AA199 - W. Edwards Deming's Profound Knowledge for Transforming Organizations

welcome to the Arguing Agile Podcast, where Enterprise Business Agility Coach Om Patel and Product Manager Brian Orlando argue about product management, leadership, and business agility, so you don't have to. Today is the day that we are finally reviewing W. Edward Deming, The New Economics. This is the second book. Originally published 1994. Still so, so, so relevant. So let's see. The huge long range losses caused by the current style of management have led us into decline. Statement number one in the Deming book, right? We've grown up in a climate of competition between people, teams, departments, divisions, pupils, schools, universities. We have been taught by economists that competition will solve our problems. Actually, competition we see now is destructive. It'd be better if everyone worked together as a system with the aim for everybody to win. What we need is cooperation and transformation to a new style of management. The transformation is what I call profound knowledge. The system of profound knowledge is composed of four parts. appreciation for a system, knowledge about variation, theory of knowledge, and psychology. So that is the topic of the podcast today. What a fantastic topic, what a great opening salvo right there with the quote. I think this is going to be very exciting. Oh my goodness, Dr. Deming. What a guy. So what do we know about, I mean, Deming we know famous for, transforming the economy of Japan post World War II. And that's, that's and then of course, obviously the, the Deming Award and, other things. He's known as the quality guy, but he was so much more than that, right? So I think we're going to get through some of that stuff today. If not a lot of that stuff today. So early in chapter one, I'm going to start right in this podcast with a couple basic like building blocks. Here to start with, which is what is quality from Deming's perspective? If he's a quality guy, what is, what is quality? He says the basic problem anywhere is quality. What is quality? A product or services, a product or service possesses quality. If it helps somebody and enjoys a good and sustainable market. Yeah, I mean, I've always held the view that quality is basically something that is, fit for purpose, right? It's fit for the purpose for which it was intended, and it provides value to those consuming it. Everyone expected the good times to continue. Good times being, the 50s of The world is in shambles, America is manufacturing apparatuses at full capacity, as it was in the war, right? So like, good times just persisted, and America rode that wave, and everyone expected the good times to continue. And, one of the statements he makes early in the book, in chapter one, is it's easy to manage a business in good times. Right. And in an expanding market, , the signs of a decline, economic decline, decline of a company, decline of a team, whatever you want to call it. It's difficult to spot and it's difficult to do anything about it because he has a nice thing that says it's easy to date. In earthquake, but it's not easy to date a decline like when it started, when it's again, everyone has a different opinion, that kind of stuff. Yeah, I mean, I think that is a great quote, because it just says an earthquake is definitive. Everybody around you knows. The ground is shaking, whereas in the other case you could debate, right? So having, having been through those good years, decades even, right? It's very hard, for organizations to get around the mindset of we always need to be ahead of the curve, otherwise competition is going to overtake us. That's a tough mode to stay in. I'll put it that way. Cause it's, cause it's a boy staying in that mode all the time. I know very few people that can stay in that mode to keep asking and reasking what's the future look like? Like, how are we going to transform ourselves? How basically, how are we going to, like I'm constantly as a product manager looking to, leapfrog my own product in the market. To make a better product so that I am not outdated because If you go through once I think i've been through this more than once I have to think about that to just to see if it's true, but I know at least once I've been through where through no fault of the employees Like the market just moved on and we like the company never reacted or the company reacted so slow that the competitors ate up the market and boy the first time you ever have to like you're part of a downsizing you have to lay off team members you work with For years and stuff like that like that sticks with you A long time. A long time. Yes, I agree. Absolutely. I also think that, the other thing is true, which is after having entered this era good times didn't last for a long, long time. I mean, they lasted long enough where everybody got very comfortable. And in that time, competitors were already building up from ground zero. Here I'm mainly talking about overseas competitors, primarily Japan, which had nothing to lose, had nothing really after the war, and , the only way was up, so they came up with some ways of thinking, which Deming was an instrumental part of. Fortunately, he did not export the American way of working. so it's quite interesting to me that the ideas and the philosophies that these Japanese companies embraced came from an American. Two more things before we're done in the concepts introductory chapter, which is the absence of defects does not necessarily build business and it does not keep a plant open. Okay., for the people working at a plant, for example, there's a lot of his stuff is manufacturing because of the time period, the book was written. I can easily bring this into software development to say you can have the best software ever, zero bugs, all your stuff's DevOps , to the max all your pipelines are optimal. You know what I mean? All your scaling, auto scaling architecture, everything is perfect. Perfect. Does that utopia exist? Yeah, but also your company can also be shut down tomorrow because that's only a tiny corner of the system He has a quote in here that says they didn't understand. I think that their efforts could be eminently successful, zero defects while the company declines. Yeah. I mean, the company is spending so much effort trying to reach that plateau of zero defects, zero anything, right. That's at the cost of everything else. So they're not maybe innovating new products. Maybe they're not keeping tabs on the competition that's in the rear view mirror, getting bigger and bigger. He gives an example in this section to kind of bound what he's talking about is the company continually asking themselves and answering the question truthfully, what business are we in? And he points out that at one point in time, the makers of carburetors were, I'm sure they were rolling into cash screws, McDuck style, and then fuel injection came out, what was that a surprise to the makers of carburetors? Because like putting fuel into the engine properly. Really was the business that they were in. And suddenly they're surprised and now they're all out of business. Well, it's, laughable because they're the ones that should have come up with this innovation to begin with. Right. Who better is qualified for that? They're in the market. Didn't do that. You know, looking at, their business on a five year timeline, ten year timeline. I mean, the funny thing about it is that he's giving like five year, ten year timelines. But , that's in manufacturing, right? Which is, well, it's in manufacturing, but also, I mean the business side of software development. Right. Again, if you listen to Melissa Perri on the Lenny podcast, which may or may not be an upcoming podcast from us, I haven't decided, , where she's like, Oh, those are just agile. It's just, that's just development stuff. Product management is over here, like cashing checks and flying, I was gonna say flying yachts. That's not you sail a yacht. Fly a plane, fly jets, fly in jets and sailing yachts, or sail in jets and flying, whatever. But the, the running of the business, like that, that shouldn't be divided from development done by some of the people that's the,, implication here is, hey man, like this can't be separate functions. That's right. You know, we can't have like the best technical excellence. We have no idea what's going on, right, right. In the business, in the field with our competitors, et cetera. And then, , to highlight the point of , it's all one system. He has an example about the president of the company, they put quality into the hands of the plant manager and say, Hey, it's your responsibility. We're tracking you on these metrics. And then in time, the results are embarrassing because quality goes down. but it was totally predictable because the plant manager is not responsible for or in charge of the design of the product. Yes, but they're held accountable for quality still at the same time. They're they have quotas. They're told to build the product that the designs were built for by somebody else. So they they're trapped. Much like the QA people at the end of the line when they're like, Oh, just check it for bugs and run all your manual test cases or whatever. Like, same, it's the exact same concept. It's like you could even say well, what is the manager of QA or the manager of whatever. Like, you're all kind of equally helpless in this system. Yeah. Right? it's management's job to change the system. Quality is determined by top management. It cannot be delegated. that's a statement that he has that, , I also agree with, indeed. I couldn't agree more. So, let's move on to chapter two. in chapter two, he denotes the different types of heavy losses The present style of management is the biggest producer of waste causing huge losses whose magnitudes cannot be evaluated Cannot be measured. So this chapter is all about identifying point out for the first time on the podcast, one of the many lean principles that you will discover from this book written , in the early 90s that have translated and worked their way into the zeitgeist and kind of filtered down , Just like on the Claire Vo podcast that we did where she's like, we should build teams and projects around motivated individuals and then give them all the resources. Summoning that out of thin air for the first time, a clearly documented agile principle. That it's like, you can go and look and find it almost verbatim. She doesn't even know that she's quoting it. Right. So in this particular book, there's another agile principle that's quoted verbatim, right? Individuals interactions. We will get to that at some point. There are quite a few that, like I said, you're going to, as we go through this book, I will stop and point out when you see things that have filtered into other areas, this is the first one, keep an ear out. And if you're listening to this podcast. And, uh, you find some that we don't point out, that's the comments are for. Yeah. Yeah. Please, please give us, , give us those in the comments. All right. He has a couple of grids that go through what the present practice is and what a better practice is. I'm going to read a couple of these to you and get your just off the cuff reaction. By the way, I asked him not to read this . He skimmed some of it when we were looking at it together. Some pages I didn't let him read. These I didn't let him read. So the current, the current practice is reactive only. So you only need skills at the job at hand. You don't need theory of management or theory of a system or theory of profound knowledge. You don't need any of those theories. you don't need to understand what agile the principles, anything we just talked about, you just need skills to do the job and you can figure it out. So he calls this the lack of constancy of purpose is what he calls it. I think I call that muddling through. I think it's the same thing, he also labels it short term thinking emphasis on immediate results. Keep up the price of the company's stock, maintain dividends. He labeled all that under this. All of that is so prevalent in today's environment. It has been for a while. So this is basically the business culture that we're in now. Short term thinking maximize short term profits. And to heck with the future. So he says, he says a better practices, adopt and publish constancy of purpose. Do some long term planning. Ask this question. Where do we wish to be five years from now? And then by what method? So you're going to hear it like this. The Deming dogma is real harsh sometimes by what method? So you'll say, well, we need to penetrate this market. Well, by what method? It's the five, by what methods? He just wants to know by like, well, I mean, I said on a previous podcast, we can sell more cars. Super easy. Just cut all the prices of the cars in half. And now we're not even profitable on one car. But we'll sell more cars if that's the, I think that particular,, philosophy may actually have been tried, but, , to go back to what he's talking about here, right? Short term is where we've been for a long, long time. Yeah. especially in today's climate, right? The timeframes that he mentions were relevant at the time. So five years, 10 years, right? Five years. I remember, , back in business school, learning about. Short term thinking, medium term thinking and long term thinking, right? And the years that we were looking at in those days, they're no longer relevant today because the business cycle is so fast, right? What used to be medium is now basically long or even beyond that, it's beyond long, right? People don't think past that. And it's particularly true depending on the business you're in. If you're in the software business and you're an entrepreneurial outfit, that's just spinning up small company, but , you're looking for VC, funding rounds and whatever else your short term is not five years. Your short term is what are we going to do in a year, year and a half, right? And you can call that whatever you can call that medium term, long term. It doesn't matter. That 12 to 18 months doesn't change all that much, but that's what you've got to drive toward. That's what he's saying here. Five years in, in that climate is what they should be driving toward, right? the constancy of purpose, it's not even communicated well today. I think I find like people are just basically minions and just asked to do something by a certain time or a certain date. I feel that's why he put like adopt and publish constancy of purpose. I feel like the one thing about the Deming book. When you're reading through it is a feel. I don't think the terminology is dated. I think the terminology in this book is very purposeful when it's put in, I think adopt and publish is basically like you can pick whatever you want, just like write it down somewhere and then put it out there and be vulnerable to be like, this is my organizational mission and vision. I'm going to write it down. Hey, that vision sucks. My vision is to make a bajillion dollars. Hey, Brian, that vision sucks. Your vision shouldn't be about money. I'm going to get beat up. Now I'll change my vision based on the feedback I get. Most people are not even going to do that in the first place. Is there afraid of getting they'll perceive it as being attacked. Right. They'll, they don't even want to open themselves up to be critiqued to be like, Hey, you don't really, Brian, you don't seem to understand how to craft a vision. Yeah, you're absolutely right. So I think it's even more kind of basic that if you ask an individual in any organization at random, say, what is the organizational vision for your company? What is its mission? Right? You'll be surprised at the kind of answers you'll get back. And that's because this is A, not very well defined, B, not very well published, right? And C, not understood by those that don't even read about it. I mean, we say lose, lose, lose all around. But then you have occasionally a company that does this well. Right. And that's when you say any individual in that company will be able to say, this is our mission, which is great because now at any point in time, people could ask each other and say, this is great. The work you're doing is fantastic. But how does it align with our mission? Yeah. The wonderful thing about what you're saying right now is when you're a team of four people, five people, like this is super easy. You talk amongst yourselves, you figure it out. One person says, Oh, this is probably it. And you have a discussion and you're like, Oh yeah, that's it. And then boom, you're done. The 10 minutes discussion, lunchtime discussion, you're done. You've got your purpose sail, your ship in another direction. Like you're ready to go, man. You know, suddenly you scale, you add teams together. You don't have a way for teams to communicate with other teams and have inter team discuss inter, inter teams, never going to learn that on any of these podcasts., and, , suddenly you don't, these are all existential questions. It'd be like, Hey, don't bother me with that, man. I'm just trying to do my job. Right, right. That's somebody over there taking care of that. And that person also, when you're at scale, doesn't want to be the one to come up and say, I know we decided this was the vision, but I was wrong. The funny thing about product management is like, there is nobody else. There is no parachute., there is no net there, everything you, it's your responsibility, everything comes back to you your responsibility. So like, there's no get out of jail, anything, right? Same thing. So, so he says no number of successes in short term problems will ensure long term success., that is a harsh statement that if read to leadership, I expect you to get immediate, immediate, immediate. poor reaction to that statement that no number of successes in short term problems will ensure long term success. And also, short term solutions have long term effects and it's fatal to work exclusively On short term problems. This is any development team that does exclusive firefighting, those teams can't get ahead. We don't have time to implement automation because we have to get this thing out. We don't have time to do proper pipelines. We just have to get this out. So we'll just muddle through and then we were in that state all the time, we don't lift our head up and say, Let's just slow down a bit to speed up, but let's slow down a bit. Now implement these things that will help us for the foreseeable future. It's true all around. Om, we can't stop it to put ourselves out. We're on fire. We can't stop. That's right. Can't, can't slow down. Yeah, keep, keep running. We'll get the water eventually. If you, if you run in one direction long enough, you will get the water eventually. You will. You will. That's true. This is factual. Even for the flat earthers around you. So especially so, so therefore, if you're on fire, you should just keep running. You should never stop. I want to pivot to the next one in the, in the heavy losses. just to get your reaction, ranking people, salesmen, teams, divisions, reward at the top, punishment at the bottom, the merit system. This is a present practice. Ranking, generally, as a whole, just seems to create more pseudo or even real competition among ourselves. What are we really gaining as a company?, it's a false sense of getting ahead in front of your peers, if you're being ranked with them or in front of , your other departments, if you're ranked with them, all of that doesn't do anything for the organization as a whole., and I think Deming was talking about that in the book at some point, , right here he says, Ranking creates competition between people, salesmen, teams, and divisions. It demoralizes employees. It certainly does. The better practice here, he had abolished ranking, and the merit system managed the whole company as a system. The function of every component, every division under good management contributes towards optimization of the system. This is we like to make fun of Brian Chesky a lot on the podcast. And I will tell you I like to make fun of him as well. But also, he's a hundred percent right in this one. He's like, listen, I can't have all these roadmaps and all these different things. Like they're not being manageable. There's one roadmap now we all work together to drive things forward. And that's the way it is now that this is what he's, , the way he did it, the way he went about it was a little funky, but, but the thing he was trying to solve. All have to be one system., well, I'm at a disadvantage in not having read the book, so I didn't know I was in this book, but listen, it is so true that that part of it is. So you can have multiple roadmaps. That's fine. You'll just go somewhere. You'll go a bunch of different places, but no, I really, right. So it's just common sense. You gotta have a single roadmap and everybody's got to be bought into it. He says, so more hot take quotes that, , you will enjoy. The aim of anybody under the merit system is to please the boss. And he also says, in the United States, because again, this is an individual that did a significant amount of his work in different countries, like in the United States and overseas, right? He says, in the United States, The last ones to suffer are the people at the top. Dividends must not suffer. In Japan, the pecking order is exactly the opposite. A company in Japan that runs into economic hardship takes these steps. In order, by the way, number one, cut the dividend, maybe cut it out. Number two, reduce salaries and bonuses of top management. Number three, further reduction of the top management. Number four, last of all, the rank and file are asked to help out. This is the inverted pyramid we talk about often, right? So you have a big base of the pyramid inverted pyramid. That's the management layer. And that doesn't get whittled down in bad times. It's always people further down this. So he actually nailed it back then, right? The way they were working in Japan. People at the top, I know he said suffer, but they take accountability for their actions and the results that ensue bonuses go dividends go salaries get cut down and they're the first ones to have their salaries reduced How is it here? Or anywhere in the Western world, it's exactly the opposite. So here, the easiest way to get your company from , red to black, , on the balance sheet is to cut headcount. So I'm glad that we're going here because , the next one he has, which should, we'll go pretty quickly on this one is, incentive pay. Pay based on performance. I bring this one up here in episode. Whatever 199 200 Because we've prodded at this in the last couple of episodes About we think this is in place because this is the system that Taylor designed that all the education Systems and all the MBAs and everybody they all picked up and taught for many many years I think all this is still in place from taylorism and I think , uh, because taylorism was Such a red hot fad back in the day and it got picked up by education It's like oh we can make some money off of this one. It got so ingrained. I think we're still Paying that debt down that the interest of Taylorism. He says reward for good performance may be the same as a reward to the weatherman for a pleasant day. The effect of incentive pay is numbers and loss of focus on the aim the better practice is abolish incentive pay and pay for performance. Give everyone a chance to take pride in their work. This is going back towards, this whole agile, topic of how do you reward your team or team members? Do you reward individuals or do you reward the whole team, right? This is going back to that, I feel. Yeah, I mean, what happens over, in Japan? When a success is celebrated and incentivized, it's the whole team that benefits. And so when you do that, there's this sense of camaraderie that we all together did this and we all benefit as opposed to, well, I only got X and so and so got Y. The other place that this could be applied also is like the salespeople selling things that like , our product is really not good at, or overselling our product or selling something like, a big license to our product or whatever that the customer's never going to use basically overselling our products. You've taken their money this year and, they're not going to renew next year. Are you saying salespeople are being economical with the truth? yes. but again, the reward for good performance is the same as a weatherman for a pleasant day. Like, it's that kind of thing. It's like, yeah, I can swindle you once. But the likelihood that I'll swing to you again next year at the same time Very low. So like do you want to build your salesforce that way? Probably not like let's not do this pay for performance thing You know, let's let's find a better way to sell but if you're only focusing on short term, profits then, you know You're not prizing really the long term loyalty of customers over short term gains. I mean i'm willing to accept bribes, in line with this one, setting numerical goals, another present practice and a better practice work on a method for improvement of a process by what method again, asking that question by what method. So you're going to set a numerical goal. I'll say, cool. You want to hit that number? Cool. By what method? Right. Cause people know that they can game everything, right? So you can game something and meet that number by what method. That's right. Also all of this. Presupposes that you're actually measuring something. So numerical goals. We're saying that in this particular, , topic at this point. people can game, the system, To meet those numbers. you can meet the quota for a time. It's like saying, well, can you have this ready by this certain date? Yeah, we can have something ready. You might not like what's ready, but , quality goes out the window. Yeah. So yeah. Yeah. And it says, anybody will meet the quota allotted to him., he is not responsible for the losses. So generated. You met the milestone, but the customer is not happy, but we're not penalizing you for that. So this is the last one that we're going to say. So management by results, MBR management by results., take immediate action on any fault defect, complaint, delay, accident breakdown action on the last data point. That's a present practice. The better practice is understand and improve the process that produced the fault defect, et cetera. Understand the distinction between common causes of variation and special causes. We'll get into that later on the podcast , to understand what kind of action you need to take. So he's separating incidents into two different buckets. Number one is. These are normal incidents that happen on a normal frequency, right? And, the other one is, these are special. He says, 94%, before you say like, Oh, I already do that, I know what's normal, normal errors versus whatever, hold on to your hat. Right. Because, he says, 94% Of the errors right belong to the system and only six percent are attributable to special causes Based on all of his studies and all of his work. Okay, which i'm I tend to just believe him at face value I'm, not going to ask deming to show his work because I didn't I didn't transform the economy of an entire nation So I mean there's that plus there's a lot of math involved and and 94 percent belong to the system And the system is the responsibility of management to change. So we're 24 pages in. We're barely scratching the surface of this book. And there is the central claim that I wish that could be the title of the podcast, but I can't, it probably Deming should be in the title of the podcast, 94 percent of the errors belong to the system, which only management can change, which is a terrible title, but it's absolutely true as a statement though, because most of the problems emanate from a poor system. And in our culture, we don't really focus on the system. We focus on individuals, right? And the, the culture we have in,, in place now is we'll reward an individual for the performance of the system. Which is beyond one, one individual. And we'll also on the other end, punish an individual for the failure of the system, as opposed to let's fix the system together. Yeah. Right. We don't do that. Anyone listening to this is probably wondering at this point yeah, the system is terrible, plenty of companies are bad places to work or people don't stay there too long but they still make money, you know what I mean? some of the worst companies in the world. Command the most market cap and he has a statement for this as well. Like he does talk about this. It's not just a statement. He does talk about this as well. He says, companies are doing well, even though the management follows one or all of the above bad practices, there's more that we didn't read. I just read the pertinent one to us, and he says, if anyone here, if anyone were to study without theory, such a company, meaning a company that was doing well, without knowing what questions to ask, he would be tempted to copy the company on the pretext that quote, they must be doing some things right. And that copy is to invite disaster. And I feel Om, you have something to say about this topic because this is the majority of the world of software development in the last. I don't know, 10 years or so is copying judiciously, shamelessly from other people and not developing things unique to you that work for you. That's right. This is very, very prevalent. Immediately the word that springs to mind is the Spotify model where people just copy, Hey, Spotify did so and so, so we can just copy them and we'll have happy tribes everywhere. It doesn't work that way. And that's because people forget the fact that. Organizations are unique. Every organization is unique. Their culture is unique, their set of processes are unique and their, beliefs of what they're there for. They're unique. So any company can. Quote unquote lift and shift practices, but that's not an effective way because you don't have what they believe in their culture You don't believe in yours, right? So yeah, I mean for many many reasons this is not worked out for us You might even have a good approximation. like a good replication.. But you don't have those people you have different people and different interactions. Right. So therefore, you have a completely different system. And you should learn from what they did, but don't copy and paste it. Yeah. Develop your own. Right? Develop your own, look at your own practices, and see how you can change those for your own culture, for your own people. I guess you could people that you're looking at copy from, I guess you could go live with them for a while. And work in that ecosystem to try to figure out how they communicate, and then try to mirror that in your own organization. I mean, corporate America doesn't work that way. Corporate America is much more, adversarial. Organization is not set up where it's like a win win that's very true. I mean, a successful company probably not even be willing to have somebody come in and shadow them, right? That's because that's their secret sauce, right? So, , this has been going on for a long time in the software space and really, there's no success stories out there. There are a lot of failure stories though. These people that do that just move on to another place and repeat the offense. Some success stories also turn around and become failure stories as well. I was listening to a podcast recently, that, was talking about, the huge sweeping, successful transformation stories of bringing product management to the masses that large financial institutions that may or may not have fired a bunch of product. People every one of them. Yeah. So you're right. it just doesn't work. It's I mean, obviously, a fundamental mindset shift had not taken place. But I'm sure a fundamental. Financial shifts had taken place of, paying whoever consulting anyway. we might talk about that in the future, but we're not going to talk about it today. We're going to skip on to the next chapter, which is the introduction to a system, which is important that everyone understands what a system is. The way Deming wants you to understand what a system is. So he says most people imagine that this style of management, like short term thinking, all the problems that we just pointed out in the previous chapters. Has always existed and it's a fixture. Actually, it's a modern invention. A trap that has led us into decline, and transformation is required. So again, you've got that four letter word of transformation. Whether it's product operating model, or agile transformation, or really literally anything else. They're bad four letter words right now. But yes, absolutely. So how smart was he to recognize that back then, right? And yet here we are. We're still talking about this stuff. So he says a system must have an aim and the aim of the system must be clear to everyone in the system and the aim must include plans for the future. It's very simple. Like that statement is very simple and very clear. It's like it's simple sentences, not compound sentences. Very simple for executives to understand. Cause that's the way executives need it. They need it. Lots of short sentences, maybe written in crayon for them to understand, write down what your, what the aim of your system is, write it down, write down what the plans for the future are, write it down and put them out there so everyone can read them. This is like, this is, this is a, it's a regurgitation of what we said early in the podcast, but also it's a reiterating of our mission vision podcast where we kind of laid out like, Hey, if you don't know how to do this, this is how to do it. Right. Yeah. He also, I think he says that the transformation begins with the individual. Yeah. Right. So we don't really focus on that these days too much. No. We just say the transformation is spurred on or catalyzed by a consultant who comes in and says, DA shall do this. Right. That is fundamentally true is the transformation needs to happen with every single individual and that is the only way that the rising tide will lift all boats like we do this transformation because it is haaaaaaaaard! Sorry had to get that in there at some point. I said I would he says left to themselves in the Western world components become selfish and Competitive, independent profit centers and thus destroy the system. He's basically saying the regression to the mean in the western world is this selfishness, this self destructive impulse of destroying the system. Where we, if everybody was on some kind of transformation journey, right, that started somehow at day zero, I don't know how it starts or how, but if everyone was on that journey and knew where they were going on this journey, we could. Slowly lift the regression to the mean we could slowly lift the mean out of the gutter I'm worried about the mean is what I'm saying is that they're living on the street It's a tough time to be the mean but that that's that's the statement he made here the components break apart start looking out for themselves. So the flip side of that, I mean, transformation beginning with the individual is that the individual is fully bought in into this, right, by themselves. Like, this is what I need to do, this is what I will do. Without fear of repercussion or anything, be brave to do that. lead by example where people can see you doing it. Be a good listener, right? But at the same time, don't compromise. You have to keep at it. Continually teach other people and help people to pull away from that mean right? Help them, with their current practices and beliefs that they're coming into that mindset, fixed mindset, basically people that come in with a fixed mindset, help them get away from that. And without having to worry about, as I said, being blamed or having a feeling of guilt about the past. He has a, he has a quote here as, an additional responsibility of management is to be ready to change the boundary of the system to better serve the aim. Meaning the, the purpose of your organization. So like, again, I, we, we have said this a couple of times, it's like mission and vision. Those are flexible over time, right? Your vision more so than your mission, but also like the tool of organizational design. To act more quickly to accomplish like that. All this is like in the bound, in the realm of management. And, boy, like it's, it's, it's tough. I know we're only like barely scratching the surface of the book, , it's tough even reading it because it's even fewer times that I've seen, a leader in the organization to realize that like, this is a tool that they can employ and also this is a tool that they should be employing. You know So like even if they're educated enough to know that this is a tool do they have the understanding to actually use it in an effective manner? As opposed to just saying like, oh, we're not seeing results We're going to shuffle all of our teams with no plan like what are you doing? I kind of right any system needs guidance from outside. Again, a system cannot understand itself. An organization may require someone in the position of aid to the president to teach and facilitate profound knowledge. So that sort of goes back to what sometimes grinds my gears in the pockets is like, why can't anyone listen to anyone in the organization? To point out their problems. Like sometimes the people at top need someone from outside the system. Hearing exactly the same thing as they would from inside, but they there's credibility cause you're paying for that expertise maybe, or credibility that the outsider brings.. Yep. And then, on page 39, he has figure six. I'll put figure six up on the screen here which is basically all of the different divisions in an industry. boundary of the system is described here. What i'm showing on the screen, drawn around a single company or industry and he says that This was a like this flow diagram of how? Things move through the system products, goods, services they move through the system This simple flow diagram was On the blackboard at every conference with top management from 1950 and onward He's talking about his time in Japan, right? to understand that like all these pieces together fit together as a system, which is funny, man, we've used this graphic before, on different podcasts, but it's funny because, later in this chapter, he has the same diagram, which again, I'll, I'll put it here on the screen. He has the same diagram with circles drawn around each, piece of the diagram here. I'll show you on the book. I'll show you the diagram right here. Just so you can Right here. That's the diagram. Got it. Yeah. And he says Basically, the boundary of the system is not each department, like with their own metrics and their own OKRs, right? That's not the boundary of the system. The boundary of the system is the whole thing, all those pieces working together. But when you say like, oh, every department has to have OKRs and every individual and manager has to have OKRs that roll back up to whatever now you're drawing borders, and then people are going to find ways to hit those OKRs. And departments are going to find ways to hit those okrs and you might even say like oh brian Stop being silly. That's not even really what an okr is like, , first of all, I agree with you, but are people educated enough to know what an okr really means and to apply it properly? Do you want to take that chance or do you want to just say like? Be a good partner in the system This is the way it is here's our goal everyone in every single department our goal if everyone is a Working on a manufacturing line to build a car Like our goal is to give the best car to the customer that we could possibly can produce like top You know best efficiency best quality, you know drive it for years and years That's your goal. Your goal is not to like I want to make sure that the in you know, the back seats are You Free of defects or whatever like well, unfortunately, you know what we What you just said is being undermined by the tyranny of departmental budgets Because every department is looking out to protect their own budget, right? So already that whole systems level Conceptual thinking that we speak of breaks down Well, I'll I will tell you what's not making it better. It's like managers coming in, working a program for six months, 12 months, 18 months, and then shuffling out. I've told this on a podcast many times before about, programs that I was on where they would shuffle the management every six months or whatever, looking to make a radical that, that was just like the people leading that program, that that's what they felt. that that's the way they felt they were making a change. They would just shuffle. Management and then what you ended up with you never ended up with a constancy of purpose over the whole program and most of the workers stayed on that program for a long time years. But the manager is shuffled out every six months. This is even worse at the higher level where you have leadership being shuffled out.. Or they leave.. Or maybe with a golden handshake or parachute or whatever it is. The new set that comes in and it's always a set. A person comes in and they bring their whole gang with them from wherever they were working with them before. So, they have to. By definition when they're coming in, they have to do something different from the outgoing regime. Yeah, and they're going to right So the constancy of purpose I feel like it's just gone out the window as soon as you talk about these kinds of changes that we're so fond of making well, I've often thought about having a podcast on this topic about the second And third order of effects. So like basically delayed effects of things happening. Some of the podcasts I listened to, like Silicon Valley is, just catching on to second and third order effects Like they invented it, right. But here he, he calls it delayed effects. He says the effect of movement by a manager. Made now may not take effect till many months have passed even years, right? the immediate effect might be nigh zero even negative, right? You might rebound when that person leaves or whatever But it's gonna take years and then he also points out like why does the company spend any money on training? Because they affect the training Isn't going to be felt for a long time we need to run our company like there will be a tomorrow. Absolutely, yeah. And part of this is, it's hard to quantify those ROIs. You know, you're training people. How do you quantify ROI on that? Yeah. Right? So yeah, that's part of the reason why people are also thinking about it short term. It's just, there is a future., let's plan like there's a future. Like that, , that's a lot of what he's laying out here, like you can boil it down into like, I don't, and it's funny to even say it out loud, cause how do we even get to a point where people are planning like there's no future, like a, the quarter is a quarter and that's it, there's no future beyond that, you know. That's , it's a little bananas is what I'm saying. He covers some of that in, he does say that part, part of it is inextricably linked with their reward systems. Right? If you're going to reward somebody for short term gains and performances, that's what they'll do and then they'll move on somewhere else based on that to do the same thing there. At the end of this chapter, he has, some examples of cooperation inside of a system. red and green traffic lights that mean the same thing the entire world over , that system works very well , the time of day being based on Greenwich Mean Time. That system works well. You know, everyone uses the same time. Right. The metric system. Ha! Maybe, maybe a bad example. Bad example for the U. S.? For one country.. Yeah. Oh boy, journals, articles in which the authors share with the world new ideas, new methods, new results. Interesting. Yeah. It's like the whole internet right there. So we're going to move on now to the, to chapter four, which is a system of profound knowledge, right? So, let me step through the four categories, to reiterate them for people that are, lost. Like me. Appreciation for a system, knowledge about variation, theory of knowledge, and psychology. So, let's step through these four categories. He says, What is a system? We talked about this in chapter 3. What is a system? A system is a network of interdependent components that work together to try to accomplish the aim of the system. And the system must have an aim. do we always know what the aim of our system is? Absolutely not.. So we're off to a false start to begin with. I'm just, I'm just collecting a check here, Om. Clock in, clock out. Just tell me what to do. exactly. knowledge about variation. Variation will always be there between people, in output, in service, in product. What is the variation trying to tell us about a process and about the people that work in it? We can talk a lot about variation. We're going to talk about variation a little later in the podcast, so I don't want to go into it now about stable and unstable states, common and uncommon causes of variation. And, we'll cover it in depth a little later. the theory of knowledge teaches us that a statement, if it conveys knowledge, predicts future outcome with a risk of being wrong and that it fits without failure observations of the past. Is there, an opportunity to delve more into that later? do we have that, the theory of knowledge itself and kind of break that down? Wait, let me see. There is a chapter on the management of people. And there is a chapter on control charts, and that is the closest we will get to that. Yeah. It's basically using, first of all, , not trusting that there's a true value. There is just a series of control numbers. Right. there's not like one thing that is it every time.. There's a series of control numbers, and that you have to use data from the past, To predict the future, which is funny to us on agile teams, because we're like, what is the velocity? When's it going to be done? Like the whole, we just did a podcast where I was completely unhinged and ridiculous about when's it going to be done. it almost clocked into a solid 30 minutes. Cause I could not stand myself for a second, more than 30 minutes. If you have no knowledge about when things were going to be done in the past You have no basis to ask that question and we didn't bring that up in that podcast Which is shocking right was shocking that we were like you you're asking when it's gonna be done It's a brand new thing with no history at all How dare you? It'll be done on a day ending in a Y I absolutely guarantee. Yeah. And then pure information is not knowledge. That's, that's also included in the, that the, theory of knowledge, like information, like that's not just data. That's not knowledge. You need context around it. Yeah. We talked about Theory of Knowledge. We talked about, Management as Prediction, basically. and then, Psychology. Is his last section psychology helps us understand people interaction between people and circumstances interaction between customer and supplier interaction between teacher and people interaction between manager and his people in any system of management People are different from one another Shocking, I know amazing, isn't it? Yeah They broke the mold The funny thing about let me, let me check myself right here before I go on the funny thing about, , psychology in this section. He points towards, , I don't know if it's in the section or somewhere else, but he points towards some,, Alfie Kohn books like punished by rewards, which are excellent. First of all, highly recommend much better than most , books that people will recommend to you because you actually will learn something about the way that you were brought up in the educational system from reading those books. And, , he says, no one, child or grownup can enjoy learning. If he must constantly be concerned about grading and gold stars on his performance, right? Yeah, because then the focus is entirely on something completely different So then why is it so vital that managers spend time to listen to an employee to understand whether he is looking for recognition? By the company or by his peers Flexible working hours time to take a university course in this way a manager can provide positive outcomes for his people And may even Move some people towards replacement of extrinsic motivation with intrinsic motivation That that he's talking about how people learn and that there's an inherent joy in learning And that the system can either punish or, or basically destroy that inherent joy of learning and, that the, the, the modern manager in his, in his ascertation here, needs to basically like, understand where people get their intrinsic motivation from. Yeah, I mean, there's some literature out there on intrinsic and it's all good, mainly in the space of psychology, but in your everyday work when was the last time you talked about intrinsic motivation with your boss? We'll be talking about this when we get to chapter six. We're not quite there yet. I want to hit the chapter on leadership first because the chapter on leadership is. Like five pages and I want to talk about the chapter on leadership right quick. And it starts with. He uses the term leader, he says the job of a leader is to accomplish transformation of his organization. He possesses knowledge, personality, and persuasive power. Right, this is like, this is the typical leader that you'll work with. Right, Well, is it? I mean, you're right, you're right. It should be the typical leader that you work with, right? But, I think for most of us, a leader is more like a, A manager they, they're, they're not embodying all of these attributes of leadership. So he says, how may he accomplish transformation? First, he has theory. He understands why the transformation will bring gains to his organization and to all the people that his organization deals with. Second, he feels compelled to accomplish the transformation as an obligation to himself. and organization. Third, he's a practical man. He has a plan step by step and can explain in simple terms. First one is purpose. Second one's intent. And he can, and he can go A to B to C, right? He can carry out a simple plan. Like none of that is spectacular. None of that is skills that are beyond most people that listen to this podcast. I would think everybody listens to this podcast. I don't think any of those skills are beyond anyone here, but most people don't move this intentionally. Right. And that is the difference. Again, Earlier in the podcast, we talked about going from latest fire to latest fire. You got the pressure, you got a cognitive load. You know what I mean? You're not exactly sure what your purpose is, what your aim is. So you're kind of trying to find that too. You're doing a lot of stuff. It could be a lot easier and doing it the way we're doing it now makes it very difficult for the team To buy in not just say okay you say so must be true No really buy in at the individual level that doesn't happen often enough he has a great zinger in this section, too He says acceptance and action on a great idea depend on simplicity and brevity of presentation this is again, going counterculture to those voluminous, PowerPoint slide decks that people do. It sure is, but boy, when you watch a TED Talk and people say the most mundane stuff in that inspirational way like a talk that we might have watched on a podcast where people said mundane stuff. Right. oh boy, does it go over like, oh yeah, of course. Of course, like you can inspire some business leaders to have some takeaways to take back their organization when you say stuff in a simple and inspiring way, clearly and in plain language. So like, there's some showmanship involved. This is what he was on to here. Like, again, everything in this book, I think, very intentional as he stepped through it. I definitely agree with that, definitely agree way ahead of his time. All right, well, we're going to move on to chapter six, which is the management of people, chapter six and chapter eight are probably the densest chapter. So we're gonna move on to six, which is a dense chapter. I got a great declaration for you to start. Here we go. It says. If you cannot argue with your boss, he is not worth working for. Hey, listen, this absolutely aligns with my thoughts. If you can't argue with your boss, he's not worth working for. So what do you do? Lieutenant General Leslie Simon. When he held the rank of captain in 1936. Holy smokes. Ah, all the best, all the best zingers were said before the internet was created. Right, exactly. You're right. Right. No, I like this because you know, if your boss isn't worth working for, well, there's only one thing left to do. Get a new boss. Well, that's the nice thing about Deming as opposed to like, , Drucker and other people that came later Shots are fired all over the place with no regard like that. I get he says he's a corporation publishes He gives he gives an example of incompatible goals, right? He's a corporation publicist says goals and objectives number one, provide systems of reward that recognize superior performance, innovation, extraordinary care, and commitment. Number two, create and maintain the stimulating and enjoyable work environment with the aim to attract, develop, and retain self directed, talented people. Most people hear the statements and be like, That sounds great. That's a good place to work. The very next line in the book, these two goals are incompatible. Goal one will induce conflict and competition between people, a sure road to demoralization. It will take the joy out of work and thus defeat goal number two, however, noble it be. Man, that man was brave and he'd stay. Set it like it is. So this is still relevant today. So we've read a lot of books We've talked a lot of stuff. I was gonna say talk a lot of trash on the podcast I have that too and like one of the things of the product operating model was called transform by Marty Cagan We did that book on the podcast with Ed, right? Right and in transformed Marty Cagan made the declaration the new style manager has different job responsibilities, right? The new self manager, they're more of a coach than they are a manager. They're basically like a hiring manager with coaching responsibilities. Right. And that really is the bulk of their job.

the new role of the manager after the transformation, we're going to walk through his bullet points. I'll try to zip through them because there are quite a lot there. There's 14 of them, there's quite a lot here. Maybe I'll hit the highlights and get your reaction, alright? Sure, yeah. So, he says, number one, a manager understands and conveys to his people the meaning of a system. He explains the aims of the system, he teaches his people to understand how the work of the group supports these aims. So first of all, the system exists for a reason. He's gotta he's gotta evangelize that, right, and get everyone bought into that. I like that. And then how the system would work for those individuals. I think this is spot on. He hopes his people to see themselves as components in the system to work in cooperation with preceding stages and with the following stages towards optimization of the efforts of all stages towards achievement of the aim. So overall holistic thinking rather than just compartmentalized thinking, right? And the fact that every one of these pieces of the puzzle are important because without any of those cogs, the machine doesn't work. I got a good one for you in number three, a manager of people understands that people are different from each other. He tries to create for everybody interest and challenge, enjoy and work. He tries to optimize the family background, education skills, hopes and abilities of everyone. Wow. That's fantastic. I listen, who does that today though? Nobody, so this is where it breaks down for me today. When people say, here's a team, how many resources do we have the human beings? So we're not going to go down that path today, but yeah, when you be little people to be like resources, And basically at the end of the day, a cell on a spreadsheet somewhere. That's terrible. You're not even looking at what they bring to the table, what their background is. And so he's talking about that. He's talking about managers caring for an individual at the individual level. Yeah. Rather than just basically bricks in a wall and everyone is different. So again, I was a manager at a certain point in my career where I hired people. they will ask you this, sand trap of a question of like, what's your management style? You're supposed to say like, whatever the person is, whatever they need my management style to be, I will tailor it to the person because the underpinning is that the person asking a question, maybe they don't understand truly why they're asking the question. Maybe they aren't just asking you gotcha questions, but the underlying roots of that is every individual is different. Correct. So, when you're a manager, you have to understand and approach everyone like they're their own unique situation that you've never encountered before. Maybe there's some similarities, and it's a little easier than you expected, but that's the way you have to approach every situation. And like, At this point, I'm already, I'm only three bullets into whatever 14 and I'm already saying like this is a hard job. It is a hard job., because at the end of the day, people just simply, stratify people that they're hiring. Developers, well, the developer has these hard skills and that's it. But yeah, everyone's a unique individual. They're dynamic human being. So, Let me quickly move to the rest of these points so we don't get bogged down. He's an unceasing learner. He encourages his people to study. He's a coach and a consul, not a judge. He understands a stable system. He understands the interaction between people and the circumstances in which they work and paraphrasing some of this got your reactions to any of those. The only reaction I have to this is yes, yes, yes, that, but also some of the newer, models that people are throwing out there. Basically is this stuff. It's this. Yeah, right. Yeah. Right. Yeah We put new terms on them because that's the way to sell books it's this I mean this very little new that's not that's not introduced in this list So the next one is one where we should talk about for a second because he says he has three sources of power number one authority of office We need no explanation. Yeah given number two knowledge number three personality and persuasive power You Wow. So, okay, let's just talk about the second and the third. Sure. Right? Knowledge. So the person that you're hiring is supposed to trust you, that you can be there for them. If you don't have the knowledge, how are they going to do that? the knowledge doesn't necessarily mean technical knowledge here either, right? Sometimes it can be, but not always. It's about how to succeed in the organization in that specific role, Given what they bring to the table, right? Yeah. And then the, what was the third one again? The third one was personality, persuasive power, and tact. Tact, I haven't seen very much of, I have seen more directive, approaches, I'm your boss, here's how I like to work this way. the higher you go in the organization, the more refined a level of tact is. should be yeah, but what I've seen in real life is not that as much so yeah, definitely that that's something that I think people can learn from A successful manager of people develops numbers two and three the ones we just talked about, he does not rely on number one, which is the authority of office He has nevertheless obligation to use number one as a source of power enables him to change the process To bring improvement Which is to reduce variation in output. So again, like you, you do have those three different sources of power. And the first one, which is again, the one, that the less effectual manager will lean on. That is the one you should be leaning on to change the system. Right. Absolutely true. That's interesting. Yeah, but again, you don't really see that very often. Okay. Number eight, he'll study the results with. Aim to improve his performance as a manager of people. Interesting, he'll try to discover who, if anybody is outside the system and in need of special help. So again, we talked about their common causes for issues and there are special causes. So they're looking for people that are outside of those common causes to see if. Anyone needs help. And again, this is like the Kanban Andon on pull the cord. You need special help. I think the whole ethos here, making sure you take care of the special causes before they become common causes is very interesting. number 10, he creates trust, creates an environment that encourages freedom and innovation. Number 11, he does not expect perfection. Number 12, listens and learns without passing judgment All kinds of common sense to you and I, you know. Yep. Absolutely agree there. In that time he wrote about this in the masculine terms, right? But he means he, she, and number 13, he will hold an informal unhurried conversation with every one of his people at least once a year, not for judgment, merely to listen. The purpose would be development of understanding of his people, their aims, hopes, fears. The meeting will be spontaneous, not planned ahead. I mean, this is called coaching, right? This, this absolutely is. And the year is really the one year that he mentions is in the context of manufacturing. So today in today's world is obviously a lot more frequent. The interesting thing is that last bit for me, right? This is not, Oh yeah, you're Annual performance review is on this date, right? This is about, Hey, let's pull up and talk about stuff. How are you doing?. There's nothing to do with, , oh, there's an event that happened for which you need to have the meeting. No. This is just a spontaneous meeting. Tap on someone's shoulder or virtual shoulder. I mean, this is going to launch with your people on a normal basis. This is having one with no, no preconceived agenda other than just, Hey, let's, let's talk. And again, like people might be listening to this and say like, well, I have one on ones or whatever, but if you're one on ones are just like status reporting sessions or like sessions for your boss to tell you how terrible you did this week or whatever, to say like, I don't like when you said this thing or whatever this is not, you're not, this is not, yeah, that's not it. Exactly. Yep. and then, the last one in this category, he understands the benefits of cooperation and the losses from competition between people and between groups. So again, they're aware of that system works. Exactly. Yeah. And then not let the the people that they're supervising fall victim of the machine, right? Yeah. Yeah. Yeah. Yeah. I mean, that's a different class of. Manager, one that is a rare breed, unfortunately, and it's even out of all these bullet points, even in the transformed book now that I'm seeing the broad breadth of all these bullet points, I have to say I would like to go back to the podcast we did on transformed, because I think that , the responsibilities in that book only scratched the surface. I think these are way deeper. They're deeper, but I think they're also more encompassing, broader. I don't know. They're broader and deeper. Yeah, they're wider and deeper. Yeah, exactly. Yeah. So he says, is the company hampering itself by mismanagement of people? That's a bolded question in this chapter, the management of people chapter that we're on, and he says the full capability of the people in the company, working together, working with, and for each other. May be expressed as, and he gives a formula and I'll, I'll show this on the screen. There it is, Brian, right there, editing Brian on page 90. The math, it hurts! And it is a function of the top line of individuals. The top line is a sum of the individual's abilities of the people in the company. Right? Parentheses denote interactions between people. Right? And then, an interaction may be negative or zero or positive, right? So this is the sum of all the individuals. And the interactions, which is again, another principle that's again, like hidden Oh, Oh, this is dreamt up. I went to a ski resort and I just figured out like from scratch that this was not like, this is, it's not a thing that was just like invented out of the air. There is documentation that this is a thing. This is how it's done again. This is all based on research and work done in the fifties and before. And this is some of this stuff is like based on a short, which he talks about later in the book. So it's even like earlier than that, that these concepts have evolved. He says, why is it that a company as a whole may be less than the sum of the individual abilities, the abilities of the individuals, right? If you look at this formula of individuals and interactions, the funny thing about this is that he doesn't really state this in here, but as soon as I saw that formula, I said like, Oh, well, you should have, you should break up your individuals and interactions into smaller segments so that the individuals don't need that many interactions to succeed. The number of interactions is a load, right? Yes. The higher number, the higher the number. The worst. The worst. The worst. The worst. The worst. The worst. The overall picture. It's the whole cognitive load podcast that we did. Yeah. This is this is this whole section. That picture is great. So, arguing Agile 175 was why you need to make space to learn cognitive load in Agile software development. We probably should just call that cognitive load in Agile software development. That's a long title, I do have to say. How long is it? 30? 34 minutes? It's only 34 minutes? That's Amazing. That, that podcast, it was only 30 minutes. I highly recommend. And also I'm biased here, but also arguing agile 175. how many different teams can you be on? How many different people can be on your team? How many different, whatever, like there is a cognitive load. even if you have A small size team. Three, four people. Right. Okay. Well, on a regular basis, do you have to interact with like another team to do QA or another team to deploy your software, another a management team to do strategy with a, how many different customers, user per user personas do you have to interact with to, to demo yourself? We can start building this spiderweb and find out that like, even though your team's small, you still have a lot of vectors here. Tons. Yeah, absolutely. Tons of interac. To your people. So, what we know just professionally, what we know about this individual's and interactions, it's hard enough to do that. And then you introduce these tools and processes on top of that and you just compound this problem. Sure. times a million. I don't know. Statistically, that's a, that's a real number. That's an approximation. Yeah. Yeah, absolutely. So, I mean, he, he talked about this back in the fifties and was still doing this, right? Have putting people on multiple projects or product managers working on multiple products. I mean, you name it, it's prevalent everywhere. You know, one of management's main responsibilities is to know about the existence of interactions. basically cognitive load. And it was just, which is hilarious that that is on page 90 of this book, because I mean, I don't think I've ever worked in a single place where management, but what I think of as management really understood the effect of, the existence of interactions with regard to the way that people are interacting, maybe undermining their individual abilities and skills. I've never come across that in corporate life. Yeah, never, yeah. People just don't, don't really give any credibility. Only in like the agile coaching space have I even encountered people who want to figure out how to measure it and figure out how to improve it. Yeah. I mean, Deming said that a long, long time ago. And, unfortunately it's fallen on deaf ears for the most part. Well, what hasn't fallen on deaf ears is the plan. Do study act cycle, which he points out in this book right here, I'll put the picture up on the screen right here. It's on page 91. the plan, do study act. he says, step one is a foundation of the whole cycle. Step one is a foundation of the whole cycle. A hasty start may be ineffective, costly, and frustrating. If people have a weakness to shortcut this step, which is to plan the change or test aimed at improvement. The do is carry out the change or the test, preferably on a small scale. I hope you can see where we're going with this again. And once again, lean startup MVP approach here., study is the study, the results. What did we learn? What went wrong? Actually understand the data. This means you actually have to record and measure data. this is different than just the step that's known as check. It sure is. Deming was, he was quite a sickler that, , about that he didn't like. Calling it check because check didn't go deep enough. Right. Check sounds like you're not recording a lot of data or you're not taking it seriously. And then act, adopt the change or abandon it or run through the cycle again., if something seems off or you, have the idea that something needs to be changed, you go back into planning stage and you run the whole cycle again. That's PDSA Plan, Do, Study, Act. Yeah, so a lot of people have heard of the PDCA cycle, right? And they may be implementing it to various levels of effectiveness. A lot of times what I've seen is the plan piece is short it's shorted. They don't do enough planning. The do piece, that's the one thing that they do. That's the easy bit. And then the check or, study piece is also glossed over. And surprisingly, quite a few times I've seen the A. Just missing it's on a dashboard. Here's what we're gonna do. Yes, and then the doing piece doesn't happen No, the a is missing completely. I will say modern product management I would say like the majority of time is spent in the do cycle and a lot of people that say product discovery like they're They're over here saying we should do more planning that's really what like what I interpret from a lot of the folks trying to push we should be doing product discovery. Well, you should be doing better planning. Well, what is planning? It's a change or a test aimed at improvement. Well, how do you even get the idea? For a change or a test aimed at improvement you talk to your customers you come up with plans So you spend time in this plan cycle and then you develop something and then You don't do metrics and you don't act on, you don't, you don't do metrics. You don't study the real metrics. And then act is what we talked about. On the last couple of pockets, actually, we've talked about the same thing, which is a validation step after you're to do doing done for development that says like our customers really using it in the way we intended. And is it really solving their business problem that we planned? Right. That's the, that's all part of the accept. And if it is great, if it isn't. Not great, we need to figure out to do something about it. But even assessing that. Yeah. I guess you could say it's part of the study, , the ACT part is, we're gonna make an intentional like, Oh, people are not using it, why are people not using it? We need to run a survey or we need to, Add some metrics. We need to do something to get some more data, and again, I'm, I'm with you. Most people just, they're stuck in the do loop. Yeah. the doom loop. They're stuck in the do loop. Some people add planning to that. People with the study and the act pieces of that loop functioning properly. And even in modern product management,, as we learned recently, again, on this podcast, , where people are like, Oh no, product management is completely different than development as well. Like we're so great. Even they are weak at the study and the act part of this loop. Overall, I think you could say that as a summary that You know, most organizations are weak at doing those two, but I'll, I'll tell you, it's like small startups like the pre MVP folks, I think they do all these. They have to, right? They have a choice. They're probably the only purists. I don't use that four letter word often. They're probably the only purists that are doing this. Type of thing properly. Yeah, I agree with you. I don't also believe that in this specific case, which might be the exception that people that, grow their organizations to a bigger level at scale, they can't do this. I think that's an excuse in this case. They can do it. Absolutely. They just don't well, the plan, do study act cycle, , very interesting. It's it's a, it's a flow diagram for learning or improvement of a product or process. So just keep that in the back of your mind. A lot of people will go through the cycle because their aim is to shorten the development cycle, right? If you're a product manager, you might say like, I want to shorten the time to value, not just the development side, right? But, like what is the usual. Methods for rushing the development process. When you cut on quality tests, you mean you cut, you say MVP, but you're really just putting out a crappy product that doesn't quite service everything. It says one reason to shorten the development of a method by which to make something Is to move into an existing market for product or service that is already well established or will be. Speed and development of the process captures profit at the point where profit is easiest to capture. This track may be far more profitable than development of a new product or service, and he gives examples. He actually gives examples in this category about Americans invented the video recorder and the Dutch invented the CD player. And they both were, they both became Japanese products in the end. So, the funny thing in our industry is like, we know that Google likes to swoop in and take over entire market segments. Hey, you just go into an existing market. And, do it better than the people who are already in that market. I mean, there's so much here, right? There's a lot. There's a lot here, yeah, absolutely. This is a dense bullet point right here. Yeah, absolutely. It certainly is. There are a few like that, right? So, I think if you're in a stage of growth where you've just started out, some of this stuff you can do, it's easier to do. If you can make a product cheaper, you can take it away from the inventor, which is a bold statement. I feel like a lot of economists and people like business folks will say that like, it's prophetic, right? But what he says is the secret he points out for doing this for the reduction in time of development is to put more effort into the early stage and to study the interaction between the stages. So. Buckle up. There's math involved here. He says, we content ourselves to adopt a constant ratio of cost from one stage to the next. Oh, we got a development team. They cost X dollars. You know, the run rate of the whole team is what, let's just take like 200, 000 per developer per team member, team member, right? Blended run rate, 200, 000, 200, 000 per person on the team. There's five people on team. That team costs a million dollars per year to finance. So to develop my product, right? It costs a million dollars per year. I just, that's just my rate. It's flat. It's a flat rate. It doesn't change. What he's saying is, no, specifically let the cost at any stage be one minus X times the cost of the preceding stage. Then if K is the cost of the opening stage, the zeroth stage, which is the MVP stage, as far as we're concerned., then the cost of the nth stage would be KN equals K, parentheses, 1 minus X, And close parentheses and I'll put, I'll put the, I'll put this, this whole page I'll put in the middle here because he shows in figure 15, he shows graphically that he did the decrease in cost and effort stage by stage as you get further away from stage zero. And I think of say zero as the MVP stage. So like we spend most of our time doing new things. And learning and testing markets in the MVP stage. And this is why I tell people in product management, there are product managers that can do new product development, new market development. They're the same thing, by the way. And there's everybody else yeah I mean no argument for me on that definitely, but i'm wondering how much awareness there is of this particular topic out there Seriously, right people just don't think about that as much I don't think with mathematics To define the total cost of the stages. Right. And, , It kind of is like a step function, but with teams that are like, if you have a team, that's good at doing stage zero and then handing stage zero off to another team, or having another team join them and do stage zero together and then breaking off that other team to go manage the product while they move on to another stage zero, you know what I mean? This is like your, your. Your think tank team or your lab team or whatever. I don't, I don't know what to call it, but, including a product manager and developers and senior developers, full stack guys, right? UI, UX people, architects, right? this potentially could be a really, really powerful team, that does the most expensive work in the business. Again, if that's a skill, it's hard to find people to do that. And if you go back, and if you go back to our life cycle podcast, if you're going to transition that team to build something for the first time, get those customers and then keep that product running. In the Life Cycle Podcast, I posed the question are these the right people to be working on the product in maturity?, probably not all these, they're probably bored at that point. I would think so, absolutely true. I think in most companies you could apply this equation, right? That this mathematics and, the only thing that varies is the size of x. The equation is still constant no matter where you are. but again, there's no, there's not much, awareness of this. Well, he says, he will says, he will says, he says, it will be necessary for top management to block the privilege of anybody in top management or in any other level to come along at the end of the line with a bright idea. A bright idea belongs in the zeroth stage, not in the last stage. The system of development must be managed, it will not manage itself. He was certainly bold, wasn't he? Yeah, absolutely. So, so, so true. I mean, this is what a 20 year career has taught me, is like, you can't come along with your shower thought, Mr. Executive, with your unresearched And like no data supporting you hunch, and then get offended when, the stage zero team wants to test your hypothesis, wants you to help us build the customer base, right. To go back to testing, , wants you to share context, and then you get offended because we're basically asking you for a minimal amount of work are used to doing on a regular basis now if you're the type of executive or salesperson or whatever that is Fired up by like let's test different markets Let's talk to a bunch of different people like if you're fired up by that Great, like you you might have a future a bright future When you learn how to do some product management like you start reading the marty Cagan books now You got a future kid. Okay, so, there's a slight pivot in Chapter 6 where we talked about the, the different stages and whatnot. And, he kind of pivots to talking about, responsibility and promotion and how people get promoted. He has a statement. The usual method for selection of someone for promotion is by recommendation. One's chances for promotion depend on who knows him or put another way, who knows you. The people with the skill and this is like I was trying to point this out on the career on the on the 20 years in tech podcast, like badly by the way, Which is like this this thing like who knows you like that's what gets people hired into these executive roles Right. It doesn't really matter if they like Gary the sales guy Never worked a day in product management in his life, now he's this chief product officer. Yeah, yeah, certainly true. Listen, everywhere we've worked, we've seen corporate politics at play. Sure. And they rule the roost when it comes to promotions and things like that, right? people promote people they like, people promote people that subscribe to their type of thinking. Right. And not necessarily about what they can do. But this is, I mean, it's important to understand this because, again, we're talking about management, how management gets hired. They don't get hired the way workers get hired. There's this side of the argument about how these folks get hired and the other side is, the education of, this type of person, this management class that he's kind of outlining because again, like in the era he was outlining, it was like a different set of people went to college, different set of people like were in this management class. Type of field now, it's a little bit more mixed. I don't know. Maybe it's getting better. I don't know I really don't know. I'm not here to make a statement on it He says but but he does make some solid statements on business school Yeah, because he says schools of business teach how business is conducted at present In other words, they teach perpetuation of the present style of management. They teach perpetuation of our decline Oh boy, he says they ought to teach The damage unmeasurable that comes from, I'll throw out a couple of bullet points and it'll get your reaction at the end of it. Okay. They ought to teach the evils of short term thinking, ranking people, teams, plants, divisions with rewards at the top and punishment at the bottom. The evils of the merit system, losses from management by results and tampering. We'll get into tampering later in the book and demoralization and losses from incentive pay and pay for performance. My goodness. Everything that's happening in today's corporate climate is the opposite of all of that, unfortunately, right? So, where do we even begin? Like, how do you break into this and say, this is how we need to do things? How do you even start with this? Well he outlines it in the very next page, maybe two pages. Two pages. In the very next page, You have to figure all these folks getting into the workforce like you back up a step and where do you get to? We get to the education system is what you get to when you back up a step if we're talking about raising the the mean The only way we're gonna raise the mean across the entire workforce is through education through better education And oh boy like in case you thought it was gonna get better let me hit you with a remark on education from page 100 He says there's a deep concern in the United States today about education. No notable improvement will come until our schools Abolish grades. Oh boy. We're starting with a great one ABCD like from toddlers up through University So grades are gone in his world. Abolish merit, merit ratings for teachers. Abolish comparisons of schools on the basis of scores. Abolish gold stars for athletes, best costumes, etc. All schools must preserve and nurture the yearning for learning that everyone is born with. Joy in learning comes not so much from what is learned, but from learning itself. Joy on the job comes not from the results, the product, but from contribution and optimization of the system to which everybody wins. My goodness. Listen, none of that happened when I was in business school. We were taught the advantages of short term thinking as opposed to, Oh, the advantage of competition. Yeah, absolutely. Yeah. So on the, on the very, so on the very next space, he says, how does a student get a good grade by feeding back to the teacher, the same marbles that the teacher gave out to the class. So stated by Dr. Edwin Rothman, 1990. Grading in school is an attempt to achieve quality by inspection. William J. Latsko. So he's got some quotes. He's got some people attached to those quotes. Like, it seems like he's done his research here., to make statements like grading and ranking produce artificial scarcity of top grades. Only a few people on the job are admitted to the top rank. His claim is there is not a scarcity of good people. these are unnatural systems put in place on top of people. That's right. for reasons like really, I don't understand the reasons, but, all they do is, dissuade people's natural inclinations of learning. People want to learn because they like learning. That is a something that a you're born with right and again He doesn't go too deep in that in this book. The Alfie Kohn books do go deep into this So if you're interested in this topic if this stuff just doesn't sit right with you like I I highly recommend any of those Alfie Kohn books punished by rewards that's a good one to start with Yeah I think it's up to if you're a leader it's up to you to take on some of these and You don't have to take on all of them at the same time, maybe, but take them on and see if you can improve your, organizational climate, the culture. Yeah. So I want to end the, management of people chapter with a example he gives in the book about a school gym class. And first of all, if you're still listening to this podcast, Here at the, hour 15 mark, hour 20 mark, whatever it's going to be right now. Thanks. And, , also let me know if this was your school experience, because this is, this is verbatim my school. If I could have AI create a cartoon of this right now, it would be my, my childhood gym class experience. Right. It says the aim of class in gymnasium should be physical benefit to everybody. In my school it was called, , physical education, it was called P. E. I know, mine too, it was called P. E. Instead, P. E. class were typically spent playing a competitive game. The child that did not display athletic ability received no benefit from gymnasium. For example, in softball, the non athletic child would be placed in right field where the ball would seldom be hit. In basketball, she would be sit on the bench till her team had a sustainable lead and then be sent in and she could not jeopardize the victory. Thus, at a very early age, once a child is labeled non athletic, there's little opportunity for benefit from gym class. Even the method for, Forming teams involved constant winners and losers. The gym teacher would select captains who would then choose their teams. The captain selected the best players first, and then with consultation of each of the players selected the next level of players, the last to be picked would endure the humiliating experience of being judged by their peers as inferior. In the classroom we had a chance to shine. However, others did not. Students were early labeled winners and losers. This stifled natural motivation and joy of learning. The classroom version of the bench warmer was afraid to raise his or her hand for fear of giving a wrong answer and being laughed at. this could be a lot of teams right now. You know, people stay quiet in teams for a reason but yeah, I mean whatever they say you could just say, well, that was silly, right? That's this happens all the time. Reading this section - infuriating, like those are adults perpetuating this, the gym teacher in this example is selecting captains and letting this thing happen. Like those are adults. Those are adult. Like, listen, you should know better.. No, I agree. Unfortunately, in this, in that specific example, unlike the corporate setting where we keep telling people to keep their resume updated, what can those students do? They get frustrated. And then, naturally, their talents are stifled, so they don't blossom. Yeah. Athletics wise, right? I mean, that's sad. Right. Very sad. and again, like the whole hello, like a hundred episodes ago, we were talking about the Carol Dweck book. Right. You can go listen to that Carol Dweck podcast, the, Mindset podcast. Yeah. And you can clearly see why a kid. Who has to endure this every time they go to P. E. class. You know, they get, I don't know what kids go to once a week, twice a week. I don't know if they go to P. E. class anymore in school. Yeah. But, you could clearly see why, they think they're like, Oh, I'm not good at sports. Well, I'm not good at physical stuff. I mean, you're not good because no one's there encouraging you. No one's asking you, no one's putting you at first base. You know, you're going to get the most catches at first base. What if you're not good at sports, the where you should play first base. So, yeah, this is, I think, unfortunately, there are a lot of kids out there who can relate to this, but they can't keep their resume updated. It's not like they can just leave bananas., this category is so, it highlights a systemic broken nature. Of this problem, but it's okay, Brian. Here's what we do. We say we declare ourselves world champions. We could be the only ones playing that sport, but that's okay. Right. With we're world champions. What an infuriating kind of wrap up. so, chapter seven is exclusively the realm of the red beads experiment. We are not going to go into the red beads experiment here. You can watch videos about actually actually watch the red beady experiment happening online, encourage you it's worth five minutes or whatever to watch the red beady experiment. Basically, you take a bunch of beads. There's red and white beads and the supervisor yells at you and says no red beads only filter white beads and here's a paddle or something with holes in it and You're supposed to scoop beads out and paddle them in and they yell you for getting red beads Which is like it's funny because like you can't control the scoop. You can't control within the scoop, right? You can't get yeah, so There's a bunch of stuff you can't control. What it's supposed to teach you is the system is stable. You scoop the beads, you shuffle them through the holes, they fall into the thing, a certain amount of red beads, like the system itself is stable. Stupid, but stable. Right? And, You don't get any say over the process. So it's supposed to be a hands on experiment to teach you that like, listen, why, why are we not just like, who gave me this bucket of beads? Why can't I just tell them like, Hey, stop giving me these red beads. What are you doing? Right. In the experiment, if you watch the experiment, there's like, Oh, the foreman hits this quota, they get a bonus and workers get fired for getting too many red beads, the process is. In control, but we're playing all these games inside of it. And, it's really fun to watch. I think most people can relate, from that video to what happens at their work day to day. Yeah. And, the end of every red bead experiment is like, well, we decided to close a plant. You guys can't stop the red beads from coming through. We're going to close a plant. That's enough is enough. And management has made the decision which is, I mean, that's great. But, again, it's a good hands on experiment to get you to understand this. Yeah. If you don't, right. Right. But I want to move to chapter eight, which is a short and control charts because it's a, it's a, it's a pretty, it's a pretty important chapter. to talk about because, this is where he explains common causes and special causes. Page 120, Dr. Shewhart invented a new way to think about uniformity and non uniformity. He saw two kinds of variation. Variation from common causes and from special causes. Okay, he puts in a footnote, Dr. Schwartz spoke of chance causes of variation and assignable causes. It's common versus yeah, so but he changed the language a little bit. Anyway, common causes of variation, common causes of variation produce points on a control chart that over a long period all fall inside of the control limits causing common causes of variation, say the same day to day, lot to lot. The special cause of variation is something special, not part of the system of common causes. It's detected by a point that falls outside of the control limits. And just to bring this into perspective with an example I told om but when we were prepping for this podcast, , he says later in this chapter And I know i'm not going to quote it i'm not going to find it but he says later in this chapter a young boy Waiting for the bus for like for school, he wrote down the time the bus came every day and, the bus never varied more than five or so minutes, outside of the normal range. he wrote that down the entire school year and there were only two days that it varied outside of this, five minutes give or take, it only varied on two occasions, one was they got a new bus driver. because the bus driver was sick so it was a substitute bus driver. the other day, the door opener was broken on the bus. Oh, okay. Yeah, so they probably had to get a new bus or something like that, right? Yeah. So like, those are the two, so those are like, those are special causes. Everything else is like, well, maybe, maybe there's traffic, but there's traffic every day. Or maybe there's maybe somebody was like, got sick or woke up not feeling well or whatever, that could happen any day. So like there was a little bit of variance, but when he plotted all of the data on a timeline, there were two blips and he figured out what the upper and lower bounds were. He bounded all the data. And the only blips outside of those normal bounds were those two things for the whole year. So, and he points on the book, he's like, Hey, if whatever eight year old, nine year old, I don't remember how old the boy was in the story, can do it, surely your management can do it. Absolutely, if they want to. If they want to, yeah. I think the goal, the goal being here, getting ahead of those causes that Are special. Right before they become common. He says, Dr. Shewhart saw two kinds of mistakes described and we're gonna repeat them here. He says, mistake number one, to react to an outcome as if it came from a special cause, when it actually came from a common cause of variation and mistake number two is to treat an outcome as it came from a common cause. When it actually came from a special cause. So basically mistaking one for the other, or both mistake number one and two, right? And this section is pretty good because it gives you some examples of that kind of stuff. I've been in some shops in my time in software development, where they say, we've got to get to the bottom. We got to get to the root cause analysis of every single bug. and listen I might have thought about this early in my career in a different way Whereas like that's just a bug because we're pressed to get stuff out as quickly as possible And that's just an effective system of getting stuff out as quickly as possible and turning stuff around as quickly as possible. We're just generating bugs Are these bugs that were created because of a normal common cause of just always rushing the development department if so No real rca necessary No, everyone knows it . Yeah. I see is are actually a very valuable tool for those causes that are special, special. Exactly. So that they don't become common. What would you say if someone, if someone is listening to this and says, Well, Om, if you don't do an RCA on every single bug, how would you ever know what's special and what's not? Oh, you would know because the special ones don't happen all that frequently. And when they do happen, they, they are much more impactful. Like they impact you to a degree where it's not just a bug. So yeah, you would know, you would definitely know. And if you can, if you can intuitively tell as a team, perhaps, right? I didn't do polls or whatever, how are you going to do this? But you can tell that. We're causing more bugs because we're pressed to get things out faster. That's just a sacrifice of quality he says we can avoid either mistake, but not both He says it's impossible to reduce both mistakes to zero The best way we can do is to make mistake one now and then mistake two now and then yeah So I I think there's two things I get out of that one is you cannot eliminate all causes Things will happen. Something will happen that you just cannot prevent. And when it does, you can learn from it, right? That becomes special, then great, because you can now make sure that it doesn't happen again. So that's the first one. Well, that's the second one. The first one was you can't prevent. Everything right, right. No matter how much you try. So to your point earlier, for those people that say, what if you don't do an RCA on everything? Well, you could, but is that the best use of your time and your team's time? There's another great statement in this chapter. I don't want to miss it because it's another one of those ones that, Has propagated outside of this book and been kind of taken and used in a different way. It says when a control chart indicates no special cause present, the process is said to be in statistical control or stable. The average and limits of variation are predictable with a high degree of belief over the immediate future. Quality and quantity are predictable. Costs are predictable just in time begins to take on meaning. So again, with that, like the bus is running on the schedule, if I can draw an upper and a lower bound on all my points in time, and I can predict like, well, the bus will definitely be here between. Well, we live in Florida, so the bus comes at like 4. 30 in the morning. Well, it's still dark. It comes super, super early. If the bus comes between 6. 44 a. m. and 6. 50 a. m., that's a six minute window. Yeah. Okay, so when you're like, Brian, when are you going to get on the bus tomorrow? I'll say, first of all, I don't go to middle school, leave me alone. but second of all, I'll say, it's going to be between this six minute window and then set your watch because watch my team perform and I can be ridiculous about it, but also like there's a high expectation that you can set your watch to my delivery time. And we will hit your deadline or milestone, wherever you want to call it on the Gantt chart, we'll hit it. Because this just in time thing is like, we have real statistics backing us up. Yeah, yeah, special cause is notwithstanding, of course. Absolutely. That's very true. What if there's a crash on the only road the bus can take? Well, that doesn't happen every day, right? So, to your point, if you're in the bounds, upper and lower bounds, the processes in control, this is control, basically this is control systems theory. Yes. But if you're outside of that, that's where you should spend your effort to figure out the RCA. Well, he has a couple of statements. The performance of an unstable system cannot be predicted. That's a Brian Joyner, 28 July, 1992. So like, if you have an unstable system, you can't plot those control charts. You can't do the upper and lower bounds or you have no data. We didn't talk about that yet. Well, you're not doing this. There's no sense of normalcy. When's it going to be done? I don't know. This is a new team, right? Or this is a new technology. Yeah new program new customer Exactly a million things you shuffle all the teams you change all of our team members around We can't predict anything that this is a the the system has not been proven and then he says Once statistical control is achieved, the next step is improvement of the process, provided the economic advantage hoped for will be a good investment in view of the expected cost and improvement. Improvement may be defined as a narrower variation, moving the average to the optimum level, or both. So basically once you have those control bands, now you can start working. And this is like the Toyota system of production , this is that system is we have control bands, everything's in control. And now we want to narrow and narrow and narrow until our just in time becomes tighter, our delivery, our quality becomes better., through each step in the process becomes faster that you can't do that until you have those upper and lower. You have to have a stable system before you can improve the system, right? and narrowing of those bands to get more and more Optimization out of it happens over time. It doesn't happen quickly. He has one more thing in this section before I move off of it, which is, he says specification limits. Or not control limits, which is saying, Oh, we're, we're working to spec basically saying like, Oh I think of, software development, SLAs is like a spec. Somebody picked that out of the air. Of course. Now, if it's, if you've done your statistics, you've done your control chart and you know, your upper and lower bounds of all your points over time, and you're constantly adjusting as things move up or down or whatever. But if you just, if management is like, we want whatever we want the software by this deadline or we want this milestone or whatever you're kind of, talking about this here is you, you declared a specification and, Deming says, There is no logical connection between control limits and specifications. Control limits, once we have achieved a fair state of statistical control, tell us what the process is and what it will do tomorrow. The control chart is the process talking to us. So again, that mirror just shows you what's happening. You picking a spec and saying, look, I want this by this date was nice to want but it's not yeah it's nice it's nice but that that's what a spec is yeah yeah I fully agree Well before we're done with this chapter I want to wrap up by saying there's a lot of expertise employed in understanding a stable system like a Kanban is the closest that software development gets to this Right. Here, here's, here's our flow through the system. What can we do to tighten this flow to make it faster, higher quality, et cetera, et cetera, right? He has a quote in here that I think is brilliant. It says, the beginner is entitled to a master for a teacher, a hack can do incredible damage. And oh boy, there's a lot of hacks in this space right now. For sure. Way more than there are masters, I might add. Absolutely. Absolutely. Wow, what a profound quote. They're just talking the talk with regard to management, the chapter on management we talked about, or they're kind of muddling through with regard to the chapter we just read, the Schubert and control charts. Like they're making decisions without. the long term data going through the process of what is the upper and lower bounds of this process and understanding the system, the bounds of the system in which they're working and, the aim of the system. So they shortcut any of these things at your own peril. Oh boy, if you're one of these folks that are a hack that are making money off of whatever, I don't even know what you sound like. You're a disguise master, basically. there's a lot of this out there right now. And unfortunately it is now. Becoming evident that it doesn't work. So it's hurting. the funny thing is there's a lot of rebranding in the market. There's a lot of like, Oh no, all the agile folks can't tell you anything. You need product people. Oh, all the product people can't do anything. You need growth people. Oh, the growth people I don't even know what's next. You need AI. That's what's next. Until the AI starts to feel it. I mean, theoretically we're already there. in, chapter nine. He does the funnel experiment, which is similar to the red beads experiment, is an experiment on variation, where they put a funnel over a table and they drop marble through it onto the table, and then they tell you to change your process based on where the marble falls. So, in the first version, the marble falls in one spot, and they tell you just keep the funnel stable in one spot. And just drop the marbles as close to each other as possible. Just try to keep the, the, the funnel stable. And the next one they say, well kind of move it as your best guest in a tight pattern and try to keep it stable. And then the next one, they tell you, move it to where the last marble dropped and keep moving it and whatever. Like, and then like, they will show you in this chapter, if you read the chapter, the control charts get worse and worse and worse, the more that you. The more that you mess with the process, I was going to say monkey with the process, the more that you, interfere, there's a word for it. The more that you tamper with the process, that is the word he uses. That's right, tamper. if a process is stable and you tamper with it, it's only going to wobble. Right? Right. But that experiment, such a low tech experiment, but it's very profound. You could clearly see the impact of that. So he says, Improvement of a stable system requires fundamental change in the process. Fundamental change might be extremely simple. A process may be stable, yet turn out faulty items and mistakes. To take action on the process in response to production of a faulty item or a mistake is to tamper with the process. The idea is, Unless you have the control chart, unless you're watching those metrics, you need to make a single change, just, just like testing. Just like software testing. In software testing, you would try not to change too many variables at once. You try to change one variable at once. Yep. See the impact of that, and then decide whether to make that a permanent part of your process or not, and then roll it back. Now, that's not always possible. And again, depending on who you're working for, , that amount may not be practical if you wanna keep your job , but, that's the basis that's the basis of the testing. So he, that's what he covers in chapter nine. I'm gonna spend, I'm not gonna spend a lot of time there. I'm gonna go into chapter 10 because it's lessons and variation. He starts to wrap up some things in chapter 10. Cause again, this is Deming's last this is his last chapter that he wrote. And then the chapter 11, this book was written by, Kelly Cahill. Yeah. Other people. we saw only in, the Red Bead experiment. we saw only common causes of variation. We've learned that it's important. In the management of people to understand the distinction between common causes and special causes of variation but he says a layman, however, well educated, but not learned in statistical theory, attributes every event to a special cause. Unaware of the distinction between common cause of variation. And special causes which I totally get this I mean it's software development completely get this with the bug example of like, oh, it's a bug We gotta dig into every single one. I mean like listen guys, we're rushing. We don't need to dig in everyone. That's right Let's just fix it move on fix it move on that may seem a haphazard attitude to a lot of people. but if you really understand the system of like, guys, listen, we're in MVP phase. It's just a bug. Forget it. Like, let's go. the learning is the most valuable thing in this phase. Indeed. Forget it. It's a big sentence to choke down for a lot of people in this field. Yeah. Yeah, definitely. And the other thing I would say is you don't have to fix all of those common causes like you have to fix all of the bugs. Right? Look at each one on the basis of its severity, its impact, and its priority in the backlog. Yeah. We don't fix some of them. Another thing he points out, he says, One necessary qualification of anyone in management is to stop asking people to explain ups and downs, day to day, month to month, year to year, that come from random variation. So again, this is like, just like the bug thing. It's like, if you're being Ask to explain every single bug that hits you in production or every single ebb and flow of your users of usage of your application or whatever. Yeah. Some of that is just like variance over time. Like, you have to explain every day. Like that, that's you're going to find. Too much overhead. You're going to find excuses. Of course. Like first you're going to make stuff up. Let's, let's throw that out there, first of all. Yeah. And it's a huge overhead for no potential return. So, we just talked about stop asking people to explain the ups and downs. And then next thing he goes into in the book is the use of loss functions. We don't like in software development. I don't think I've ever talked about loss functions and, I'll put the example that he gives in the book on the screen. But the loss function describes the losses that a system suffers from different values of some adjustable parameter. Use of a loss function is restricted to the realm of losses that are measurable. So there's that! So he says the most important use of a loss function is to help us change from a world of specifications, meeting specifications, stuff like that. Arbitrary goals to continually reducing the variation about the target through improvement of the process. the loss function here that I'm showing on the screen. It shows, it shows basically it looks like a bell curve, intersected by a slope and it basically is the loss function that says, well, you're going to lose a number of. Minutes or potentially hours, right? To say, if you want to show to the airport before your flight leaves, okay, you're going to be sitting around the airport with nothing to do. That's a loss. That's the bell curve of loss, right? If you get there super early, you're going to pay that whole bell curve. Yeah. Yeah. So the goal is to get there just in time, just in time where you minimize the loss, but also don't suffer missing your flight in your example. but the nice thing about the particular, there's other curves he has in the book that explain this, but the nice thing about the one I'm showing on the screen is if you miss. The opportunity, you miss everything. Like the curve just goes infinite. Yeah. You miss everything at some point. So if you're like Brian going to Tampa airport, like you show up, you show up into the, what is it called? It's not called economy parking garage anymore. It's called like. Extended parking. You show up at the economy lot, like 30 minutes flat from where your plane leaves the tarmac. Cause I know that. Cause I don't travel with check luggage or anything. only one time I've ever just absolutely missed my flight. This is a great illustration of this loss curve of, somebody has to pay for those losses. So if you're going to the airport and you miss your flight okay, you pay for those losses in either money because you have to get another flight or time because you have to just wait and book you for another flight. So, you directly pay for those losses. But if you're a company and you miss on the market or you don't innovate that loss curve of those opportunities that are lost, who pays for those? So in the book, he says, somebody has to pay for those losses. He says, Dr, Taguchi called it a loss to society, September 1960. We all helped to pay for a mistake, a breakdown, failure, bankruptcy of the, of a company inept management. So basically society. Shoulders the burden when a company or maybe a government sector or whatever that is trusted by people to be operating on our behalf makes us failure. So that was very interesting. And I think when a company fails also, at large companies stuff like that the people inside the company They might be the portion of society that pays for this loss because their business leaders Weren't paying attention to the market or weren't you know, I mean like that kind of thing Yeah, yeah. So in machine learning and deep learning, loss functions are used to evaluate how well a model fits a data set. The goal of training a model is to minimize the loss function, or to reduce the distance between the model's predictions and the actual labels, right? So who pays if that delta is wide? It's the consumers of that model. Well, , that moves us along to Chapter 11. It starts off with a question to Dr. Deming, dr. Deming, how many organizations are using your methods today?, 100 percent today. And Deming says none. And then the question is, how many? If no organization is using your methods 100 percent today, how many will be using your methods in a hundred years? And Deming says, all that survive. So, as, sassy as Dr. Deming was, I like him, 90 year old, sassy pants. he's just saying in the future if you're gonna survive you will need to do these your managers will need to be coaches. Otherwise, you will not survive. You'll need to understand statistics, otherwise, you won't survive. So we're gonna breeze through this chapter. Just to talk about some things to wrap up. We'll start with quality. He says, The bigger picture of what Deming was doing in Japan, like he wasn't teaching them, he wasn't teaching them a way of management. he was teaching them a systemic viewpoint of how organizations operate and how organizations need to operate for a continual improvement. And again, this is like filtered in continual improvement as filtered into the ether. In various ways, various business books and whatnot, but that is what he taught. He taught improving how the entire organization is managed as a system is required because managing an organization as a system provides enormous leverage to reduce the costs overall, while optimizing quality and product productivity and enhancing joy in work. Wow. Yeah. He also, said organizations exist to. Not only provide value and service but also to create jobs for people He actually said that and that I find quite stark like right now Organizations don't really care about that so much. Well, I mean part of why organizations might not care like He has a he has another quote in this book. He says another factor It was the human brain's default setting to accept what is familiar. The power of familiar was very evident in how leaders led. Command and control, management by rules, management by objectives change is hard, Ohm. That's what he is pointing out early in this book, is like, you, you could go with the theory of profound knowledge that is here, which is basically setting you on a path to say like, hey, you don't know it all. And even if you do know all the facts, all the knowledge, Like that's not wisdom. That's not, that's not a, a, a, a, the, the, the fluid movement of the show shoe Hari, like that, like you still have to continually dedicate your life. In pursuit of these concepts and quite honestly, that's hard it's hard, but it's also necessary And so especially if you want to survive let alone thrive, we also would have accepted that like what else are you doing with your life? Like Come on, what else are you doing sitting outside the gas station like Jay and Silent Bob? the other nice thing about the tag on chapter is where they say like, how many leaders can actually articulate their management philosophy? Meaning like if you're not dedicated to what you're doing in this book to what they outline in this book, like what really are you doing? Can you articulate what you're really doing? Because the so called best practices that they call out, first of all, they call out in this book, best practices. I'm gonna name a few of them. In a second and you're going to laugh because there's going to be some familiar ones on here to anyone that listens to this podcast, he says, so called best practices you realize are just a hodgepodge of beliefs that often contradict one another. Set a goal, get out of the way, let people figure it out. If you want them to grow. Versus, you gotta mentor people, help them be successful, if you want them to learn and grow quickly. Yeah, I mean, just leaving them out there to fend for themselves, that, that's one idea, but that's not necessarily always going to be successful. Here's another one. If people do not meet the stretch targets you give them, replace them with people who will. Versus, if you turn over employees quickly, because you worked them to death, word will get out that you're a bad place to work, so you should set reasonable targets. Again, like these are all like in the zeitgeist of business, right? Absolutely. How many, how many fads compiled from Wikipedia, CBS News, Harvard Business Review, Forbes. And he gives a list of the fads how many of these. Do you recognize total quality management, business process, engineering slash re engineering 360 degree feedback management by consensus, six Sigma ISO 9, 000. Management by objective core competencies employee engagement surveys one minute management theory z. I don't know what theory z. I never heard of that. There's just so many management 3. 0 Throwing that in there how does it happen that dr? Dr. Deming's teachings could be co opted by people that he calls This is a good one. This is, this is a good quote because he says, instead of Dr. Damning's idea of continual improvement, meaning deep, holistic change throughout the organization, leaders were spoon fed different definition by people cherry picking and trying to make money on training. Yeah. These things that were consultants. Yeah. That's very interesting because like to our line of work, oh boy, this is try to avoid this. I mean, you almost would have a tougher time. Trying to avoid this and having like trying to get a one stop shop that really truly understands and appreciates everything Like that's I mean a needle in a stack of needles, right? Right exactly in a forest full of stacks That's right. It was crazy crazy crazy that he nailed this all it all those years ago. If you listen to this whole podcast, first of all, congratulations. Second of all, where can you start if you want to start this system of profound knowledge, you want to start. The number one bullet point they put in here in the book that they put here in the book is be sure to communicate what you're trying to accomplish, why and how. So again, write it down. Write down so that you can constantly revisit it and it's everyone looks at the same writing. And then they have some things here about Continual learning of the principles. So you can stop managing your organization by visible figures alone. Look more deeply to what's causing those figures. You can eliminate incentive pay. You can eliminate commission pay to salary. You can start using control charts. And again, when you start using control charts, that means some kind of commitment to measuring data that maybe wasn't there before. A lot of companies don't even have the data today. So, start at least with getting the data and go from there. All right, so some of the failure modes. That they point out here and near the end of the book, like things that you're bound to failure? Hey, you're trying to take on and do too much, too fast. A lot of the failure modes that are in here are also agile failure modes, you're trying to do all your teams at once. A big bang transformation, whiz bang transformation, like pick a pilot team. Start small start your transformation. It says, if you do not take the time to engage senior management and board members, then you're putting your implementation at risk. This is all like find and replace Deming with agile. You've got the exact same talking points. I believe that's true. Yeah, definitely. They also say going too slowly. that communicates a lack of commitment. Yeah. Because you're really not sure of the direction you're heading in and then the rest of your teammates or the company is really, not gonna be bought into this. Right. I haven't heard that one too often to be honest. But it makes total sense. Well, when I read it out loud, it makes total sense because then you let, the hangers on or the people that are like, oh, this is all just blow over. If I just Duck and cover well at worst you sew fear uncertainty and doubt like we don't know where we're going Yeah, i'm gonna keep updating my resume now Always good advice. the belief that you have to have all the answers before you begin I've seen I mean i've seen analysis paralysis a real thing. I haven't encountered it too much to be honest when it comes to organizational design, but I do believe it and then the Number four is the partial application Of deming's methods here. Yeah, which is probably the the majority of what we're gonna talk about. Definitely. Yeah. Yeah, I agree Yeah, that's avoiding failure And then, he has an interesting comment on systems thinking here near the end of the book. It says systems thinking is a subset of appreciation for a system, which we covered in the previous chapter. he says systems thinking is a subset of appreciation for a system, which we covered in chapter three, and it's not the same as appreciation for a system. Appreciation for a system. So like system thinking is like the, the quotes, you know what I mean? Of that, that's, that was interesting to me. I was like, Oh, I never thought about system thing as in like, Oh, you got to think about the problem that you're solving in terms of the whole system. Not, Oh, you got to think about the system and then all the problems that could be included within. You got to kind of think about it in reverse. It might sound pedantic to some people, but, if you really step back. And like sit yourself down under an apple tree and think about it. It does make a lot of sense I agree with that. Definitely if quality in your organization has become something that is delegated to a department You'll want to rethink that one reason that quality has been delegated is that leaders thought it was quality was a technical function Dr. Deming saw quality as a strategic function that permeates entire organization. It starts at the top. So that the Deming's chain reaction through the whole organization can be achieved Yeah. I mean, this, we see on the podcast often that build in quality, don't inspect for it at the end, or that's, I guess, part of what he's saying here. Implementing technical quality improvements or where a lot of firms start. And that's where a lot of firms stop. And like you can find a replace like quality or Deming or whatever here with agile. Sure. it would hit the exact same. To them, quality means compliance. Right. And that like that's a performance. That's a big problem. And compliance is compliance to a specification. And that is a big problem for all the reason we just described two hours ago, strategic quality in contrast to technical quality means that the organization is being led in a way that decisions are made throughout the organization that contribute to it to quality which is where we started in the very first opening of the podcast talking about what quality is where quality is a product or service possesses, a product or service possesses quality if it helps somebody and enjoys a good and sustainable market. Sustainable is another good one for us because we did a podcast on sustainable. We did, yeah. So where I want to wrap the podcast up, quality is a strategic issue. It's not a technical issue. He said oh that that's stuff that the development teams take care of or that's something this you know the the people writing reports or whatever take care of though. No, no quality is a strategic issue meaning strategic meaning like all the questions about like roi and like how how much Like can we twist the dials and pull the pulleys or whatever? Like yeah, this is a strategic issue, right? It's top level for the business and we're willing to spend all the money or whatever. That's a level of importance that quality has in the organization and that's where you can adjust the system you can adjust the Levers that are available to management and only management to adjust the dials that output the quality that are only available at the system level. Right. Right. I'm trying to say something here. No, I got to get it. I get it. At the system level. So it's not something that is at the individual, silo team level person or team or really any, if you think about like any company that has a product they're selling quality isn't just in the making of that product, right? It is at the beginning. It is also at the end servicing the product. You know, the help desk, all of that quality talks to all of those things that basically is the totality of the experience for the customer. Yeah. Well, that was W edwards deming the new economics for industry government education thanks for sticking with us on this podcast. If this is episode 199 Put your hands up. We're going over the roller coaster here in a second. I'm so excited. Thank you for coming on this journey. If this is episode 200, thanks for coming to episode 200. We made it. We did it. Yay.