoming legacy systems, legacy culture must also be addressed if true digital transformation is to be achieved. The first way to do this is to align application development with business goals, showing how a focus on the former helps to achieve the latter. Here, the adoption of a DevOps mindset can bring about the right culture for increasing innovation within. Though not entirely applicable to legacy systems, which must be evolved at a much more gradual pace using a waterfall approach, DevOps can be applied when it comes to systems of differentiation—which include decision-making, pricing, analytics and risk management tools in the middle office, as these tools will need updating more often to accommodate changing business practices or customer requirements.

    Creating cross-functional teams that include business analysts, developers, data scientists, QA, UAT and compliance experts means there is collective focus and responsibility for the delivery of applications. It also enables more agile development so that applications can be pushed through to the production environment continuously, rather than simply throwing a finished product over a wall with little care as to how it performs.

    In recent years, IT increasingly has been seen as a business driver. As software development methodologies and practices that rely on a collaborative culture continue to mature and further prove their value, partnerships between larger organizations and disruptors will be viewed in much the same way.

    — Mitesh Soni

  • Leading Business Transformation From the Top

    Leading Business Transformation From the Top

    From their inception, new agile digital disruptors have realized the importance of centering their business objectives around value and technology, making it vital for traditional incumbents to follow suit. If waterfall organizations ignore this challenge, their ability to innovate and react quickly to market changes and new customer demands is threatened. To change and succeed, the active involvement from the C-suite is essential to instill a cultural shift, placing value and people (employees and customers) at the center of any transformation.

    Sounds easy, doesn’t it? Well, actually, it is.

    At the heart of any transformation, there are common themes among agile organizations that, if implemented correctly, can have a major impact on productivity, innovation and the ability to grow market share, while enhancing the customer experience.

    Be Value-Driven

    Being value- and purpose-driven should be at the center of any organization wanting to be more agile, with a strong focus on the customer. To serve the customer, your organization, team and individual purpose must be explicit and aligned to one another. This ensures that every team member is directing their energies for the same goal to unlock the full potential of the business.

    On the surface, you may think this is already happening. Some boards are setting objectives related to the customer or efficiency, but too often this message gets diluted due to an inconsistent approach to determining value and prioritization. Often, decisions are not based around customer value because customer thinking isn’t extended throughout the value chain. Frequently, when decisions are taken in isolation, work that could offer true customer value is missed altogether. For example, fixing certain tech debt is often prioritized without the consideration of customer value, which contributes to waste. Value may be lost due to legacy processes, such as planning, budgeting and forecasting, which can slow organizations down.

    A lack of feedback loops and continuous planning can also impact business velocity, with the board needing to listen to product teams, as they are closest to the customer. This ensures that any reprioritization by the board is based on value, which is then filtered down once again, giving the product teams confidence to make decisions that will positively impact the customer. Traceability is increased further by implementing a story hierarchy, allowing everything from initial concepts, features and detailed user stories with acceptance criteria in a structured, easy-to-follow way.

    Do

    1. Ask what the value of any initiative is, even at the feature level, making sure it aligns with the organization’s objectives.
    2. Create true transparency of organizational alignment via a consistent hierarchy of work.
    3. Understand and organize around your value, helping teams relate to the customer and your goals. Too often teams are functional or system-based and don’t appreciate the end user experience, making systems thinking harder to achieve.

    Don’t

    1. Prioritize based on effort, which is a typical waterfall anti-pattern. Small, easy, quick wins will only reduce the capability to deliver true value.
    2. Set up projects to deal with regulatory change. Consider these as any other non-functional requirements and add to the product teams’ backlog.
    3. Organize in functional silos with work having to be passed between them to be completed.

    Create Teams Around Products

    In the world of agile, teams siloed by function rather than products don’t work. They’re too removed from the customer, require process hand-offs and often have competing objectives, resulting in work not focused on value. Small product teams stay close to the customer and quickly adapt to sudden market changes and differing customer demands. When done well, these teams are consistently more productive, morale is higher and better-quality products are released to market faster, with a lower risk of failure than traditional methods.

    To do this, teams need to be carefully constructed with the right multiskilled people who complement the product, including non-IT roles, such as sales and marketing. They should ideally be no larger than 10 to 12 people or “two pizzas” (see Brooks’ Law), which makes them highly productive and accountable, empowered by clearer visibility and effective collaboration. Organizations with large monolithic systems will find this challenging due to the amount of responsibility placed on the team. Breaking these down into loosely coupled microservices can help by reducing the scope of accountability to a manageable size.

    By having teams work this way, products can have funding associated to them, with product teams directly mapping to this. This makes it easier to track ROI, which is a better metric to measure output compared to capex or opex. As a result, legacy reporting needs to change, too; the metrics you really need are cycle time, right first time (quality) and customer experience. These are then used by product teams to understand how they are contributing value. All these metrics can be generated automatically and made available through dashboards; gone are the days when PMs and PMOs need to chase developers for updates.

    Do

    1. Value teams and individuals in value creation roles and remunerate them accordingly, considering product ROI. In particular, rockstar engineers should be able to increase ROI, and should be retained at all costs.
    2. Break monoliths down into microservices. These are smaller in scope and more manageable for a single team.

    Don’t

    1. Set up project teams, which by nature are short-lived and reduce accountability. Empirical data shows that stable teams are 60% more productive and 60% more responsive to customer input than teams that rotate members.
    2. Track value through project accounting metrics–opex/capex split doesn’t help make decisions, it only creates management overheads that demotivate people.

    Create an Engaging Working Environment

    Globally, two-thirds of employees are not engaged. This means employees turn up for work but do not apply themselves and offer minimal effort. By having an agile mindset, implementing a set of principles based around value that everyone works to, gives employees the confidence when making decisions. Even if the outcome isn’t exactly what was expected, having a fail-fast attitude can allow continuous learning and improvement to flourish—the only way to evolve is to fail. It also helps create a culture where engaged employees feel valued and psychologically safe.

    With an engaged workforce, people collaborate more, helping knowledge and skills to be shared, boosting innovation. This notion is supported by the Medici Effect, where the greatest innovations are created by the “intersection of ideas, concepts and cultures …” This environment doesn’t just have an impact on innovation: According to Gallup Business Journal, engaged employees can be directly related to increased revenue. That isn’t all: Compared with disengaged teams, engaged teams show:

    • 24% to 59% less employee turnover.
    • 10% higher customer ratings.
    • 21% greater profitability.
    • 17% higher productivity.
    • 28% less shrinkage.
    • 70% fewer safety incidents.
    • 41% less absenteeism.

    Leaders should make space and time for diverse new ideas to emerge but must maintain an overall sense of purpose. It is their responsibility to help people resist the urge to converge quickly on a solution without feeling they lack direction.

    Do

    1. Empower your people by trusting them to do their jobs, which in turn will create value for the customer. As Richard Branson said, “I have always believed that the way you treat your employees is the way they will treat your customers.”
    2. Embrace failure and learn from it. The fastest way to innovation is through experimentation and learning. Delivering in smaller increments reduces the risk and investment and gives results quicker.

    Don’t

    1. Assume you have all the answers. Allow your employees to develop a collaboration of ideas to identify one possible solution to a product or process design challenge and find seven possibilities.
    2. Expect innovation to happen in a vacuum. It’s not the responsibility of a few individuals but rather one big team. Value new ideas from your employees and create an environment where innovation can flourish and is rewarded.

    Outside-In Focus

    Although trust in your employees and understanding their motivations promote increased productivity, if organizations ignore their customer pain points and don’t have the ability to adequately respond to customer feedback, all other efforts will be in vain. Leaders need to consider what is happening outside the organization and be aware of customer demands, as well as market trends and behaviors.

    In one of the most recognized cases, Blockbuster’s demise, many consider digital disruption paved the way to administration. In reality, it may well have been the company’s difficulty to innovate quickly enough compared to more nimble competitors. Blockbuster was savvy enough to see the rise of Netflix as a threat, but internal legacy processes made it more difficult to react. When it did act, its traditional way of working led to a proposed solution costing circa $400 million, which led to investors struggling to see ROI, so deemed it too risky.

    A more agile organization could have responded quicker and with smaller increments (MVP), making its overall solution cheaper. Further analysis would have also identified that the cost of technology advancement would decrease and support services would evolve. Being set up as an agile organization and assessing outside influences, Netflix had also foreseen the move from the traditional VHS-versus-DVD market to what customers really wanted: video on demand.

    This is no longer a choice; all leaders must be aware of outside influences (PESTEL) and emphasize the use of consumer analysis and encourage their employees to put themselves into the end user’s situation. By doing this, agile organizations can adapt to market forces and customer feedback quickly, helping to prioritize the backlog and provide value.

    Do

    1. Take feedback from the customer early, feature toggling and canary testing are great ways of enabling this.
    2. Constantly research, analyze and understand the effects outside influences can have with business and customer alignment, and the impact on value.
    3. Respect your competitors and the new kids on the block. They may have seen something you don’t.
    4. Understand how technology can and will change consumer expectations and habits. Evolve your products accordingly.

    Don’t

    1. Rely on past successes to survive. Phrases such as, “We’ve always done it this way,” and, “We’re too big to fail” should never be spoken.
    2. Dismiss information (shoot the messenger) because it’s a tough pill to swallow and will require significant change within your organization.

    If the above organizational attributes are not realized, the chances are that your business is not agile, so a shift in mindset is necessary to establish a new way of working. This will only happen if the CEO leads from the front, embraces agile personally and creates an engaging working environment where work is prioritized by value and people (employees and customers). Then, and only then, can innovation thrive, boosting productivity and helping your business to react fast enough to changing market forces and remain competitive.

    — Louise Cermak