Chapter II: The Patterns

Read Chapter I

Move to the Virtual World

Strategy emerges through hypothesis testing. However, not all hypotheses need testing experimentally. Many can be tested in the virtual world of the imagination. This is a place where the real world of practice is constructed; a place where virtual decisions can be made and their virtual consequences considered.

When considering a proposal, or strategic idea, managers often cannot let go of their obsession with detail. They can get caught up in thinking about implementation and why any given idea might not work. They reason as if every move discussed is irreversible. They freeze up, confused and confounded, leaving the best ideas unexplored.

In This Context

Frustrations will mount between those who can jettison details and those who cannot. Someone people will play the devil’s advocate, but all this will do is sabotage the creative process. Exhaustion will set in, the most dominant person’s idea will be accepted and, should it go on to be implemented, could fail because of lack of support.

• Organisations that focus on stability are usually run by people who are not creative.
• The first idea is often the least creative and therefore the most expensive and / or destructive.
• Those who are most dominant tend to consciously or unconsciously use their power to promote their ideas over others, running the risk of leaving the best ideas behind.
• Many teams have developed techniques for suffocating divergent thinking.

Therefore

Travel to the virtual world and test hypotheses with the cheapest type of experiment: the thought experiment. In the virtual world, we can take actions that would otherwise have irreversible effects. We can make virtual moves and roll back and forward as we like. Thought experiments can be assisted with white boards, pattern cards and the Wardley Map.

Virtual worlds:

• Create space for people to come together to discuss ideas.
• Create shared understanding. 
• Focus on divergent thinking and not closing down debate.
• Remind us that details confuse and confound. The time for detail comes later.
• Allow us to freely consider the art of the possible.

Consequently

Your team will be able to consider multiple strategic moves. By connecting pen to white board - or pen to map - previously unthought connections will be made and your intended strategy will become richer.

• Moves that are irreversible in the real world can be considered.
• Moves that you might not have considered will appear. This is the creative act.

• It can be a frustrating process for those who are new to it.
• The virtual world cannot protect you from real life consequences.

Related Patterns

• Dynamic Strategy.
• Vision First.
• No Regret Moves.
• Reduce the Cost of Experimentation.

Related Bias

Moving into the virtual world is like stepping into a minefield of cognitive biases. This is why good facilitation is so important. Here are just a few classic biases you are likely to fall prey to when operating in the virtual world.

Ambiguity effect

The tendency to avoid options for which missing information makes the probability of the outcome seem “unknown.” An example of the ambiguity effect is that most people would choose a regular paycheck over the unknown payoff of a business venture. Unfortunately, a crisis, such as the COVID-19 crisis, requires us to seek the unknown if we are to mount a decent response. 

Authority bias
The tendency to attribute greater accuracy to the opinion of an authority figure (unrelated to its content) and be more influenced by that opinion.

Bandwagon effect

The tendency to do (or believe) things because many other people do (or believe) the same thing. Related to groupthink and herd behavior. This means, in the virtual world, we’ll come up with stale, me-too ideas.

Default effect

When given a choice between several options, the tendency is to favor the default one.

Information bias
The tendency to seek information even when it cannot affect action. This is very common in a Waterfall organization’s efforts to try to find more and more answers for more and more questions, regardless of the fact that there are only two or three possible actions to take and the benefits of one of them are very clear. This is analysis paralysis.

• Virtual worlds are a concept from Donald A. Schön’s The Reflective Practitioner.
• Our blog talks about virtual worlds here.
• The biases are all documented in our book, Cloud Native Transformation.
• Come to our webinar on July 22nd to find out more.

Dynamic Strategy

Today’s tech-driven marketplace is a constantly shifting environment, no matter what business you are in—so your game plan needs to shift right along with it.

A company is commencing on a new initiative, like a Cloud Native transformation, or is thrown into turmoil by something they didn’t see coming, like the COVID-19 pandemic. In normal circumstances, a company could set a direction, translate it to objectives, and then move comfortably into long-term execution without ever looking back to re-evaluate. Today’s environment is uncertain and constantly changing. Dynamic strategy is how you succeed in this reality.

In This Context

Not responding quickly enough to market changes or new information may lead the company to continue building products according to an old strategy that is no longer fully relevant. The original strategy could be realised in its totality, but in the meanwhile competitors could come up with better products, technology could change, and much better opportunities could be missed. Ultimately, the company may end up with a ‘Rolling Stones strategy’: they get what they want but not what they need. 

• New technologies are constantly introduced, bringing unexpected new competitors to every sector.
• Low-certainty projects carry extremely high risk. Any decision made early in the project is highly likely to be uncovered as a wrong decision later.

Therefore

Continually re-evaluate circumstances as the initiative moves forward. Check if the relevant products are still in demand and if the chosen technologies, organisational structure, and development processes are still the best for the most successful delivery. Always monitor the competition. If you build digital products, adjust your deliveries and release functionality to maximise impact. If you are navigating a turbulent moment, such as the one we face at the time of this writing because of COVID, keep abreast of market forces and government schemes and adjust accordingly. 

• If adjustment is required, use the Gradually Raising the Stakes pattern to reduce risk and make better decisions.
• In dynamic environments, dynamic strategy is essential to success, from inception to completion. Build it into your way of working from the beginning.
• Use reflective breaks for the executive team to review and reassess strategy.

Consequently

The leaders are aware when the environment changes and adjust strategic goals to keep the company heading in the right direction.

• Running a business is a constant balancing act between innovation and pragmatism—delivering what earns the company’s money right now.
• If a disruptive new competitor enters the market unexpectedly, the CEO and board can shift the company toward increased creativity to keep up.
• If something unexpected happens, you have the framework for shifting your focus and responding accordingly.

Related Bias

Irrational escalation (also known as sunk-cost fallacy). The phenomenon where people justify increased investment in a decision, based on the cumulative prior investment, despite new evidence suggesting that the decision was probably wrong.

Relationship to strategy: If you’ve spent six months trying to bring your strategy to life, it will be hard to change direction. People routinely push forward with projects that are obviously not going to bring any value. You can only succeed with dynamic strategy if you can overcome this bias.

Research Through Action

People can sometimes use research as a way to avoid making decisions, so hands-on learning through small experiments builds confidence and jumpstarts progress.

The challenges are new and complex, information is scarce, and the company is pushing to go fast.

In This Context

In a new or unfamiliar environment, people can analyse things too much and fail to make progress: analysis paralysis. Unbelievably, they do this during crises, too. The tendency is to spend a lot of time on research, because making an actual decision is daunting—particularly in an environment where failure historically resulted in punishment. The effort to take in so much new information can also be overwhelming. As a result, people will often skip from one idea to the next before getting enough understanding to guide informed decision making. All of this adds up to procrastination, because data is not really being gathered in order to move ahead with a plan—it is research for research’s sake.

• When people are not allowed to fail, they avoid taking risks.
• Quick actions carry a lot of risk.
• If the cost of action is high, people tend to delay and wait for more info.
• In a world with many dependencies, taking action requires involving others.

Therefore

Run small experiments instead of full analysis and research; choose action over extensive contemplation and exhaustive research. We all find ourselves from time to time in front of a massive pile of work without the faintest idea where to start. Doing nothing is the easiest choice, of course, but this won’t lead very far. So then we try some thorough planning to ‘make sense’ of all these tasks, doing lots of reading and Googling. 

In an uncertain environment, however, we won’t be much smarter after all that work. The best course of action is to simply pick the first task from the pile and do it. Then another one and another one. Keep doing this until you gather enough information about what’s going on, and at that point a bit of planning could be appropriate.

• Experiments and PoCs instead of in-depth architectural documents.
• Limit the risk of action with short deadlines and low cost.

Consequently

You are making minor yet tangible progress through taking small, iterative steps.

• Uncover unknown-unknowns through experimentation.
• Increase team motivation and joint learning.
• Many experiments fail. This is OK.
• A solution that is not fully baked can still be a valid choice.
• We often don’t have the luxury of full information before making a decision.
• Don’t let perfect be the enemy of progress.

Related Bias

Information bias. The tendency to seek information even when it cannot affect action.

Relationship to strategy: information bias is really a nice way to say you have gotten a case of analysis paralysis. It is very common for many organization’s try to find more and more answers for more and more questions, regardless of the fact that there are only two or three possible actions to take and the benefits of one of them are very clear. Often, this information seeking behaviour is a ruse for avoiding responsibility. We deliberately let perfection be the enemy of progress.

Vision First

Defining a high-level vision as the very first step helps set the right course through an uncertain environment.

It’s clear that times are uncertain. There’s also been a lot of infighting and second guessing. Now it’s time for a vision, something to direct our energies toward.

In This Context

The company needs to define a clear and achievable vision that can be translated into specific executable steps.

• Without an overall consistent vision, different teams will make independent and, frequently, conflicting decisions.
• The combination of limited experience and lack of extra time and flexibility for research leads me to strategies. 
• Agile methodologies, widely adopted in the contemporary business world, create pressure to produce results early. Incremental changes, however, do not a strategy make.

Therefore

Define and visualise the current future we are moving towards.

• This can be uncovered by a series of small research and prototyping projects ranging from a few hours to a few days each.
• Keep the vision high-level to allow freedom of choice during implementation (not dictating specific tools or approaches) yet also specific enough to provide clear goals and desired outcomes.
• Revisit the vision regularly to evaluate status and adjust the plan if necessary.
• Executive commitment is needed for successful vision creation.

Consequently

All teams have a clear guiding principle for the actions that have to be taken.

• The teams can start planning their own strategic actions; the actions that move the organisation towards their strategy objectives.

Gradually Raising the Stakes

In an uncertain environment, slowly increase investment in learning and information gathering; eventually you uncover enough information to reduce risk and make more informed decisions.

You are in the beginning of a change, and the executive team is committed to moving forward but needs to map how it will proceed. The company has little knowledge of what needs to be done.

In This Context

Making major decisions before having enough information to understand the parameters carries a great deal of risk. However, in the uncertain environment, when there is not yet much knowledge or a clear path, grabbing right away for a ‘big bang’ solution is very tempting.

• In traditional environments, budgets are allocated based on full estimation of scope and a clear execution plan.
• In an uncertain environment, estimation is difficult; next steps are not predefined but uncovered one at a time.
• Executives still expect problems to have a well-defined and reasonably predictable solution, because that is how they have always worked.

Therefore

Avoid making big decisions early; do a series of small projects, always growing slowly in size, until you have enough information to make a big bet. Begin the initiative with small no-risk actions that benefit the organisation in any circumstances.

Once a baseline understanding is in place, move to actions that help deepen understanding in areas that seem especially relevant to the organisation’s goals, and begin narrowing down the field of options. Eventually a reasonably clear best path will emerge, and the company can then make a reasonably confident Big Bet. 

• Move incrementally through three stages: first, learn the basics. Then deepen knowledge through more detailed investigation and experimentation, which helps eliminate wrong choices. Finally, gather the information revealed and use it to decide the best likely path.
• Once the big bet is taken, stay on the path until the circumstances are stable.
• If circumstances change due to new information uncovered by experiments, or if the market changes, then remember to recalibrate using Dynamic Strategy.

Consequently

The project has been gradually refined/decided without taking disproportionately high risks, and appropriate budget and resources have been allocated to each stage based on its level of uncertainty.

• You know how much resource each project will require as you uncover next steps; you are allocating just that, no more, no less.
• The level of detail of the project, and the understanding of the scope and the context, gradually increases with each step—which proportionally lowers the embedded risk.

• There is great ambiguity in the project, which prevents thorough financial and resource planning. Ambiguity typically feeds anxiety.

No Regret Moves

Small, quick actions that require little investment of time and money but increase knowledge, reduce risk, and benefit the entire organisation.

A company is in the beginning of a strategic initiative or facing any other difficult technical or organisational question with no obvious or readily available answer.

In This Context

Lacking adequate information, the team has no practical way to make an educated decision—and essentially will have to gamble on a semi-random solution and hope for the best. Unfortunately in many organisations, managers are measured based on their success in leading large initiatives. Thus, many ignore initial small exploratory steps in favor of jumping into a game-changing project that will earn them a fat bonus and a nice promotion.

In traditional organisations, which typically operate with known technologies in reasonably stable markets, that strategy often works. But in a highly volatile environment, it can easily lead to disaster or, worse, wasted years without either clear success or failure.

• Change creates anxiety, so people tend to avoid it.
• Systematically reducing risk goes against the bullish (reckless) behaviour that some organisations promote.
• When we’re doing something new, like a Cloud Native transformation or as we might be during the COVID pandemic, there is little knowledge or experience within the organisation.
• The situation is highly uncertain, and making big commitments early carries a lot of risk but eases anxiety because managers convince themselves they are “taking charge”.

Therefore

Take first-stage, risk-reduction actions that are quick, low-cost, and benefit the company no matter what. In other words, make moves that will give you no regrets. Some improvements to operational effectiveness—including training and coaching, and, in a project context, running small experiments and technical exercises—would benefit any business in just about any circumstance. These small but beneficial and practically no-risk moves are especially valuable during the first, highly uncertain moments of new initiatives. 

• Gap analysis creates situational awareness that is universally valuable to the organisation now.
• Training and educational offerings keep employees engaged and constantly refresh their knowledge.
• Hackathons and small experiments uncover technical answers via hands-on actions.

Consequently

The organisation has gained self-awareness and knowledge without investing huge amounts of time or money. Risk has been incrementally lowered, and the company’s leaders are ready to take the next steps.

• When people know more, they feel more confident, which increases their ability to meet challenges creatively and proactively.

• Since No Regret Moves are so affordable and beneficial, the company could stay stuck making these moves indefinitely. This means they’ll never get beyond incremental improvements to radical breakthroughs. 

Options and Hedges

Research has created deeper understanding, and a few potentially promising paths have begun to emerge. Continue reducing the risk by focussing on the most promising options and developing them further.

You have achieved moderate certainty by running a series of No Regret Moves. This means you have started to strip risk out of your work. You have jettisoned what didn’t work and are now ready to double down on what is working.

In This Context

Your research has given you a better understanding of what is going on, but major decisions are still not obvious. Commitment to a large solution or programme of work at this point still carries a huge amount of risk. You could choose the wrong path. However, tiny experiments that will not uncover any new information are just a waste of time.

• Pressure is rising to make commitments.
• It’s too easy to keep running experiments forever.
• There will always be some uncertainty, no matter how much research you do.

Therefore

Make small tactical decisions aimed at creating and understanding a new path forward. They can be rolled back or forward, ramped up or down, and will at least eliminate some options while you create new plans. The goal is to validate the results of any successful experiments performed so far.

• Do mid-size proof-of-concept projects that take a few weeks to a couple of months.
• Stay aware of biases like the IKEA effect and sunk-cost fallacy that could lead to sticking with a solution even when it’s not really working.
• No commitments yet. Maintaining the ability to change direction reasonably easily is still important here.
• Take a vendor-neutral approach: companies need the best tools and techniques for their work, and these are not necessarily the ones offered in bundled solutions by providers.
• Avoid fads like the plague.

Consequently

You have uncovered the majority of the important information required and are reasonably certain where you are going next.

• Risk declines because, as you experiment, you eliminate things that don’t work and reveal the ones that do.
• Next steps come into stark relief. The results of all these little experiments actually shape what will happen next. 
• You are ready to take the next big steps (Big Bet) because you have gained knowledge and experience.
• You have stacked the odds in your favour.

Big Bet

When enough information is available, your strategy will come to life and then you will be ready to commit. Focus on execution rather than research.

A company is facing a big technical or organisational decision. Experiments were performed, research done, major points validated, and the team has a good understanding of the company’s needs and the problem domain. Multiple major directions are still open.

In This Context

Continuing research and experimentation without ever making any big decision leads to significant waste of resources as the teams are not focused on solving the problem and the direction is not chosen yet. It means that there is no clear alignment across teams regarding a strategy, and no stable and focused process has been established.

• When developing, some teams tend to do too much research and try to find all the answers for all questions.
• Many times, any decision is better than none.
• Large corporations are allergic to risk and therefore push for more research.

Therefore

Make a commitment to a proper strategy, like a large rebuild, architectural change, migration, purchase of new products, etc., bearing in mind that it might require organisational change. After exploring the options with No Regret Moves and increasing the chance of success with Options and Hedges, we now can make a big commitment toward the right longer-term solution. Once the commitment is made, the teams switch from research to execution mode, provided there are no significant changes in the market or other game-changing information. 

This creates alignment among teams and allows quick product delivery, without endless discussions about the direction. 

• Make the commitment clear to the team.
• Stop doing competing projects.
• In order to align internally, make you bet in public.

Consequently

There is full commitment to the chosen direction. It is clear to everyone that this is a commitment moment: at this time we stop experimenting and move forward. Unless there is a significant change in market or strategy conditions, teams stay committed to the chosen path.

• A single strategy is chosen, and the team is focused on making it work.
• No effort is wasted on work that doesn’t improve the decision process.

• There is always a chance that the direction is wrong.

Psychological Safety

When team members feel they can speak up, express concern, and make mistakes without facing punishment or ridicule, they can think freely and creatively, and are open to taking risks. This is essential for strategy.

A company is about to embark on a difficult journey. The path is uncertain and strewn with problems that the team has never encountered. The team needs to take a collaborative problem-solving approach, learn together, and push one another to think creatively.

In This Context

In traditional enterprises that are mostly designed to support stability, people fear exposing themselves by asking a “stupid” question, suggesting a “crazy” idea, or giving difficult feedback to a teammate, let alone a manager. All such actions typically are dismissed and ridiculed or, even worse, punished. In such an environment people tend to keep their ideas to themselves until they’re fairly certain they will be welcomed by others. That means the best and newest ideas might never have a chance of being adopted. And since many new ideas seem a bit crazy and risky in the beginning, the team never gets a chance to really innovate.

• Experimentation requires honest assessment.
• Fear of failure generates resistance to trying new tools or techniques.
• Many attempts to discover new things will fail.
• In hierarchical organizations, people at all levels tend to hide information that could be harmful for their own careers.
• If teams lack the ability to fail safely when experimenting, they waste time analyzing all future outcomes to minimize exposing themselves to risk.

Therefore

Create the shared value that no group member will ever be punished or humiliated for speaking up with ideas, questions, concerns, or mistakes. In the workplace, psychological safety among teams means that the members believe they can express ideas, concerns, or mistakes without being punished or humiliated for it. As a result, they are willing to express new or different ideas, even if they diverge from overall group opinion. When we feel safe, we become more open minded, resilient, motivated, and persistent. A sense of humor is encouraged, as is solution-finding and divergent thinking—the cognitive process underlying creativity. This creates the confidence necessary for trying and failing and then trying again. It also shuts down time-wasting risk-avoidance behaviors like trying to find a solution that is absolutely going to work before you even start trying it out. In a novel situation, that requires strategy, that solution does not even exist, anyway.

• Many discoveries look odd and “stupid” at first glance.
• In an environment with high trust, people will feel confident in speaking up.
• Creativity occurs much more often in high-trust environments.

Consequently

People can propose new methods or approaches knowing that their ideas will be treated respectfully.

• Team members can put forward “wild and crazy” ideas without fear of shaming or embarrassment.
• Even when experiments fail, learning from them via blameless inquiry feeds further improvements.
• Strategy is strengthened at every step as the whole organisation’s creativity is unleashed.
• Creating psychological safety in an organization requires intentional investment of time and effort.

Fuck It Bucket

Strategy comes from exploring options and discarding the ones that don’t work. This process involves failure and all the emotional baggage that goes along with it. For those not used to failure, this can be crippling. The fuck it bucket lets people move with freedom, explicitly reminding them that failure is part of the process.

A company is thrust into an unknown situation. Managers who have never formulated strategy cannot get their heads around the fact they have to act their way out of the “valley of death”. Scared about “wasting” time and resources on failed ideas, they freeze up and can’t move.

In This Context

Infighting will be rife as managers second guess themselves and each other. Huge amounts of energy will be wasted arguing about what should happen next. Managers will neutralise each other through vetos or diametrically opposed actions. The fear of failure will be so crippling that the team will never get beyond step-wise, incremental, but ineffective gains.

• Organisations that focus on stability have no mental models for exploring options.
• In many teams, failure is punished. Therefore, when the moment for managers to formulate strategy arrives, they are not prepared.
• If teams lack the ability to fail safely, they waste time analyzing all future outcomes to minimize exposing themselves to risk.
• Some managers deliberately let perfection get in the way of progress. This is a ruse. They are not really looking for a great outcome, they are using convoluted arguments to avoid taking responsibility for a decision. They are covering their asses.

Therefore

Use the Fuck it Bucket to make it explicit that things can and will go wrong. When things do go wrong, take whatever you were working on and “chuck it in the fuck it bucket”. This has the effect of celebrating failures and gives teams the chance to talk openly and humorously about what happened. The bucket becomes a repository of things that didn’t work, a history of the group’s effort and endeavor. Ultimately, the best strategy will come with an accompanying bucket that will be full.

• Create structures and rituals that let you celebrate failure.
• Remember, exploring options is a cornerstone of strategy formulation. 
• Since failure and all the emotional baggage that comes along with it is a part of strategy, the fuck it bucket will encourage your team and yourself to stretch.

Consequently

Your team will become more resilient, learning over time to shrug failures off. They will use the bucket as part of their process. The bucket will fill up and later you’ll find yourself rummaging around for previous ideas that didn’t work then but might work now.

• Teams become more resilient.
• The bucket becomes a repository of ideas which may not have worked in the past but could work now.

• Don't let the bucket be used as an excuse for recklessness.
• The bucket doesn’t excuse you from the systematic work of exploring options and gradually raising the stakes.

Reduce the Cost of Experimentation

When someone has an idea that requires validation, the costs of doing experiments around it need to be as low as possible.

Uncertainty is very high. New ideas and solutions come up all the time, and the team has to run a variety of validation experiments to select the best ones.

In This Context

There are significant barriers to experimentation in the organisation: permission is required, and the related planning, documentation, and coordination meetings take a lot of time. Getting to results requires a significant wait. To get around this, people forget No Regret Moves and Options and Hedges and immediately commit to poorly thought out ideas or worse, solutions that were sold to them by a vendor.

• Higher cost means an experiment is less likely to be done.
• If cost is low enough, people can experiment even with things that lead to failure.
• The higher the cost, the lower the willingness to abandon the experiment (sunk-cost effect).
• Traditional organisations require extensive documentation with any experimentation, which by definition makes costs high.
• A software license does not a strategy make.

Therefore

Put in place a simple, straightforward, and seamless process for doing experiments. When experimentation is central to an organisation’s process and progress, it needs to be an inexpensive. 

Outline and publicise a process, or provide periodic training for how to create appropriate hypotheses with measures and then design small experiments to test them. Aim to remove bureaucratic roadblocks such as managerial approvals and extensive documentation for every action, while providing technical infrastructure that is light, fully automated, and requires only a tiny budget. Cloud Native, one of our favourite subjects, is at its heart a framework for experimentation; if you’re building a digital product, you should adopt Cloud Native.

• Create a framework around experimentation: the tools, facilitation techniques, project-management structure, and guidelines for allocation.
• Such facilitation makes it faster to obtain and understand the results of an experiment.
• If you are building digital products, adopt Cloud Native.

Consequently

More experiments take place. Instead of extensive research and guessing when a complex problem arises, a rapid process of hypothesis/results/analysis provides the solution. The odds of success with later Options and Hedges and Big Bets are stacked in your favour.

• Teams can be more innovative when they know they can easily try out ideas.
• There is a cost to experiments, even if it is low.

Read Chapter III