“The rhythm of technology is changing the rhythm of business, and we’re all going to need to adapt” – Jeff Gothelf and Josh Seiden, Authors of Sense and Respond

Back in 2013, in a post on sense and respond systems, I talked about the drivers that would push organizations towards a sense and respond paradigm. There are no bigger drivers than volatility and uncertainty, and nearly four years since that post, that fact is becoming clearer. In a recent book by Jeff Gothelf and Josh Seiden, they elevate sense and respond to a position that is core to achieving an adaptive enterprise. They see feedback loops and a movement away from command and control as the enabling mechanisms that allow us to thrive in the digital age.

Management expert Gary Hamel summarizes the challenges we face as the structures of the industrial age collide with the digital age:

“Modern management is one of humanity’s most important inventions. But it was developed more than a century ago to maximize standardization, specialization, hierarchy, control, and shareholder interests. While that model delivered an immense contribution to global prosperity, the values driving our most powerful institutions are fundamentally at odds with those of this age – zero-sum thinking, profit-obsession, power, conformance, control, hierarchy, and obedience don’t stand a chance against community, interdependence, freedom, flexibility, transparency, meritocracy, and self-determination. It’s time to radically rethink how we mobilize people and organize resources to productive ends”.

As the authors of sense and respond describe, our ability for two-way conversations didn’t exist when our current management paradigm was invented. The management tools at our disposal were built for a completely different pace of operations – the pace of the manufacturing economy. They point out that operations in the manufacturing age were slower and more predictable. They rewarded a management approach based on planning, deliberation, and secrecy. The economies of scale in a manufacturing economy made it difficult to change plans in midstream, but there was less need to change plans in that era. Adjustments made on an annual basis were sufficient. All of this suggests that significant Structural Change lies ahead, and sense and respond is a critical piece of the emerging management paradigm.

Jeff Gothelf and Josh Seiden identify the most important principles underpinning the sense and respond approach:

1. Create two-way conversations
2. Focus on outcomes
3. Embrace continuous change and continuous processes
4. Collaboration
5. A learning culture

While the focus of the book is on two-way market conversations for the purpose of rapid innovation in the area of products and services, I see sense and respond being applied across five critical areas:

Futures scenarios: we will all struggle with the uncertainty and pace of Our Emerging Future. Sense and respond methods play a vital role in seeing that future and positioning our response

Innovation: as described in the book, unexpressed and unmet needs are a byproduct of complexity, the intersection of multiple building blocks, and our connectedness. Sense and respond in the form of two-way market conversations is critical to converting emergent need to emergent value

Opportunity: access to conversations also affords us a chance to sense opportunity and respond. Examples include needs expressed in social channels that are now visible

Operations: early warning on potential operational issues affords us the opportunity to avoid impact by taking corrective actions. Example: visibility to a Tweet regarding a factory fire affecting one of our suppliers (sense) allows us to take corrective action (respond)

Risk and Security: risk manifests itself in many forms and security issues increase in severity. Technology is enabling our ability to sense broadly and deeply. Risk signals that we can capture (sense) provide us with an opportunity to mitigate that risk (respond)

Sense and respond methods involve monitoring and observing, incessant rehearsing, understanding and interpreting data, deciding how to respond, and producing a response. The people that we hire either support or undermine this shift. As the authors explain, we need to hire explorers, researchers, and problem solvers who are not content with the status-quo. They identify a catch-22 that I see as an Achilles heel: you can’t hire the right people without the right environment, and you can’t create the right environment without the right people.

I have broken the messages of the book into several broad categories and provide a brief summary below.

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UNCERTAINTY IN THE DIGITAL AGE

The digital revolution has brought uncertainty: as our software systems get more complex, it becomes harder to predict what people will do with them. We need new ways to respond. Key messages:

• An explosion in the level of complexity drives a high level of uncertainty
• Embracing continuous change, complexity, and uncertainty. Sense and respond is effective in the face of uncertainty because it actively embraces the idea
• Older methods of planning don’t deal with uncertainty or work in the digital age
• Sense information, reduce uncertainty and adjust direction
• Complex adaptive systems that contain multiple intersecting building blocks behave and interact in a way that make prediction impossible
• Without embracing uncertainty, you can’t capitalize on the value that emerges from these complex adaptive systems

ACCELERATED LEARNING

Feedback loops build learning into our daily operating rhythm. For the typical twentieth-century leader, not knowing was considered taboo. To admit uncertainty was a sign of weakness – a mindset that remains common in many organizations. That mindset in a digital age must give way to continuous learning. Probing efforts start this process and accelerate the path to outcomes and ultimately strategic intent. Key messages:

• Learning your way forward
• Build a rhythm of learning loops
• Prioritize learning over delivery
• Learning moves us from doubt to certainty
• Emphasize learning through action versus research
• Answers are a unit of progress
• Loose plans, adjusted as you learn

VALUE DESIGN

Value design gets increasingly complicated as environmental complexity intensifies. I love the authors focus on outcome-based road maps and their ability to guide multi-team initiatives and articulate the key elements needed to direct their work: strategic intent, strategic constraints, and the definition of success. Outcome-based road maps achieve the critical alignment required to operate with speed in a multi-team environment. They tie planned work to the outcomes expected and strategic objectives desired; creating a coherent story that connects leadership to the efforts on the ground. Key messages:

• Emergent behavior creates emergent value
• Two way market conversations with minimum investment
• Willingness to look within feedback for opportunities to create new value
• Value is not what we say it is, but what the customer says it is

STRUCTURAL CHANGE

As described in the introduction, structural change is inevitable. Delivery cultures characterized by top-down decision making, multiyear road maps, annual planning cycles, and arbitrary deadlines are destined to fail. Key messages:

• We need to manage our business the same way we manage software
• Most companies manage projects in terms of outputs and not outcomes
• Sense and respond methods push decision making out into the organization – allowing the people who are closest to the customer, to the markets, and to the situation at hand to make decisions

INNOVATION SPEED

Speed and adaptability trump all else. Continuous deployment techniques are embraced by the dominant Internet Companies of the digital age. They make many small changes to websites in an ongoing way, each team acting within strategic guidelines is free to experiment, learn, and adjust. The now popular A/B testing approach has become a standard technique in the online world. A large online retailer unlocked $300 million in annual sales by changing the wording on one button in the checkout flow. Key messages:

• Expressing our assumptions as testable hypotheses and then running a series of experiments to find the truth. Hypotheses serve as a mirror of our thinking. They position our assumptions in a way that makes us question our original thoughts
• General Electric has begun a program called Digital Twins that involves creating digital simulations of hardware products. A jet engine might have a “virtual twin” specific to the engine running entirely in software. This allows GE to monitor real-time performance of that specific engine and also to experiment with new engine features and settings in the digital realm without having to take safety risks in the real world
• Many companies will run their experiments off-brand. They might launch new ideas under made-up company names, for example, or try things on such a small scale that it limits how much impact a bad test would have on the brand
• Many companies have adopted agile methods without really understanding why they are doing so. Often these methods are used simply to execute a predetermined plan. Decision making – the ability to respond to feedback from the market – remains outside the team, and thus operates at a much slower pace
• Early-stage ideas are funded with small investments and are expected to return learning rather than financial results. In other words, teams are asked to validate their business ideas and not to return a profit
• A great example of conversations and uncertainty is the hashtag. This ubiquitous means of tagging content and conversations on the internet emerged from Twitter users in 2007 as a way to track their conversations with one another. This feature wasn’t planned or introduced by Twitter. In the information age, we have so many new situations that it’s hard to rely on a traditional understanding of the market
• Place value on customer behavior as a measure of progress – and not on the number of features the team was shipping
• Folks who are invested in their own ideas will have a hard time working with a team that wants to listen to the market, gather evidence, and find the best idea, regardless of its source
• This is a pivotal moment in the way we approach our interactions with our customers. The same technology that powers continuous learning in our organizations drives the real-time interactions our customers are coming to expect from our companies