Traditional management culture stymies technology business aspirations

Among the more interesting takeaways from the Gartner Symposium in Barcelona was a keynote on the afternoon of the second day by Andrew McAfee, co-founder and co-director of MIT’s Initiative on the Digital Economy.

The topic McAfee spoke about is the subject of his new book, The Geek Takeover, which looks at what traditional companies can learn from the tech giants.

There are numerous examples of CEOs who now say that their business is a software business. But the rise and fall of Volkswagen’s former CEO, Herbert Diess, shows is that becoming a software company is far harder than it appears. The carmaker bet everything on a software-enabled electric vehicle platform.

But, as McAfee says, using Tesla as an example, technology firms need to be managed differently to management practices that evolved from the industrial revolution, “It requires a different business model,” he says and, looking at the top publicly listed companies, the tech firms are pulling away. What this means, says McAfee, is that a bunch of geeks have found a way to run a company.

One of the major problems traditional companies face, is the ‘‘90% syndrome’, which is discussed in depth in the paper, The Liar’s Club: Concealing Rework in Concurrent Development. This occurs in concurrent development problems when a project reaches about 90% completion according to the original schedule but then stalls. According to McAfee this happens because of a trait of human nature: highly plausible deniability. The paper describes the case of a defence firm where the practice of hiding one’s mistakes was institutionalised through a so-called liar’s club. Here, members of the liar’s club hoped someone else would be forced to admit problems first, forcing the schedule to slip and letting them escape responsibility.

Metrics are everything

The second problem area McAfee sees with traditional companies is the overconfidence of individuals. Quoting a Guardian article from 2014, McAfee discusses how, rather than rely on what highly talented and well-respected designers think is right, Google uses A/B testing and metrics to drive design decision on every aspect of its website.

From a software development perspective, this means working in an agile way, where there are rapid iterations of working software and a high level of transparency, such that someone has to certify and confirm that the code is working as specified.

McAfee uses the term Hippo (highly paid person’s opinion) to describe decision-making made by expensive consultants and experts. In the top tech firms, these people are a dying breed. Becoming a software business requires a massive cultural shift in management practices. Is your CEO prepared for this change?

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