Boyd for Business and Innovation — 1

Got back on time from San Diego last night, which is saying a lot, considering what’s happening on the East Coast.  On the other hand, fifty-five degrees and horizontal rain isn’t something you generally associate with San Diego, but it’s still one of my wife’s and my favorite cities. [As I'm typing this, we're starting to get heavy rain here. It's followed me home.]

The conference was great. Hans Norden along with the staff at the Rady School of Management at UCSD did a fantastic job of pulling it together. If you didn’t make this year’s event, I think they’re planning for another to coincide with monsoon season next year.

Personally, it was a hoot meeting several folks that I only know through this blog. Thanks to all of you for coming and for your enthusiastic participation.

I’ll be posting more over the next several days. In the meantime, Chuck Spinney has given me his presentation, Evolutionary Epistemology, for posting, and it’s up on our Articles page now.  I’ve been watching this pitch evolve, if you’ll pardon the expression, since about the time Chuck first gave it. It just keeps getting better and better.

More stuff and impressions over the next few days.

 

Competition Rules

A little double entendre to start your Thursday.

First, an op-ed by Jacques Gansler in the NYT, “To Save on Defense, Hire Rivals.”

If monopolies are created in a quest for short-term savings, taxpayers eventually pay more and our country is less safe.

This is a favorite theme of mine, expressed as “If you can’t afford two suppliers, you certainly can’t afford one.” The question would be, “Who really wants to save on defense?”

And then there’s a short piece on LinkedIn by David Edelman on a favorite theme of Boyd’s, “Don’t be ruled by rules.”

And in a world of rule-based contacts, there is still important space that needs to be made for two people just being allowed to discuss a customer’s need and develop a solution. No one likes to sit through a canned set of questions when they agree to enter a chat window on a site or when they call a representative. We want a human, free-flow interaction. Many clients of ours have actually found that they resolve issues faster on the first round, cut call times, and have happier customers when they loosen the rules and give smart reps more leeway.

Slavishly following rules makes you predictable. This can be fatal in a conflict, and boring, and hence also fatal, in sales & marketing. It’s worth noting that a lot of this argument goes away if you replace most of your rules with an EBFAS-type culture.

I’m off to the Boyd conference in San Diego. More on that as it happens.

Adding it up

By the time I had grabbed my iPhone, slid to unlock, put in the passcode, found Calculator, punched in the numbers, punched in the right numbers, and read her the result, my wife had easily figured the answer to a tax problem on a scrap of paper. Worth her studying math for 12 years in school?

“No,” is the clear answer given by Simon Jenkins in yesterday’s Guardian.com, “For Britain’s pupils, maths is even more pointless than Latin.” I completely agree. For one thing, except for what she regards as the most useless subject of all times, Euclidean geometry, she wasn’t doing math, or “maths,” as they say over there, at all. She was, basically, learning to replace a calculator.

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Another note on cheng / chi

As you may recall, the idea of playing off the expected, cheng, with the unexpected, chi, plays a major role in Boyd’s conception of maneuver warfare. Following Sun Tzu, Boyd advises engaging with the cheng, and winning with the chi. This is the strategy of deception: Go in with something the opponent believes he has figured out, ideally with some effort on his part in order to set the hook, as it were, then at the moment you believe will have the most paralyzing impact, spring the chi. Boyd has a nice summary on Patterns 132.

As I’ve mentioned before, and devoted an entire chapter to in Certain to Win, this idea translates nicely over to business. Give the customer what he expects, wants, needs.  In simple terms, the product or service you provide has to work and do what you’ve told him it will do.

But customers become bored, eventually, with this approach. To hook them for the long term, you also need the unexpected, the surprising, the delightful. This may not be just the product or service itself but could include customer service or even packaging. For years, Apple was the master of this approach.

Hiroshi Mikitani had a nice cheng / chi piece yesterday on LinkedIn: “Selling distinction in the Internet Age.” Mikitani is the founder and CEO of Rakuten, the Japanese Internet retail giant that bought Buy.com a few years ago. What’s interesting about Mikitani’s approach is that he’s advising not more delightful packaging, which you could implement as well through Internet sales as anywhere else, but shifting to a new domain entirely.

What’s important is that your business think in these terms. Harried CEOs sometimes regard anything other than getting product out the door as distractions or at best “nice-to-have,” and bean counters look on them as added costs — i.e., they get points for griping about them or worse, eliminating them. Actions like these leave you open to smarter competitors.

What I recommend instead is that from the very beginning you regard your Schwerpunkt as not the chi nor the cheng but cheng / chi.

Values first

From The Guardian’s interview with Rose Marcario, newly appointed CEO of outdoor gear maker Patagonia:

Q: When you bring new people on board, what are you looking for?

RM: Well, I think the number one thing is somebody that shares our values in terms of the commitment to preservation of wild places and the environment and planet earth. That’s pretty much the foremost aspect we look for in terms of sharing our values and also people who are committed to making a quality product without compromising.

I think that’s a very important aspect [that we hire people that] care about what they’re making and what they’re putting out in the world in a passionate way. Many of the folks that we hire in our core sports like skiing and fishing, climbing, and obviously want the job and have deep passion for the sport.

Boyd often stressed common values as a requirement for Einheit, so this is an important statement.

It might be worth pointing out that a sampling of their web site indicates that most of the people who “care about what they’re making and what they’re putting out in the world in a passionate way” are living in China or Vietnam. I failed to find anything — jacket, pants, trail runners or hiking boots — made in the USA, much less anywhere near the company’s HQ in Ventura, CA.

CTW passes 10,000

Certain to Win has surpassed 10,700 sales.

MANY, many thanks to all of you who bought the book!!!

I am working on a new book, if “working” can be the right word (lots of distractions in an over-55 community …) In the meantime, my two papers, “Boyd’s Real OODA Loop,” and “John Boyd, Conceptual Spiral, and the Meaning of Life,” both available from the articles page, will have to stand in as updates.

CTW is also available in a special Indian edition and has been translated into Portuguese. Unfortunately, I don’t have sales numbers for them.

Shocking news: Execs do what they’re paid to do

From Matthew Yglesias’s column in Slate:

In theory, executive compensation schemes linked to stock market performance are supposed to focus managers on the long view. But in practice, the opposite seems to be the case. In an impressive paper published in April 2013, Alexander Ljungqvist, Joan Farre-Mensa, and John Asker found that publicly traded firms systematically under-invest compared to privately held ones. The effect is larger in sectors where stock market swings are more closely tied to quarterly earnings reports, indicating that what they call “managerial myopia” is likely the culprit. In other words, when you pay executives to increase the share price, they focus on increasing the share price—even when that means focusing on headline numbers in the next quarterly financial report rather than on the long term.

Changes their orientation, in other words. If you read this closely, you can see the effect of incestuous amplification: “Of course our strategy is working! Can’t you see the share price going up every quarter?”

To paraphrase Yglesias’s argument, companies that don’t obsess on quarterly profit growth open up a range of options. If you read his entire column, you can see that the real secret of Amazon’s continued success is that it uses these options to operate inside customers’ and competitors’ OODA loops.

Ilya Prigogine and the inevitability of the OODA “loop”

Fans of Boyd’s Strategic Game will recall the quote from Order Out of Chaos that Boyd included as Chart 18 and this bit of analysis from Chart 19:

Prigogine called far-from-equilibrium forms like the vortex, ‘dissipative structures.’ The name comes from the fact that to keep their shape these structures must constantly dissipate entropy so it won’t build up inside the entity and ‘kill’ it with equilibrium … [These dissipative structures] can survive only by remaining open to a flowing matter and energy exchange with the environment … The structure is stabilized by its flowing. It is stable but only relatively stable—relative to the constant energy flow required to maintain its shape. Its very stability is also paradoxically an instability because of its total dependence on its environment. The dissipative structure is autonomous (separate) but only relatively separate. It is a flow within a flow.

The idea of a dissipative structure heavily influenced Boyd’s thinking on Orientation, which he would characterize as a far-from-equilibrium process, and eventually on the entire OODA “loop” and the processes that support it:

By pulling all this together, we can see that the key statements, OODA loop sketch, and related insights represent an evolving, open-ended, far- from-equilibrium process of self-organization, emergence, and natural selection. (The Essence of Winning and Losing, 4)

New research out of MIT now suggests that the idea of dissipative structures not only explain the the OODA “loop,” but make its existence and indeed the existence of life itself inevitable:

The formula, based on established physics, indicates that when a group of atoms is driven by an external source of energy (like the sun or chemical fuel) and surrounded by a heat bath (like the ocean or atmosphere), it will often gradually restructure itself in order to dissipate increasingly more energy. This could mean that under certain conditions, matter inexorably acquires the key physical attribute associated with life. (“A New Theory of Life,” by Natalie Wolchover, in Quanta Magazine, a publication of the Simons Foundation)

Although the article doesn’t delve into organization theory, it might be that the same process operating at the macro level explains why a large degree of bottom-up self-organization can produce devastatingly effective organizations. But I speculate.

Boyd Conference in San Diego

Friday, February 28 and Saturday, March 1, 2014, sponsored by the Rady School of Management at the University of California San Diego.

Chuck Spinney will present a revised version of “Evolutionary Epistemology, A Personal View of John Boyd’s ‘Destruction and Creation’ … and its centrality to the … OODA Loop.” This is absolutely the best summary of Boyd’s philosophy, and, as far as I know, the only one to connect Boyd’s 1976 paper to the OODA loop, which he unveiled some 20 years later. If you’ve found “Destruction and Creation” daunting (be honest now), “Evolutionary Epistemology” will answer a lot of your questions.

I’ll cover what went on between those two bookends. We’ll spend most of our time on Patterns of Conflict, introducing its main themes and discussing a fair number of its charts. I’ll also touch on Organic Design, Strategic Game, and Conceptual Spiral, and Boyd’s last briefing, The Essence of Winning and Losing. These are complex works that Boyd evolved over two decades, and my goal is to make their powerful ideas accessible to entrepreneurs and established business leaders.

For information on the conference, go to http://boydbusinessinnovationconference.com/, and to register, visit the Rady School’s conference site at http://rady.ucsd.edu/Exec/Open/Boyd-Conference/.