Category

Disruption

The Luna MBA 2014 Update

By | Agile, Development, Disruption, Education, Lean, Organisation | No Comments

Two topics remain consistently popular on our little LT site… Agile Workplaces and the Luna MBA.  Just as we encourage all our clients and friends to keep reading and learning so we do ourselves and so we present some new reccomended additions to the MBA… If you’ve finished the current list then consider this extra credit for your degree.

Adapt: Why Success Always Starts with Failure – Tim Hardford

A remarkable, if slightly repetitive set of stories showing us the unpredictable path to true innovation. He starts with the story of Palchinsky at the turn of the 20th century who may have just invented Agile approaches analysing the Russian ecconomy even before the ship building yards of the first world war; Of course he was exiled to Siberia for his efforts. He also explores our aversion to variation and experimentation – the tendency for governments and corporate bosses to love large and grandiose projects instead. As Hardford points out the proliferation of iPhone and Android apps has hidden the uncomfortable truth which is innovation is harder, slower and costlier than ever before. All the easy problems have already been solved. I’ll leave you with a quote from the book to inspire you to buy and read it.

‘Return on investment is simply not a useful way of thinking about new ideas and new technologies. It is impossible to estimate a percentage return on blue-sky research, and it is delusional even to try. Most new technologies fail completely. Most original ideas turnout either to be not original after all, or original for the very good reason that they are useless. And when a original idea does work, the returns can be too high to be sensibly measured.’ Read More

Agile Encore – Workshop and Talk – Nov 14th 2013

By | Agile, Disruption, Education, Lean | No Comments

I talked about one of our favourite clients BAUM Cycles at Agile Australia 2013 in the middle of the year – It must have been popular because I’ve been invited back for the Agile Encore in Melbourne on the 14th.  I’m also running a workshop in the morning before the afternoon session – Here’s an insight into what you’ll get !

Afternoon Talk – Agile, Lean, Broken Ribs and a World Champion

Taiichi Ohno was reputed to take new graduates at Toyota to the factory floor and draw a circle on the ground. The graduate would then be told to stand there and observe; if upon his return they had not seen enough then he would tell them to observe for longer. While it might feel like something out of a Karate Kid movie Taiichi Ohno was really teaching a simple lesson. The only way to really understand a problem is to go to where it happens and see it.

Admiral Rickover (father of the nuclear submarine) understood this only too well and long before the Toyota Production Systems day he would force ships’ captains into boiler suits to crawl the bilge of their ships with him looking for problems on ships in for repair and refitting.

“What it takes to do a job will not be learned from management courses. It is principally a matter of experience, the proper attitude, and common sense – none of which can be taught in a classroom… Human experience shows that people, not organisations or management systems, get things done.” – Rickover

Genchi Genbutsu – Go and See.

How then do we do this when more than 90% of us are creating virtual things – intellectual property, software, design or products – not something you can drop on your foot?

One of Luna Tractor’s most interesting projects over the last year has been working with BAUM Cycles. Their bikes are widely regarded as the Ferraris of the bike world, ridden by world champions who pay their own money and line up like everyone else. In a small, sometimes hot, often cold and dirty factory on the North Shore of Geelong, they have been steadily shifting the operation of the entire business to an Agile and Lean process.

With a blue collar workforce, most factory language unprintable and the background noise a constant mixture of Triple M and machinery; some different approaches are required.  Hear real world lessons about Lean flow, physical stock management; Agile sales and customer service along with who ended up with the broken ribs.  Get a sneak peak into the new factory design that we are currently building also.

You can sign up and see the rest of the program here – www.agileencore.com/index.html

Morning Workshop

In addition I’m running a workshop in the morning covering a wide ranging background of  Agile, Lean and Systems Think as it can be applied across a whole organisation.  This session will be great for beginners and experience agilistas alike with a focus on the background, and philosophy of Agile, Lean and Systems Thinking as well as interactive discussions about how to practically start using these approaches right across your organisations – not just in IT.

Full Details and workshop sign up here – www.agileencore.com/workshops.html

PS: Use the code ENCORE-JAMES to save $100 on the workshop.

Ground Hog Day

By | Agile, Disruption, Strategy, Technology | No Comments

I just saw this graphic of American Print Newspaper Advertising (adjusted for inflation) and had a strong sense of deja vu:

Exhibit A: Newspaper Ad Revenue in the US

Exhibit B: US Recorded Music Revenue in the US

Business Insider points to journalist Jay Rosen’s comment that the peak for Newspaper Ad sales lines up with the birth of blogging online.  I find it fascinating and terrifying that we see this same pattern of the rapid disruption of business models, with industries succumbing to seismic changes being repeated time and again across unrelated verticals.

The speed of the change can result in the digital companies that inherit the previous analogue dinosaur’s world only working in a market a fraction of the size of the old industry. The money, and the consumers, just go elsewhere.

Chaos theory shows us how small changes in the fundamentals can cause such different results in otherwise deterministic systems, and that the changed results are often so dramatically different that it is likely to be impossible to predict. Not even in your 5 year plan you paid consultants to write I’m afraid!

Nigel and I have thought about this quite a lot in the past when we invented our Dalton-Pierce Disruption Quotient.  Indeed it was one of the drivers for starting Luna Tractor itself.  Predicting these changes is one thing, but learning how to respond faster is really the only thing you can control. Resilience and speed to learn are the new competitive advantages.

The lifecycle times for industries and business models are getting shorter too. Maybe they relate to the build time of a dynasty or maybe something else – cultural inertia, stickiness or just a generational change.  Older, more traditional businesses (like newspapers, broadcast TV or music) may take 50 years to build and 10 years to decay.  Younger inventions like fax machines have already come and gone, along with many early dot comm successes (MySpace anyone?).

The early giants of computing are all fading fast or changing their business model. With Apple selling more iPads in the last quarter than any computer-making rival sold laptops or desktops, I’ll have a bet (with anyone that will take it) that computers are next … via Ars Technica

Exhibit C: Sales of Smartphones and Tablets vs Computers.

Apple and their iPhone commands around 80% of the profit from Smartphone sales while all the other makers struggle to sell units at any price (note Samsung is a minor exception to this, Apple and Samsung are the only games in town really, hence the large fuss over their recent court dealings).  Google tells us that we search more on our phones than on our computers now.  Where is the peak for Smartphones, and I wonder what will disrupt them?

WHY ?

By | Agile, Communication, Customers, Development, Disruption, Lean, People, Strategy | No Comments

At various times I’ve heard Fiona, Nigel and myself telling people “If you only adopt one Agile practice make it the retrospectives” … But why ?

The boards are useful, but they are really just give you a prompt when you talk at your stand ups, and those are just an efficient way to make sure everyone is communicating.  While the demos and showcases give some social incentive to produce real things and check your progress over a useful timeframe (weeks not months or years).  But … The retrospectives (or reviews), that for me is where the real magic happens.  If you never stop to check, to ask how things are going and question why things are the way they are, why you are doing things and what you should do next in response then you risk having  the veneer of an Agile process which is either just micromanagement on the wall, Waterfall or perhaps worst of all, no real plan at all.

Being Agile isn’t enough.  Being Lean isn’t enough.

It’s all to easy to build and do the wrong things very well and very quickly using these techniques.  Perhaps the single most important thing is that your CEO, your leaders, your product people and you need to understand, ask and articulate is WHY you’re doing things.

If it’s a statement about profit and growth, start running. The powerful WHYs come from passion and insights from your customer (or potential customers if you’re doing something new).

WHY –> WHAT –> HOW … Simon Sinek

There are two standout statements in Simon’s TED talk.

“People don’t buy what you do, they buy WHY you do it.”

“There are leaders and there are those that lead. Leaders hold a position of power or authority, but those who lead – inspire us. We follow those who lead not because we have to but because we want to, we follow those who lead not for them but for ourselves.”

Too many companies and individuals talk about what they are doing, the great ones talk about why.

Luna USA Field Trip: lessons for the future of retail in Australia

By | Customers, Disruption, Lean, People, Retail, Strategy | No Comments

If I had a dollar for every whinging column-inch where our Australian newspapers copy and paste press releases from Myer, David Jones and Harvey Norman’s PR departments, blaming the dreaded interweb for the end-of-days in our retail stores, I’d be wealthy enough to buy my Levis from DJs all the time. Which is another story, but to be fair, a related one.

As data from Marketing Magazine recently reported, and as I have duly illustrated above, online sales (the pirate) amounted to a mere 4.9% of total retail revenue in Australia. You’d think it was 49% the way the captains of industry are moaning! You would have to take the 15 top-ranked etailers (look away venture capitalists) to beat Myer’s sales in 2011.

Three quarters of those etailers are Australian based (like recent Melbourne niche startup Oola Toys, catering for quality kid’s toys online), belying the hysteria that the foreign pirate devils are plundering our shores.

Like pirates, etailers are moving fast and nimbly, growing 29% per year, but it’s a perilously small base, and although the power of compound growth of that kind is well-noted by economists, the pirate’s flag was visible from a great distance.

In the long run, can ye olde worlde Australian retail survive this onslaught from the internet? Will websites that enable people to self-serve, in their own good time (websites rarely snear “you’s been fixed?” while texting their mates on their iPhone), with near perfect information on price and quality, put bricks and mortar to the sword?

What’s particularly disturbing as Luna Tractorites, is that while we wait for the millionaire boys club to figure it out, the Australian retail experience just seems to get worse, accelerating our move online. As management consultants advise the command and control CEO-classes that the only sure-fire road to profit is cost reductions, they cut wages, staff numbers, staff benefits, premises and service.

I just don’t buy all their complaints about retail rents and wages. As this report on the state of Australian retail by The Australia Institute shows (yes, I know, they have an axe to grind and I should declare, distantly linked to my new employers), there is plenty of misinformation being spread at present to discombobulate us all.

Australian CEOs should know by now that by their very nature, big consulting firms will only recommend a cost-cutting program, since a well-known result of an ideas or innovation-based strategy is that some of the ideas won’t work. Cost cutting always gets a result for a CEO, and since they’re only going to be in the job 2 years, the next guy can handle the fallout.

The less than 5% of Australian retail sales that ecommerce plunders appears to have undone the psyche of the highly paid leaders of our big retailers. Their inability to grasp pure online is only surpassed by their choking over their morning tea and tim-tams trying to figure out how to make online and bricks & mortar stores work together. Which the rest of the world has had a better go at I might add – according to the Marketing article, 13 of the top 15 etailers have a bricks and mortar presence of some kind.

The web is growing fast too, off that tiny 4.9% base, and it appears nobody near the top of big retail has a single good idea to play. Remind me again why we pay them so much?

To add final insult to big retail’s EBIT injuries, the Australian ecommerce industry is still sexy, bright and cool 12 years later – and still attracting talent and investment. And more often than not, attacking using small teams moving fast and agile.

Luna Tractor sent me to the USA in May 2012, the land of BIG retail, and I am pleased to report that whilst on assignment, I have seen the future.

Knowing a fair few camera nerds (James, Gus, Jamie, Steve I am looking at you all), they often recommend a website called B&H Cameras, based in the USA, as trustworthy, value for money and easy to deal with. The 3 horsemen of the retail apocalypse.

And thus, being in Manhattan for a few days, I felt duty bound to check them out.

The approach, from Penn Station through roadworks and fairly drab streets did not auger well. The only retailers in this area were basic, small and a bit sad looking.

Eventually I spotted a nondescript B&H sign, and a couple of traditonally dressed and coiffed Jewish guys sitting outside the door to a loading dock, looking exhausted from their morning’s work, and seemingly pleased to be in the open air. Hmmm. Entrance round the corner. Okayyyy.

Round the corner, in the front doors and BAM! Like a cross between Penn Station and Willy Wonka’s factory, there are people everywhere, and the zziiippp, zzziiiippp sound of machines, rollers and gears. I look up to see green boxes flying around gantries above our heads at high speed, like a Terry Gilliam film.

Photo from wikipedia

With electronics gear everywhere. It’s about the size of a decent JB HiFi store in Australia. On each level!

It is immediately explained to me I should check my hand-luggage in at the concierge, and then I’m free to head into the store.

Nondescript on the outside, treasure trove on the inside. Hundreds of customers, and dozens more of those mysterious traditionally-dressed Hasidic Jewish men. They are everywhere, chatting to each other, chatting to customers, laughing, looking serious,

Level 1 of B&H

debating, calling out to one another. I quickly get the picture they own and run the business.

My genuine requirement (and yes, there is one my dear family) is a couple of packs of Polaroid’s new zero ink ‘Zink’ printer paper, for the gorgeous little GL-10 portable printer we use. It is portable, battery powered, and most importantly, emulates the look of a genuine old Polaroid camera print. Essential cool.

Having bought the printer at Michaels in Melbourne, I figured I would acquire more paper on the road in the USA easily enough. I figured 100% wrong, as I found in San Francisco, Minneapolis and Boston. “Polaroid?” they all said. “What’s that?” or “they went out of business”.  Even the specialist camera stores blanked. At worst I got the surly ‘haveaniceday’ which translates to ‘whydidIwastetimeonyouloser’.

I wandered upstairs at B&H, seeing the family safely despatched to check out the world’s largest 3D televisions, and am once again taken aback by the sight. Not dozens of Jewish men, but hundreds.

Product is divided by brand, and by categeory. A whole shop-sized stand of Canon cameras, of Nikons, Leica, and Olympus. Printers arranged accordingly. Historical displays. Apple computers, Sony, you name a brand, it’s there. I am drawn to the Polaroid and instant camera stand, and to my utter disappointment see their old Pogo printer and a paper rack saying ‘out of stock, new product coming soon’. Images of the Lady Gaga designed GL-10 printer as a paper weight flash into my brain.

“Sir, you look like you saw ghosts” says a man at my elbow. I explain my problem, what I want, and he steers me by the elbow – “it’s not my area, but come over to where the printers are, we’ll see what we can do”. I am introduced to the 3 printer guys, who have the tiny range of Polaroids (there are only 2 printers, and a couple of cameras) on their shelves.

Then my server shocks me – he opens the freaking company website on a computer on the stand! I quickly jump to the conclusion that the game is over, and I’m about to be sent home to order it on the web.

To have a retailer even admit they have a website is rare enough, but using the site within the store to actually assist a customer even rarer. There’s no commission on that sale surely! Having got a visual check on what I want through the use of a quick search, the guy CTRL-C’s the product SKU, alt-tabs to another boring old mainframe looking screen, pastes it in, and whammo, we have an order.

“Were you thinking of anything else on today’s visit?” he asks. As it happens, I have ummed and ahhed over a simple 50mm f1.4 lens for shooting indoors for a while. “Do I have to go somewhere else for lenses?” I ask. “No, no, if you know what you want we’ll find it” comes the confident reply. One website search, visual confirmation, cut and paste of the SKU, and I am done.

The B&H service counters where you inspect the goods brought up from the warehouse. Spot any queues here?

I now expect my guy to take me to a till and ring it up. Silly me. Nor does he point and tell me to wait in the queue over there. He TAKES me to a free service person at the biggest customer service counter I have ever seen (I counted about 70 stations), and introduces me to the next guy in the chain. Then he waves goodbye and goes back to the printer display.

I have a small ticker-tape printout in my hand of the items, with a bar code. I am greeted, the serving guy simply scans the code and suggests I try one of their delicious candies, as the goods will be a couple of minutes. Ummm, so where are they then?

In under 2 minutes, 2 green boxes with my lens and paper arrive on the invisible railway underneath this gigantic service desk. I get my credit card out, ready to pay. “Oh no Sir” he waves my card away, “we’re just going to let you check the items are what you wanted – you will pay downstairs at the next step…”

Now really intrigued, I decide to race the items downstairs. My effort to beat them will doubtless be foiled by a queue at the payment counter though. Except there isn’t one. In fact, I have not seen a queue anywhere in the entire store. Payments is only the second place I have seen any women in the store at all (the first was bag check). Six checkouts for credit cards, 4 for cash and cheques.

Having paid, I am ushered over to the collection counter, where my items, with warranty cards filled out, my receipt stapled to them, have been delivered by the magic railway and are in a bag ready to collect.

Boggling.

So what has happened here? Well, given that these guys have been in business for decades, I have just learned where Steve Jobs got his Apple Store commerce and Genius Bar service processes from.

B&H are basically masters of FLOW, and ensuring that value is accruing the whole time for the customer.

B&H have counter-intuitively divided up the value stream into discrete parts that are delivered rapidly by discrete people. In a time where everyone else is cutting staff numbers, training and service levels, they are dialing those factors to 11.

They have worked out the bottlenecks in their store flow, and simply calculated the required ratio of servers, inspection staff, cashiers, help desk and collection staff based on the pull of customer demand.

They also have a booming website business, shipping huge quantities of product across America and the world, with integrated logistics partners like Fedex. To comply with traditional Jewish law, they are shut on Saturday, and do not even process internet orders placed on a Saturday. The system just queues them up for Sunday.

Now, I’m not saying they are perfect. According to Wikipedia they are defending a 2009 lawsuit focused on the lack of progress opportunities for women in the store. I can see how that arose!

But between innovators like Zara (right next door to our David Jones in Melbourne’s Bourke Street Mall, and as busy as DJ’s is quiet), Michaels and B&H, there’s hope that a retail shopping experience in Australia can still be a pleasant, and profitable one.

Just don’t expect any consultants to recommend that strategy any time soon.

Luna USA Field trip: more skunkworks reflections

By | Agile, Disruption, People, Strategy, Technology | No Comments

Like so many exhibits in the Smithsonian Air and Space Museum, this plane is not a replica, a copy, or a later model. This actual plane is the very first jet fighter produced by Lockheed Martin’s skunkworks team.

The 14 rules of the Skunkworks, written by Kelly Johnson of Lockheed Martin in the 1940s are are clear antecedents of the 2001 Agile Manifesto, and the Agile Principles behind the manifesto.

Kelly Johnson congratulates the test pilot for the new Lockheed Martin jet fighter, the same plane pictured above 60 years later.

James talks about Skunkworks in our YOW! presentation, which you can view here on the YOW! site.

Kelly Johnson, the leader of the Skunkworks organisation, had one core principle – everyone needed for the design, build, testing and launch of a plane would be in the team, and in the room. Engineers, pilots, welders, engine-makers, contractors.

This principle was brought to bear on the Allies’ big business problem in 1943 – the Germans had developed a jet fighter, capable of 50% more speed than a British Spitfire and the famed US P51-D. Eschewing the usual ‘big design up front’ period for a new plane, they went to work in a hangar and 143 days later were flying the first US-manufactured jet.

One of the secrets of the speed to market of the design was the way the plane was constructed. The tail piece, which contains the engine, could be folded back in several simple panels to reveal the entire jet unit for servicing or replacement, allowing rapid changeover and trying alternate designs.

The customer problem. For solution, see above.

At the Smithsonian, they have the problem and the solution arranged side by side in an exhibition honouring the jet engine and the Lockheed Martin’s amazing new approach to product development.

Luna USA Field Trip: Wright Brothers – less money, less resources, more innovative

By | Agile, Disruption, Strategy, Technology | No Comments

The Smithsonian Air and Space Museum in Washington DC, a treasure trove of lean and agile lessons for Luna Tractorites.

Simon Sinek has a great talk on the rivalry at play in the early part of the 20th century to successfully fly a heavier than air, powered aircraft.

It is an important tale for agilists, as the small budget and time/ weather constraints faced by the Wright’s forced them into a design that was low cost, modular, easily repaired, and could be iterated on very rapidly. With which they killed the competition. I won’t repeat it – check out the Ted Talk I have linked above.

Having generated the design for the innovative flexible wing surface to allow more control, the Wright brothers developed tools to hypothesise, test and redeploy elements of the planes in days and weeks, where the opposition (funded 20x better) took months.

Their work with a primitive wind tunnel enabled them to test quickly, and they questioned everything – including apparently proven mathematical formulae for key factors like lift co-efficients.

This image of the brothers’ workshop taken from the Smithsonian exhibition.

In the Smithsonian Air and Space Museum there is an exhibition devoted to the brilliance of the Wright brothers, which attributes their success to genius, and the short cycles of innovation and testing real, flying, machines.

The star of the exhibition is the original plane. Yes, the exact original, with new canvas stretched onto the frame in the 1980s to replace the rotted old 1903 covering. Three hundred feet in the air, strung up in a wooden, wire and canvas device, it is the best definition of a ‘commit’ that I can imagine.

Perhaps the most remarkable thing is not the first flight in 1903 – but that only 10 years later, a plane successfully crossed the Atlantic. The next big barrier, a private plane in space, was 100 years away.

EXCLUSIVE! Australian incubator launches Airbed.com, hot new social travel transaction platform

By | Disruption, Strategy | One Comment

1 April 2012

Luna Tractor has been leaked advance details of the hottest new internet property to emerge from The Y-Axis, Melbourne’s most successful  incubator and startup investor, proof positive of the benefits flowing from one of the nation’s first NBN hotspots in Brunswick.

“Airbnb were so conservative, they  never really showed signs of being brave enough to take their platform to its logical limits” say the Airbed.com founders in their embargoed press release. “It’s all very well letting out your front room, or your sister’s apartment while she is away for the

The bed as a platform.

weekend, and saying how cool and social it will be – but we all know what that really means for travellers! It’s about the bed as a social platform, stupid!”

It follows then that Airbed.com will be far more ‘mocoloso’ (mobile-cool-local-social) as a platform than any of its competitors. Mocoloso was the key term being used by the VC Community at this years SXSW trans-media conference somewhere in the USA, which none of the airbed.com founders could actually find, but they have been to America.

Slavishly following the Eric Ries ‘Lean Startup’ model, Airbed.com operate 100% in the cloud with virtually no servers, no software (“code is SO last Thursday” says the CEO), use an agile methodology, and focus heavily on the use of RESTful APIs. “Soap APIs were frightening off some of the bohemian clients from the Northside in our user trials” says the airbed.com CEO in the leaked release.

The startup team has ‘pivoted’ once already – their first website was called airbnd.com, a social travel guide that enabled travellers to locate and access B&D (bondage and discipline) services. “We ran into the iTunes store, and some silly issues over the logo, so we pivoted immediately.”

When asked about the obvious similarities to established Californian social travel business airbnb, the founders countered quickly: “this is the Y-Axis incubator’s innovation secret sauce – we’re fast followers. Mostly we like to copy people’s websites and use Powerpoint to cut and paste new logos and stuff over the top of old ones.”

37 Signals website fails to use the Y-Axis standard font of Helvetica. "It's a wonder they are still in business with that UX" say airbed.com founders.

“We saw the US dot com industry was now just duplicating 37Signal’s website as a standard business model. We tried that of course – but our Macs have had all the fonts deleted apart from Helvetica, which led us to airbnb’s site – they truly understand design in the Brunswick sense”.

There are already mature interfaces to travel social dating services like Grindr, and strong rumours of a 4Square API in the summer. “Essentially, airbed.com have totally out-localled the specialists with this offer” says internet commentator Buzz Reilly. “A room? That is yesterday’s business model – nothing could be more local than a bed. With a local in it, preferably”.

The iPhone app is planned to be in store in the next few weeks, with ‘epic’ new interfaces to accommodate its use when intoxicated. There are also strong rumours of a corporate platform being developed, though the rumoured partnership with Blackberry have been scotched by commentators. The likelihood of any of the airbed.com services catching virally is considered extremely high according to their PR Agency.

Airbed.com are looking to raise around $20m for Series B, having begun their business using only the Burger King sponsored free wifi on the 86 Tram and two iPads, occasionally having to get off to avoid MYKI inspectors and to source long macs.

“Actually, we were hoping for a big mezzanine, but some douche put it on airbnb.com, some Japanese college students booked it, and there was no room for us” notes the disappointed airbed.com CFO and founder.

From Insight to Strategy to Innovation – while standing at the Toyworld Checkout

By | Communication, Customers, Disruption, People, Strategy | 2 Comments

Listen up lean and agile thinkers. This is a simple illustration of the kind of things that make innovation and strategy easy – a gift from someone on a toy shop counter that probably earns less than $20 an hour. Are you this smart? This brave?

With a 10 year old in my household, it’s little wonder I am a fan of Lego. From my own childhood memories, to their inspiring recovery from a near death business experience (after their long-standing patent for bricks expired) just by listening to customers and innovating the product accordingly, it is all good.

One of their recent products puzzled and infuriated me though. It is a single Lego minifigure in an opaque cellophane packet – ideal for for party bags for kid’s birthdays; the child at the checkout who MUST spend their pocket money on something (and they are cheap, $4 to $5 each); or perhaps the serious collector to get some custom mini figure accessories and body parts.

Yet, you can’t see which one of the 16 in the series you are going to end up with.

I will thus confess to having spent far too much time at many a big store’s Lego counter with Mr 10, eyes shut, feeling the packets to detect the slightest variation in the components to figure out if the character is Jane Torvill (uncool!) or Toxic Space Engineer (cool!).

Children’s (and collecter of greater years, ahem) ingenuity and social network savvy soon solved it – for Series 1 and 2 they quickly figured out the bar codes were different and published the key. So Lego moved the goalposts, using a single bar code and a system of dots on the packaging to differentiate figures in Series 3. The kids cracked it again.

Series 4 onwards you have no chance of detecting the difference from the packaging. The secondary market on eBay for these figures erupted, and the popularity of the series continued to grow. Business is booming. Yet I’m still grumpy about it. Why?

Why did Lego want the figure to be a surprise? Was that part of their strategy for the product? Perhaps I will never know, and Mr 10 and I quickly became disenfranchised by the whole thing.

So imagine my surprise, when dropping into Toyworld Palmerston North in NZ last week to find the Lego minifigure packets on the checkout counter, with each figure individually labeled with a hand-written number against the official Lego key. “You can’t do that”; “that’s naughty”; “that’s against the rules” were all thoughts that leapt into my rule-obeying lizard brain. Flabbergasted, I managed to regain enough English language ask why they’d done it.

And for the readers who are struggling with why the hell I am writing about toyshops, this is called INSIGHT and is the most valuable commodity you can possess when developing something new. It is Dan Pink’s ‘purpose’ and Simon Sinek’s ‘why’ in the words of a 20 year old shop clerk:

“I just saw the looks on the faces of the kids – so disappointed that they got a cheerleader when they wanted a deep sea diver, and the conflict they had, knowing they had to be grateful, but had chosen a useless gift”.

Now, agilists, here comes the STRATEGY bit – how will you do something about that problem your customer savvy product owner has found a really sharp insight about:

“Did you get an official cheat sheet from Lego on how to do it?” I asked.

“No, no – there isn’t one. We just had time while on the checkout and watching the door, so we checked each one individually, just like the kids would do.”

INNOVATION simply comes from making this a habit now, knowing things like there are only 2 robots in the latest boxes of 100 or so mini-figures, and thinking about which of their customers might really value that robot.

“The hair on number 3 in that set there is cool for making Call of Duty characters” trots out Mr 10 to the girl behind the counter. “Really? My brother is so into Call of Duty – he’ll love that one”. Minifigure #3, the uncool, pyjama-clad kid with the teddy bear just went from ‘can’t shift’ to ‘can’t keep in stock’.

That is called GROWTH.

If you’re smart, you’ll be down to Toyworld in Palmy and hire that lady on the counter for your agile innovation team. She gets it 100%.

Eric Ries – ‘pivoting’ immortalised in a New Yorker cartoon

By | Agile, Disruption, Strategy | One Comment

James and I recently had the pleasure of hearing Eric Ries speak on innovation and product development, through an excellent event called Thoughtworks Live here in Melbourne.

Eric Ries has written a great book called The Lean Startup, which was an important book on our list of 33 texts you should read to get your Luna MBA. His presentation last week did a great job of pointing out how the book is as applicable to innovation within big companies and organisations, as it is the garage-based ‘startups’ – the more popular sense of the term.

One of the most enjoyable moments was Eric’s reflection that he never set out to add a word to the global lexicon of buzzwords around startups, and how the term ‘pivot’ had become painfully over-used over the last 2 years. It is still a key concept in the book, but to some extent obsession with it has distracted from the many other great ideas. Pivoting is all about the moment you have learned your startup idea really sucks, and (in James’ words) ‘you need to take your investor’s cash and try something completely different, quickly and without them panicking and taking all their money back’.

When there’s a New Yorker cartoon based on your new buzzword, you know you’ve made it.

LUNA CASE STUDY: A health insurance start-up.

By | Agile, Development, Disruption, Lean, People | 3 Comments

Luna Tractor has had the great pleasure of working with a small health insurance start-up here in Melbourne this year. This is their story.

The competitive landscape for health insurance in Australia is dominated by a small number of large incumbents that have been in business for many years. Below that are about 30 smaller players who have as little as <1% market share. Many of the business practices of these players are rusted on through highly proscriptive regulation, legacy systems that are common across players, and old mindsets. New brands pop up now and then, but they are bolt-ons to older players and typically somewhat contained by old practices. Even when new products come out, the bulk of an insurer’s book remains “old school” on the former products. There has not been a material new entrant since Medibank spun out of the HIC in 1975.

A small team of innovators came together in 2011 to break into this oligopoly. Setting themselves a tough deadline to be in the market in 2012, the main business challenge that emerged was to develop an effective operating model – a way for a group of seasoned insurance executives and subject matter experts to collaborate at high speed to reach their goal.

We set the company to work using the principles of Agile and Systems Thinking from the start. Instead of each subject matter expert retreating to their office to write board-level strategy papers to present to VCs and partners, they settled into their future headquarters around large Ikea tables with laptops and built a war-room. They defined themselves by this highly collaborative, communications-heavy set of business practices.

The rhythms of Agile serve them well. Daily conversations about everyone’s work-list (from CEO to office support) help avert risk and surprises. Weekly demonstrations of achievements, most of them not software at all but related to building online distribution, new products and governance, get everyone on the same page, and are platforms for the one-hour retrospectives and planning that follow every Friday.

Everyone has cards on the wall, separated into swim-lanes that reflect the key business objectives such as license approval and product development. The board is constructed using a customised ‘Hurricane’ model, ranging from 6 months out to today, in ever increasing levels of certainty and detail.

There were initial doubts about the suitability of Agile from some of the seasoned professionals on the team – having only ever worked in command and control businesses at senior levels, some perceived they were being asked to trivialise their work with index cards, scissors and coloured dots. There was a strong desire to see Gantt charts and more traditional sources of comfort. These concerns soon vanished when the blunt accountability of speaking to their peers every morning about their achievements and work for the day became apparent as the main purpose of the system.

Any concerns that the new way of working was ‘soft’ were dispelled in the many tough discussions about progress at stand-ups. As the team often reflected, it was far better to have many smaller moments of debate, receive timely feedback and correct their course than have a big ‘oh shit’ moment a month later.

In no time new boards sprang up around the walls, developing products in a shared way, and to the team’s delight their distribution partners, new IT team, Board of Directors and the industry regulators expressed their support for this ultra-transparent and interactive way of working.

With time pressure obvious, everyone focuses on delivering the minimal viable product that can be brought to the table for discussion, or validated with customers and experts. That ‘product’ might range from an actuarial analysis, to a regulatory document, competitive information, or a set of accounts – a desire to boil the ocean and deliver a gold-plated answer when 80% would enable an informed decision has long gone from the culture.

The whole business is now being built on this foundation, to be customer-focused and fast-moving. The team’s ability to collaborate, solve problems and correct their course in short cycles is a major competitive advantage they will never lose – and it is clear they will take these into the operational phase of the business in 2012.

Time to competency at working this way? Eight weeks, with one Luna Tractor Partner coaching four mornings a week initially, eventually only dropping by on Fridays for demo, retro and planning sessions.

The new company estimates their return on the investment in Luna Tractor’s executive coaching to be at least 10x.

Masters research on Dalton Pierce Digital Disruption Quotient

By | Disruption | 2 Comments

Remember this post and this formula?

The DPQ was our effort to explain the massive disruption suffered when technology starts to influence customers and business, in particular media and publishing businesses. It has survived many conferences, discussions and debates, but now we’re delighted a graduate student at RMIT has picked it up and will put it to the test for his Master’s thesis.

Matty Soccio is a former colleague of ours at Lonely Planet. He’s from the hallowed world of book editorial, so without our digital fanboy tendencies he will doubtless prove a good cynical tester of some of our predictions – and if he’s a good scientist he will be going in trying to disprove our work! Here’s Matty’s thinking on what he is about to undertake.

Breaking Down the DPPQ

The words ‘digital content’ elicit a plethora of intriguing ideas and misconceptions, though you can’t find fault in those who are out there everyday furiously tapping keyboards or skimming thousands of pages of online information in an effort to understand. I should know – that’s me too.

But why? Why are we spending all this time that we could be making meaningful friendships in the ‘real’ world, attempting to find out more about the struggle to control and ‘monetise’ ethereal concepts that we can have little hope of mastering?

Now that I’ve decided to take the plunge back into the academic world, I’m beginning to further realise the folly of ‘control’ in the digital media landscape. Perhaps the idea isn’t about control; hell, even ‘management’ could be considered as somewhat of a misnomer here. Maybe the word that future electronic publishers should be thinking about is ‘harness’. Harness the enthusiasm of millions of online contributors out there. Harness the power of new devices that are changing the way we consume content of all types of digital content. Harness the joy people get from discovering something new.

In my first semester I’m discovering what my own field of research will be. So far? The extraordinary creators of Luna Tractor have effectively given me free rein to break something of theirs.

As dedicated readers of the Luna Tractor blog would know, a theory called the Dalton-Pierce Digital Disruption Quotient raised a few eyebrows at its perplexing suggestions about the future possibility of continued control and success of traditional paid content business models in the publishing and media sector.

How does the economy affect their ability to attach tried-and-true business models to future technology/consumer trends? Are the old ideas of ‘content economics’ hiding a longer-term problem in the future of the publishing/media sector? Are the devices that people consume media on, and the consumers themselves, changing the way they consume at a faster rate than traditional organisations can keep up? Will digital content (whether it’s writing, video, whatever) continue to have an economic value on it in the near future? Many large traditional publishing organizations hope so. The Dalton-Pierce Digital Disruption Quotient may hold a key to these questions… however, there should be emphasis kept on the term ‘may’.

My aim isn’t to prove or disprove the DPDDQ, but to understand what the theory itself can tell us – is it a proverbial crystal ball or the ramblings of mad scientists? If I can show a subsequent conclusion from the results of the theory, all the better. For now (at these extremely early stages of my research) I’m content to find out if I can further my understanding of it.

If this means breaking it, fine. If it means succumbing to its lure of concrete results, perfect. By blogging my progress readers can hopefully draw their own conclusions from my results, and participate in the never-ending knowledge pool that is the digital world. In other words, to share the journey and knowledge transfer that will help to develop our understanding of this world.

Facebook = AOL 2.0?

By | Disruption, Technology | No Comments

With today’s announcement from Facebook that they have embedded Skype’s video  conferencing service, and the subsequent arrival of all my friends pictures on both left and right panels of my Facebook wall, and the beta launch of Google + I am moved to dust off an old blog post from my personal blog on the subject of the internet and how IMHO Facebook was taking us down the (walled) garden path.

Useful as a history lesson perhaps, or a check on my powers of prediction 😉

Old post begins here…

As some would know, I recently dived back into the seething biomass known as Facebook. I’d abandoned the service (committing ‘Facebookicide’) in 2008, after being stalked by one too many lesbians from Queensland to be their latest collected trophy-friend (me, a trophy?).

From where I sat, it appeared to be a massive online home for the bewildered.

Lured back into the water in 2010 by online community guru @venessapaech and the Lonely Planet strategic thinkers, I am amazed to see how it has grown. So much so, that my initial conclusion is that we are now dealing with a serious platform leap from college dorm to a new core of the internet – and another prime example of the tension between different perspectives on the web as a democratic platform, versus a closed, proprietary commercial network.

There has always been someone who attempted to dominate the shabby collection of servers, wires and users we call the internet. Its not surprising – human history is peppered with rising and falling empires, and this new digital land grab is much the same. If you’ll pardon the quality of the research, here’ s my potted view of the history of that race between the open and closed camps. As always, Wikipedia is a better historian than I’ll ever be, so many links go to them!

ARPAnet (1958 – 1988): apparently originally inspired in the Cold War period (in particular Sputnik’s shock factor in the technology race), this loose confederation of military and academic servers and connections was the seed of the internet and the classic ‘closed’ network.

Minitel (1982): ultimately nearly 25m French people were connected to Minitel, a governmental postal/telecom collaboration to supply citizens with access via a terminal to information directories, booking services, message boards, stock prices and chat services. The network was tightly managed and closed to anything not endorsed by the state – a position the owners far too long into the life of the internet as it developed in the 1990s. That said, the announcement it would be finally killed off in 2009 was met with public outcry – and still 1m banking transactions a month are done on the historic terminals.

AOL (1983): the first major money making walled garden on the internet in the English speaking world, founded on online games and communities (including popularising chat on the internet with ICQ), rising to 30m users over the next 20 years then famously blowing it all in a merger with Time Warner in 2001. Who could forget the rain-storm of direct marketed CD-ROMs that came in fancy tins and packages tempting you onto their network? And once you were in, they had you under their control. Most AOL users right through the 1990s thought AOL was the internet, holus-bolus.

The actual Internet (1988): the year the military and the commercial networkers joined up, including emerging private sector networks Compuserve, UUNet, PSINet, CERFNET, and Usenet. Still a bunch of list servers, technical people and a minimum number of tools to connect people without IT degrees or an interest in ham radio.

World Wide Web (1991): with the term coined by CERN’s Tim Berners-Lee, this was a layer on top of the internet that enabled sharing of resources beyond the list and text heavy document and email platform. It was classicly ‘open’ – anarchic in some ways with the emphasis on interconnection to make the world a better place through sharing.

The web caused a boom in browser software (and with Netscape Navigator in 1994 the beginning of the get rich quick internet startup decade), the lens you needed to see everything that was out there, no matter who or where it was served. Unless perhaps you live in China or the new Australia.

MSN (1995): Microsoft famously ‘got the web’ in the mid-90s, and MSN was their attempt at a walled garden, which basically proved they did not get the web at all. Their ongoing efforts to keep people within their domain included Hotmail, Messenger, MSN Explorer, and to some extent Internet Explorer as a non-standard browser. MSN has around 10m members today (note: fact to be checked), and has morphed into Windows Live as Microsoft’s attempt to stay relevant to a generation of users that prefer to Google, Twitter and Facebook.

Broadband WWW (c2005): without doubt the expansion of high speed wiring to the many nodes of the internet changed the game, and saw the emergence of traditional media players showing video, images and enabling collaboration and sharing in ways that dialup constrained.

Mobile WWW (c2008): 3G wireless in wide supply and a new generation of intelligent phone handsets once again changed the nature of the internet, initially slowing some things down but causing simplification and refocus about what it meant to be connected 24 x 7 x 365. Without doubt the earlier incarnations of the wireless web contributed to the acceleration of internet users to an estimated 1.6b in 2009.

Facebook (September 2006): starting small and purposeful, this College white pages site has emerged as a global player, with enough functionality and interconnectivity to keep an ‘internet’ user within it’s 4 walls for hours a day. On its way to a self-professed 1 billion members by 2012, it already has 400m members across the world and 200m highly active contributors. <editor’s note: today’s claim a year later is 750m members>

Remember it took the internet 2 decades to get 1b members!

The combination of Facebook’s fast-growing community plus hardwiring to platforms like iTunes and news media (via Facebook Connect) is further enhancing the rush back to a new type of walled garden. My beloved iPhone is a simple example – Facebook actually wraps an unbranded Safari browser for links external to Facebook, and I am rarely more than 1 button away from my news stream.

At the same time, people are searching, chatting, messaging, piping in their Twitter streams, their Youtube favourites, their Amazon book reviews and their Flickr photo collections. And spending on average 6.5 hours a day connected to the site. Soon there will be word processing, spreadsheets and proper search, and your homepage on Firefox or Chrome will be http://www.facebook.com.

Advertisers on TV and the web are starting to end their 30 second commercials with ‘See us on Facebook’ rather than making us remember their torturous www.thenextbigthing.com URL or go to a site generation Y probably can’t even use because of its overdesigned 1990s based navigation and complexity. Businesses are starting to consider internal Facebook networks to replace Microsoft’s 20 year old Outlook email and messaging, and a growing number of tools like Yammer are emerging to fill the gaps.

Now, the traditional website concept is unlikely to go away, and no doubt history will show that something succeeds Facebook. But for many people, Facebook will be the new AOL – you can check out, but you can never leave.

Call me a hippy, but I think I liked the Tim Berners-Lee vision better.

The Dalton-Pierce Digital Disruption Quotient

By | Disruption, Technology | No Comments

This marvelous graph was produced by Michael DeGusta in an erudite post on The Understatement blog on the disruption the recorded music industry has endured in the last 40 years. It’s a gloomy picture, and working for a publisher (of books, magazines, video, apps and eBooks) gave us cause to ruminate on some of the underlying drivers of the collapse of music publishing.

In a nutshell, after a decade of economic crisis the music publishing industry no longer sells a lot of CDs, album sales have been replaced by sales of singles on iTunes, and pirating has been widespread. The only legacy format remaining is kept alive by the vinyl nerds (and I’m looking at you James).

There are a plethora of moving economic variables at play in this chart from the time CD sales peaked around 2000, but we think it’s possible to turn it into a mathematical formula that can be further explored by publishers in books, video, and newspapers. We call it the DPQ, short for the Dalton-Pierce quotient:

Where:

m State of economy (misery index): the misery index is the inflation rate added to the unemployment rate. It is a raw, but effective index of economic suffering.

f Format of content: in music, the arrival of the widely agreed standard of the MP3 file enabled recording, storage, playback, sharing and commercial transactions to take place over a single song.

a Atomisation of content into chunks: the single has replaced the album as the unit of consumption in the music industry. You can read all about that on the original post.

d Devices for consuming content: in music the arrival of MP3 players (notably the iPod, but remember the Rio?) heralded a major change. Cheap, portable players were supplemented mid-decade by cheap, gargantuan hard disk drives that could store a whole music collection. If you doubt the impact hardware can have on an industry, check out the arrival of the Sony Walkman and the consequent fattening up of the cassette market on the chart between 1982 and 1985.

c Control of distribution: a trip to the music store to buy the latest album or 45 was a great adventure for me in the 1970s and 1980s. Music publishers grew strong and controlled the retail supply chain with iron fists, including the complementary industries in radio and tv for promotion of songs and albums. Nobody controls the internet – the best you can hope for is to control part of it – like Amazon music and Apple iTunes.

So the maths is simple: disruption is accelerated overall by the context of poor economic times, when consumers are motivated to change their spending habits. When the denominator in the equation gets smaller (as in the internet becomes the channel, and you lose control), disruption gets bigger by a lot. The multiplier effect of the 3 components of the numerator is self-explanatory – and in music publishing all 3 were impacted. Hence, massive disruption.

The same formula can easily be applied to other publishers and media – I’m presenting a short paper on this subject at the 2011 AIMIA V21 conference (Digital DNA) in Melbourne on the 12th of April, and look forward to a robust debate. The good news is there is a solution to making the quotient work for you, not against you.

Quote of the week

The new competitive advantage is the ability to anticipate, respond and adapt to change.

Become Remarkable.