Why are organisations, everywhere, political, commercial, and social, increasingly unable to manage their affairs?
Why are individuals, everywhere, increasingly in conflict with and alienated from the organization of which that are part?
Why are society and the biosphere increasingly in disarray?
Dee Hock, CEO BankAmericard Inc
In 1970 when the Bank of America decided to cede control of the BankAmericard program to the franchise holders one of the greatest experiments in organizational design emerged. Through leading the National BankAmericard Inc, Dee Hock managed to create alignment across a number of license holders while at the same time encouraging each of them to innovate and create experiments within their immediate networks that could be rolled out to the overall network if successful. Any company is a balance between systems (preserving the status quo) and innovation (creating a new future). Technical founders appear to be well positioned to manage the balance between exploration and exploitation that’s required to build a successful company. Dee Hock was able to create the foundation that lead to a brand that everyone is familiar with today.
There are three types of value in an organisation
Arguably, there are three key pieces to building a sustainable business; Financial Management, Business Management, and Creative Management. The first two aspects have volumes written about them. Financial Management refers to the ability to pool funds (via limited liability enterprises), generate a return on those funds, and then disperse those funds to the interested parties. Business Management is the process of executing the resulting systems that come from the process of innovation, giving line cooks the recipes and ingredients to dish up the goods. Creative Management is less well understood, it refers to the system used to optimize the discovery and realization of previously undiscovered value.
Dee Hock found early on that if he was able to give employees visibility around the overall objectives and empower employees to complete the most important tasks that contributed to the overall mission, they were more intrinsically motivated than academic literature at the time would have suggested. Distilled further, there are four elements that need to be imparted to the workforce to foster a strong creative culture:
1. Need — a thing that needs to be created, something that’s missing from life;
2. Belief — a belief it can be created, that the idea is possible, even viable;
3. Opportunity — a career opportunity to create that thing, a chance to do it; and
4. Anticipation — shared anticipation of the better, envisioned future.
The first two elements (Need and Belief) refer to the leader’s ability to project a vision to the employees. Creating an image of a brighter future that they want to be a part of and then breaking that down into a manageable roadmap so they know how to get there. The organization needs to be given the resources (Opportunity) to be able to create that future and then finally to know that they will be a part of bringing that future to reality (Anticipation).
Understanding the creative cycle was one of the founding principles of A16Z. They understood that founding CEOs are excellent at “finding, but not maximizing, product cycles” and that a successful business is a series of asymptotes, each product building on the previous experience. Professional CEOs are better at the Business Management aspects, given a cook book, they will sell as many of those dishes as they possibly can.
Technical CEOs have experience managing the value discovery cycle. They embrace the goal of getting the cost of failures down and keep the rate of learning high. This is the nature of software development. Consider this remark from Jeff Bezos when the Fire Phone failed, “If you think that’s a big failure, we’re working on much bigger failures right now. And I am not kidding. And some of them are going to make the Fire Phone look like a tiny little blip.” This is not a person that suffers from the Innovator’s Dilemma.
From the iism article, “Failure avoidance is, straight-up, a combination of success conditioning and brain chemistry, and it leads to us feeling that starting from a known good place is more valuable.” However, most innovations that create value come from the fringes of acceptable current practices.
It’s important to understand that organisations are living breathing organisms. An HBR study found that employees who took change management roles and oversaw a reorganisation realised that a lot of what they had taken for gospel was just an ad hoc solution that worked for the organisation at that point in time. Those that undertook the restructuring also felt that there was a lot of routine work that didn’t create value, adding weight to Graeber’s concept of Bullshit Jobs.
At National BankAmericard Inc they found that it was suitable to enable teams to come together to engineer solutions to problems (Creative Management) before dissolving and returning to the operational aspects (Business Management) of their jobs. An organisation needs to have sufficient structure to allow it to repeat the recipes of success but also enough flexibility to enable employees to pursue meaningful challenges that create new innovations.
Embrace failure and celebrate learning while taking value attempts, where the cost is low compared to the available resources or potential outcome. Schools typically discourage value attempts, preferring a “right” answer over the novel creation of a process to reach a suitable outcome. There are going to be more people that fail to reach their potential because they don’t take a sufficient amount of value attempts and instead prefer to adopt known paths with known outcomes.
National BankAmericard Inc was renamed Visa in 1976 and is now responsible for over $11tn in transaction volume annually. Its earnings are growing at ~15% CAGR as it continues to innovate and create new products to a globally connected network.
Read more at endeavour ventures