innovation governance

InnovationGovernance

Spark the Change / 4 Jul 2014

#gov4innov

Yoav Aviram / @yobo

Simon Baker / @energizr

Gus Power / @guspower

ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ / www.energizedwork.com

Schedule

11:30 – Introduction.

11:35 – Risk.

12:00 – Investment.

12:25 – Impact.

12:50 – Questions / Close.


Introducing

the world cafe

2Discuss

15 min

Doodle and discuss.

Build up a picture.

Focus on what matters.

1Context

5 min

Share our thinking.

Pose some questions.

3Rotate

5 min

2 stay with the table.

Rest rotate clockwise to the next table.

Hosts present whatwas discussed to

newcomers.

verbmake changes in something established, especially by introducing new methods, ideas, or products


innovate

“The accepted purpose of governance is to monitor, report on, and ensure that the specified requirements will be delivered in the agreed timeframe and within the agreed budget to realise the benefits stipulated in the business case.

And in so doing, to ensure processes are followed correctly, standards are adhered to, and the software is produced to an acceptable level of quality.”

Gating and approving / Ensuring compliance to processes and standards /

Controlling budgets and headcount / Auditing and quality assurance reviews /

Monitoring progress / Reporting status / Managing issues and risks /

Managing stakeholders


Governance


IT Programmes

17% go so badly they threaten the existence of the company. Calleam Consulting

50% fail to achieve what they set out to achieve. KPMG

60% do not meet schedule, budget or quality goals. IBM


Innovation

80% of VC investments never achieve the expected ROI. National VC Association

93% of Angel investments never achieve the expected ROI. Washington University

95% of technology startups fail. Allmand Law

“Uncertainty is the lack of complete certainty, that is, the existence of more than one possibility. The ‘true’ outcome, state, result, or value is not known.” How to Measure Anything, Douglas Hubbard


Uncertainty

Quantify uncertainty by assigning probabilities to a set of possibilities.

E.g. There is a 60% chance this market will double in five years.

“Risk is a state of uncertainty where some of the possibilities involve a loss, catastrophe, or other undesirable outcome.”How to Measure Anything, Douglas Hubbard


Risk

Quantify risk by assigning probabilities and quantified losses to a set of possibilities.

E.g. There is a 40% chance the proposed oil well will be dry, with a loss of £12 million in exploratory drilling costs.

People grossly underestimate risk and uncertainty.


The problem with risk

Our mind is wired to use heuristics when making decisions which involve probabilities.

This is particularly true in cases involving compound probabilities, i.e. where two or more related probabilities combine.

Both technology & innovation involve compound risks.


Risk management 101

Accept because some risks are worth assuming.

Avoid by eliminating the situation or activity that presents it.

Transfer through insurance or other types of contracts.

Reduce by reducing uncertainty or hedging your bets.

Information reduces uncertainty.


Reduce uncertainty

Information Theory, 1948

Reduced uncertainty improves the quality of decisions.

Improved decisions have observable consequences with measurable value.


Governance

Traditional governance seeks to reduce risk by exercising control.

It hampers innovation because it enforces process and compliance.

The goal of governance is to assure investments generate value and mitigate associated risks.

ENERGIZED WORK / HMS President Victoria Embankment London EC4Y 0HJ

Risk

What are the unique risks innovation programmes face?

How can we reduce risk and, at the same time, enable innovation?

DiscussDoodle and discuss.Build up a picture.


15 min

Rotate2 stay with the table.

Rest rotate clockwise to the next table.Hosts present what was discussed to

newcomers.

5 min

Investment


Understand the gamble

Capital investments in IT projects are made on the merits of business cases built on assumptions.

Every time you build a feature and delay validating it with customers you make a bet that it’s the right feature.

The more features you build and the longer you wait, the bigger the ante gets until, one day, you’ve bet the budget on a hole-in-one.

Increasing inventoryIncreasing investmentBigger and bigger bet

£

t

Sticking to the plan and optimising productivity so that projects aren’t late or over budget do not address the risks in following the assumptions:


More control doesn’t reduce the bet

1. The requirements and designed features define the right solution.

2. All of the requirements must be delivered before any value can be realised (all or nothing).

3. If all the requirements are delivered, the promised business benefits will materialise.

Markets shift. Governance must help projects to sense and respond.

What if you could spread smaller bets across a number of options, and get data faster to prove earlier what’s valuable and what’s not?

You can be a bit more scientific.

Small bets



Small incremental investments

Why not make smaller incremental capital and operational investments based on live business measurements?

£

t

Less inventory (regular releases)Series of smaller investments

Smaller bets


More informed decision-making

How do you decide whether to invest more or stop investing in a partially successful idea, after you’ve already invested £200K?

Answer: Have an investment strategy and data to gain insights and inform decisions. Otherwise decisions are based on gut feelings.

Why not quantify your expectations and the ongoing impact of your investments in flash forecasts and fast actuals so you can ramp up the performers and quickly abort the lemons?


Apply an investor mindset

Create your investment strategy up front based on data with “stop-limits” and “stop-losses”.

Analyse fresh data constantly to gain new insights.

Manage your portfolio from an informed position.

Otherwise you risk blowing yourself up:

1. No edge.2. No planning.3. Wrong bet size.4. No risk management.5. Mistiming exits.6. Out of control.7. Not in tune with market.8. Running before walking.9. Emotionally unstable.

10. Not taking responsibility.


Investment

Draw a picture showing how financial governance like this might work.

+ Light-weight.+ Investment strategy.

+ Portfolio of projects.

+ Data-driven.

+ Small bets.

+ Incremental investments.

+ Sense and respond.



15 min



newcomers.

5 min

Impact

Governance is there to maximise the impact of investment - to support work teams in delivering the most benefit for their stakeholders.


Quantified value

Without reality-backed and independently verifiable measures of impact, governance cannot effectively prioritise between competing demands or fairly arbitrate conflicts over resources. +

?

Past

Trend

Record

Survival SurvivalFail

Targets

Benchmarks

Constraints[ ]!Goal

Stretch

Wish?

Competitive Engineering, Tom Gilb

Governance must understand the needs of its’ users and meet those needs as effectively and unobtrusively as possible.


Minimise interruption

Too much governance, or too little, is likely to result in a system that users choose to avoid.

Governance can have a significant impact on working culture.

Tolerate it

Irritating

Glad for the interruption

Glad for the interruption

Not Useful Useful

Do

n’t

Exp

ect

Exp

ect

Governance provides services that support self-managing work teams - they are both jointly responsible for achieving their goals.

Governance that views itself as the party ultimately answerable for realizing stakeholder value opens the door to a dangerous game of over and under responsibility.

1. Considers options, makes decision, informs leader afterwards2. Provides options, makes recommendations to leader3. Generates options and asks leader for decision4. Describes the problem and asks the leader for help to solve5. Leader solves problem; staff member watches & learns6. Takes no responsibility – expects leader to solve problem

The Responsibility Virus, Robert Martin


Shared responsibility

Governance must balance short term gains against medium and long-term considerations for company survival. If survival requires innovation then governance must create a safe-to-fail environment.


Balance

BAU

Innovation

Supporting a robust, failure tolerant and creative work environment requires governance to support increasing amounts of participation and an emergent process.


Emergence

More and more, useful change comes not from traditional stakeholders but from employee insight and creativity.

Governance must adapt to the diversity of these viewpoints and methods of work or risk losing one of the largest sources of value generation it has access to.

The World Café, theworldcafe.com

Action Planning

Reflection & Exploration

Collective Insights

Harvesting DiscoveriesImplementation

Feedback & Assessment

Conversationas a

Core Process



15 min



newcomers.

5 min


Impact

If Governance is optional, what would the top 3 most valuable services be:

● for work teams?● for stakeholders?

If Governance isn’t optional, what are the top 3 things it should NOT be:

● for work teams?● for stakeholders?

Questions ?

Thank you for participating.#gov4innov

@energizr @guspower @yobo


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UncertaintyMeasure: “Uncertainty is the lack of complete certainty, that is, the existence of more than one possibility. The ‘true’ outcome, state, result, or value is not known.”

Quantify: By assigning probabilities to a set of possibilities.

Example: There is a 60% chance this market will double in five years.

RiskMeasure: “Risk is a state of uncertainty where some of the possibilities involve a loss, catastrophe, or other undesirable outcome.”

Quantify: By assigning probabilities and quantified losses to a set of possibilities.

Example: There is a 40% chance the proposed oil well will be dry, with a loss of $12 million in exploratory drilling costs.

How to Measure Anything, Douglas Hubbard


Risk / Handout

Risk management

Avoid by eliminating situations or activities that present it.

Transfer through insurance or other types of contracts.

Reduce by hedging your bets or reducing uncertainty.

Retain because some risks are worth assuming.

Reduce uncertainty

Information reduces uncertainty.

Reduced uncertainty improves the quality of decisions.

Improved decisions have observable consequences with measurable value.

Value of information

The amount a decision maker would be willing to pay for information prior to making a decision.

Understand the gambleCapital investments in IT projects are made on the merits of business cases built on assumptions.

Every time you build a feature and delay validating it with customers you make a bet that it’s the right feature. The more features you build and the longer you wait, the bigger the ante gets until you’ve bet the budget on a hole-in-one.

More control doesn’t reduce the betOptimising productivity so that projects aren’t late or over budget doesn’t address the risks in the assumptions:

1. The requirements define the right solution.

2. All of the requirements must be delivered before any value can be realised (all or nothing).

3. If all the requirements are delivered, the promised business benefits will be realised.

Markets shift.

Governance must help projects sense and respond.


Investment / Handout

Small bets and smaller incremental investments What if you could spread smaller bets across a number of options, and get faster feedback from customers to prove

earlier what’s valuable and what’s not?Why not make smaller incremental capital and operational investments based on business measurements?

More informed decision-making

Have an investment strategy and fresh data to gain insights and inform decisions. Otherwise decisions are based on gut feelings.

Quantify expectations and ongoing impact of your investments in flash forecasts and fast actuals so you can ramp up the performers and quickly abort the lemons

Apply an investor mindsetCreate your investment strategy up front with “stop-limits” and “stop-losses”. Analyse fresh data constantly to gain new insights.

Quantified ValueGovernance is there to maximise the impact of investment - to support work teams in delivering the most benefit for

their stakeholders.

Without reality-backed and independently verifiable measures of impact, governance cannot effectively prioritise between competing demands or fairly arbitrate conflicts over resources.

Minimize InterruptionGovernance must understand the needs of its’ users and meet those needs as effectively and unobtrusively as possible. Too much governance, or too little, is likely to result in a system that users choose to avoid.

BalanceGovernance must balance short term gains against medium and long-term considerations for company survival. If survival requires innovation then governance must create a safe-to-fail environment.


Impact / Handout

EmergenceSupporting a robust, failure tolerant and creative work environment requires governance to support increasing

amounts of participation and an emergent process.

More and more, useful change comes not from traditional stakeholders but from employee insight and creativity.

Governance must adapt to the diversity of these viewpoints and methods of work or risk losing one of the largest sources of value generation it has access to.

Shared ResponsibilityGovernance provides services that support self-managing work teams - they are both jointly responsible for achieving their goals.

Governance that views itself as the party ultimately answerable for realizing stakeholder value opens the door to a dangerous game of over and under responsibility.

innovation governance

Business