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Episode 1: Digital Disruption and the Five Ideals

Guest: Dr. Mik Kersten & Peter Moore

This episode dives into the Five Ideals, key principles for success in a digital age, as they are introduced with two eminent experts that Gene admires greatly. For years, Dr. Mik Kersten’s work on dev productivity and digital disruption informed many of the core concepts found in The Unicorn Project.

Peter Moore is a business strategy and technology advisor who specializes in helping companies compete in the age of digital disruption. Newly acquainted within the last year, Peter has already shared so much with Gene and Mik about how we can best use technology to win in the marketplace, from the business leadership perspective which is something every technology leader needs to know and embrace.

For sponsorship inquiries, please contact Ann Perry ([email protected]).

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About the Guests
Dr. Mik Kersten

Dr. Mik Kersten started his career as a Research Scientist at Xerox PARC where he created the first aspect-oriented development environment. He then pioneered the integration of development tools with Agile and DevOps as part of his Computer Science PhD at the University of British Columbia. Founding Tasktop out of that research, Mik has written over one million lines of open-source code that is still in use today, and he has brought seven successful open-source and commercial products to market.

Mik’s experiences working with some of the largest digital transformations in the world has led him to identify the critical disconnect between business leaders and technologists. Since that time, Mik has been working on creating new tools and a new framework for connecting software value stream networks and enabling the shift from project to product.

Mik is the author of the book Project to Product: How to Survive and Thrive in the Age of Digital Disruption with the Flow Framework. Mik lives with his family in Vancouver, Canada, and travels globally, sharing his vision for transforming how software is built.

Visit Mik’s Website




Peter Moore

Peter D. Moore is a business and digital technology strategy advisor specializing in helping companies manage for exponential revenue, margin and net income growth. Over the past 15 years, Mr. Moore has worked with CEO’s, COO’s and other C-Suite executives from Citigroup, Charles Schwab, Johnson & Johnson, Mead Westvaco, Microsoft, Tommy Hilfiger, SAP, SAS Institute and U.S. Trust. 

Over the past five years he has collaborated with his brother Geoffrey Moore to develop new models and tools to enable companies to effectively compete in the new age of digital disruption. He has introduced a new 4 Zone Model to help C-Suite executives and their senior leadership teams maximize the business value of digital technology within their organizations. Client engagements include Amgen, Box, Clorox, FedEx,  ICANN, Intuit, Molina Healthcare, SpaceX, Splunk, UBER and VMware. 

Visit Peter’s Website

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You'll Learn About...
  • How DevOps and digital disruption will bring in the Age of Software and Data.
  • A way to organize your technology portfolio and free its future from the pull of the past
  • The about First Ideal, the “lunch factor, and what is required to unleash developer productivity
  • About the Second Ideal, flow, and the conditions that allow developers to be orders of magnitude more productive than the competition
  • About the Fifth Ideal, core vs. context, and ensuring that context doesn’t starve core 
  • About Sarah Moulton, the SVP of Retail Operations, who we must either work with or compete with.
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Resources
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About the Host: Gene Kim

Gene Kim is a Wall Street Journal bestselling author, researcher, and multiple award-winning CTO. He has been studying high-performing technology organizations since 1999 and was the founder and CTO of Tripwire for 13 years. He is the author of six books, The Unicorn Project (2019), and co-author of the Shingo Publication Award winning Accelerate (2018), The DevOps Handbook (2016), and The Phoenix Project (2013). Since 2014, he has been the founder and organizer of DevOps Enterprise Summit, studying the technology transformations of large, complex organizations.

In 2007, ComputerWorld added Gene to the “40 Innovative IT People to Watch Under the Age of 40” list, and he was named a Computer Science Outstanding Alumnus by Purdue University for achievement and leadership in the profession.

He lives in Portland, OR, with his wife and family.

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Transcript

Gene Kim (00:00:00):

Gene Kim (00:00:00):

This episode is brought to you by IT Revolution, whose mission is to help technology leaders succeed through publishing and events. You're listening to the Ideal Cast with Gene Kim, brought to you by IT Revolution.


Gene Kim (00:00:15):

Well, this first inaugural episode of the Ideal Cast. I'm so delighted that I have two people who have influenced me and inspired me in very different ways. I met Dr. Mik Kersten in 2016, and he has become one of my favorite people to talk to. He got his PhD in software engineering and architecture, and more than anyone else, his views on how architecture shapes how teams of engineers work together to create value for our customers was informed by his decades of work in this space.


Gene Kim (00:00:47):

He is the author of the amazing book 'Project to Product' where he describes the flow framework and how all work fits into one of four categories, impacts, effects, risks or debts. So much of the five ideals in the Unicorn Project was shaped by that book as well as in the bi-weekly calls that I've had with him for the last four years.


Gene Kim (00:01:09):

Peter Moore is someone who I met only last year but immediately struck me as someone who is a DevOps Enterprise Community needs to know better. He spent decades in a very unique position working with both business leaders and technology leaders. Some of this was enabled by something very unusual about him because he is the brother of the famous Dr. Geoffrey Moore, author of the book, 'Crossing The Chasm' and 'Zone To Win'. Zone to win, is a book that appears prominently in the Unicorn Project highlighting the challenges that every modern organizations face, which is balancing core versus context.


Gene Kim (00:01:42):

Core are the core competencies of the organization that customers value, that create lasting, durable business advantage, or context is everything else. Without further ado, let's go into this amazing conversation.


Mik Kersten (00:01:57):

Thanks for having me, Gene. I'm Mik Kersten, the CEO and founder of Tasktop and the author of 'Project to Product' as you said. And over the last year since the books launched, I've been studying the flow data, basically the artifacts and information and knowledge slowing through software value streams of very large organizations to try to better understand where the bottlenecks are, what the systemic problems are, where these misalignments that we see between the software architecture, the customer, the business happened.


Mik Kersten (00:02:28):

And so you can basically say that for the past couple of years I've been studying closely how far organizations are from the five ideals. So I'm really looking forward to digging into that today and, and looking at how we can get them closer.


Gene Kim (00:02:41):

Thank you Mik. Peter, how about you? And maybe can you also make sure you describe how your background isn't technology?


Peter Moore (00:02:47):

Gene, thanks very much for being part of this. I'm looking forward to the conversation that you and Mik and I are going to have today. Uh, as I mentioned before, my background is not technology. It's really in the business side. Primarily back in the early 80s I, I worked at the New York Stock Exchange for most of that decade with our chairman and CEO, and spend a lot of time with the CEOs who are listed companies and saw firsthand what a challenge they faced in trying to balance the resource and budget allocations against the businesses they had in the do businesses they wanted to do.


Peter Moore (00:03:19):

And so part of what we'll talk about later on 'Zone to Win' is, how that framework helps them do that. But recently, over the last six years, I've really sort of shifted my focus toward the intersection between technology and business within an organization. And early on in the, in the about 12 years ago, I started working with the CIO, Rob Carter at FedEx and observed firsthand this adversarial relationship, you know, why does this exist and what can we do?


Peter Moore (00:03:49):

And a lot of the things in the Unicorn Project now brought that home to me. I wish I'd had it back then, it would've been more helpful. So, but I think that the key thing for, for, for, you know, the, the businesses today, if they cannot harness digital technology as a competitive advantage, they really aren't going to be very impactful in the marketplace. So a lot of what I think we're going to talk about today speaks directly to that. And the Unicorn Project did a wonderful job of amplifying that. You know, particularly from the redshirts point of view.


Gene Kim (00:04:19):

Peter is referring to redshirts as in Star Trek. These are the people in the engine room as a metaphor for people who are doing development in their daily work as opposed to the bridge crew. Who are the executives portrayed in both the Phoenix Project and the Unicorn Project.


Gene Kim (00:04:34):

So, before we jump into the first topic, uh, let me first set the stage by describing the five ideals, which are the things that Erik talks about in the Unicorn Project. Uh, we'll talk about three of them in this episode. But here's the entire list. The first ideal is locality and simplicity. The second ideal is focused flow and joy. The third ideal is improvement of daily work. The fourth ideal is psychological safety. And the fifth ideal is customer focus. So, before we jump into the first ideal, uh, which I know both of you have so many interesting thoughts on, uh, let's first talk about why you think these topics covered, uh, in the book are so important, whether you call it DevOps or technology monitorization or digital disruption.


Gene Kim (00:05:16):

I think we all have a deep conviction that the topics covered in this book are some of the most important business challenges of this era. Uh, Mik, you and I are both fans of the work of Dr. Carlotta Perez and she describes how the age of software and data may set the stage that should held in this, uh, you know, decades of economic prosperity. The last time that we've seen anything of that magnitude was likely the 50 years of economic prosperity fallen World War II. Uh, Mik, tell us about then why you think it's so important.


Mik Kersten (00:05:48):

The thing that Dr. Perez introduced in her work is this notion of these long cycles of technological revolutions. You know, economists, I call them contractive waves, but the way the exactly there is slice and dice that's up for debate, but her model dissects each one into three distinct phases. And so for a lot of us on the business side, a lot of on the technology side, it may feel like we've been dealing with technological change for our entire careers. And it's civic question becomes is, is this normal? Is it going to continue? Will we, will things settle down? Will there be a new JavaScript or other technology framework that comes out every two weeks from now on?


Mik Kersten (00:06:24):

Uh, these are questions that actually Dr. Perez has research and work and models answer, because what she shows us is that we're in the middle of another one of these massive waves. Over the last 250 years, they've been five, they started with industrial revolution, then the age of steam railways, and the age of steel and heavy engineering, the age of oil mass production, and now the age of software and data and digital.


Mik Kersten (00:06:45):

So, where she puts us is right in the middle of this age, the way these ages breakout is, is into three different periods. So we have a period of creative destruction that we're, we're quite familiar with, this, she calls this the installation period. This is where some new means of production becomes cheap and scalable and all of this financial capital pours in, in[inaudible 00:07:09] order to make up a 10 X return or better.


Mik Kersten (00:07:10):

So, this is the point in Detroit where over a century ago there were over 300 car startups in that city alone. So you know all of this innovation because mass production was in its installation period. Then from that installation period, the new giants arise the new, whether it's the new railroad barons, it's the new masters of scale. You've now have these companies, the Fords and the GMs and the others who become the new incumbents.


Mik Kersten (00:07:37):

They become so good at any means of production that they actually end up controlling and, and driving and directing a significant part of the world economy. That's called the turning point. Once we get through the turning point, we get into the deployment period where there's technology diffusion. Other companies learn how to produce cars, how to produce widgets, how to produce with quality at scale. And in this deployment period, that's when we get to the wealth generation. Uh, that's when we get to that, that golden period after the war.


Mik Kersten (00:08:04):

Um, and that's what Dr. Perez, Carlotta Perez predicts will happen to technology once we get through that turning point. But to do that, we actually need that, the fusion and we need to learn what these companies become so good at building technology. You have learned over the past few decades that the age of software, uh, started in about the '70s.


Mik Kersten (00:08:22):

So, what have they learned and with production scale that we need to apply to our companies, and this is where I think that the Unicorn Project is this incredible narrative, someone to have Elihayu, uh, Goldratt's the goal define the narrative for the turning point of the last revolution. I think the Unicorn Project will do the same for this one.


Gene Kim (00:08:40):

Maybe something that we both marvel at, uh, is that this deployment period, one of the things that Dr. Perez talks about is that this is when we take all of the learnings of um, where the revolution was created. In our case, Facebook, Amazon, Netflix and Google, and then deploy them, not just in the software industry but across every industry vertical. And Dr. Perez talks about how this is a period of wealth redistribution. Uh, in the last revolution, the economic prosperity wasn't caused by the car stops. It was, uh, the cars in combination with the interstate highway systems combined with the revolution of supply chains that drove, you know, this 50 year period of, you know unprecedented economic prosperity. Um, and so this is what you see happening in across all industry verticals as well. Is that right, Mik?


Mik Kersten (00:09:29):

Yeah, exactly. And because when we think of these technological ecosystems, it's, it's exactly you said Gene, you've got the highway systems, you've got verticals that are being transformed, um, through manufacturing and through scaling those, the generation of those technologies eventually, you know, leading to lean thinking and so on.


Mik Kersten (00:09:47):

So this is exactly what Dr. Perez predicts is going to happen now, is that we're going to move from this period where mastering software at scale is in the hands of a small number of companies, the, you know, the nine tech giants in the US and China to actually being something that generates wealth and business results and customer results and results for citizens everywhere across the economy and across government sectors as well.


Mik Kersten (00:10:12):

So, we're not there yet, but I think the amazing thing is that we're, we're starting to see what can get us there. So the question becomes how, how can it get there as quickly as we can? Because the golden ages don't come unless that concentration of the knowhow actually does get diffused across every industry and federal segment.


Gene Kim (00:10:33):

Yeah. And by the way, just to make this very concrete, and this is why that DevOps Enterprise Community is so interesting to me because I do believe that this is the forefront of where all the learnings of tech giants, um, are now being incorporated across every industry vertical, uh, regardless of company size, regardless of the longevity, uh, showing how that they can better survive and win in the marketplace.


Gene Kim (00:10:53):

Uh, so, uh, so Peter, I think one of the things that we've talked about is, uh, the notion of digital disruption. You know, it's on every board agenda these days and, you know, what I loved when you brought up you're horror and shocked about the recent McKinsey study-


Peter Moore (00:11:11):

(laughs)


Gene Kim (00:11:12):

...uh, about digital disruption, tell us about that study and why you think it's so important and urgent.


Peter Moore (00:11:17):

Yeah, and, and in fact, it's part of a blog I wrote in October, uh, Gene that was called, you know, in the digital world, actually, digital transformation is an oxymoron. And the fact of the matter is it's not about, it's not about digital transformation. It's about business transformation, which is enabled by, and in many cases driven by all of these disruptive digital technologies.


Peter Moore (00:11:39):

And what McKinsey did was they didn't study in 2018, and they documented it around the globe there was approximately $1.3 trillion spent on some version of, of digital transformation, 70% of which did not achieve its desired goals, which means $900 million, ( laughs) did not get much of a return.


Gene Kim (00:12:03):

Gene, here again, this was actually an error. Peter meant to say $900 billion, which didn't get much of a return.


Peter Moore (00:12:10):

So, but what, but what it says, and again, it speaks to some of the things that Mik was just talking about and that is we have to educate, you know, people across all disciplines and all industries and all different categories. That technology in and of itself, okay, isn't an enabler. It's not, it's not, we're not, yes, we're technology companies, but understanding what the technology brings to the organization, and I think where McKinsey was trying to start at least is to say, if you're just going to chase the next bright shiny object, that's not going to work.


Peter Moore (00:12:47):

So, you have to say, what is the business outcome that you want to achieve? So if the business outcome is to change your business model or to modernize your operating model or to significantly optimize your infrastructure model, great. Then deploy digital technology and service to that rather than just looking at it in this sort of big generic way of saying, I'm running, you know, I'll, I'll tell you one fun story that I love.


Peter Moore (00:13:15):

There's a company here in Santa Monica where I live called edmunds.com, they are online car company, you may be familiar with them. The CEO came into the CIO at one point in time, and so we have to do blockchain.


Gene Kim (00:13:26):

(laughs)


Peter Moore (00:13:26):

And the CIO goes, why? Well, we just have to do it, I read this article is really going to be cool. So, instead of just diving into it, what they did was very cool. They did a blockchain awareness month, and the whole company spent the whole month, they did a hackathon, they had experts in, they did studies and, and they, the whole company took a look at this, and at the end of four weeks they got together and they said, yes, it's interesting, but not for us now. Because there was no compelling business reason to do it.


Peter Moore (00:13:57):

And I think it's a great example of just don't get, you know, sort of distracted by all this new stuff, but understand where you want to deploy it and why.


Gene Kim (00:14:06):

That's great. Peter, you told me something, uh, last year, uh, before your October blog post, (laughing) that really caught my question, which was, it, it sort of injustice that happens when you don't have this collegial, mutually respectful relationship between technology and the business and one of them involved, uh, FedEx and how that impacted the workforce. Can't tell me about that.


Peter Moore (00:14:25):

Yeah. When, when I did work at FedEx, a lot of what, uh, the work there surrounded around something called the corporate load, which was twice a year, all the upgrades and all the new technologies. It was the pig through the python and they had one in January and one in August. And they had this very elaborate process by which projects lined up to get into the queue to get into the, the corporate load each year and then they'd go forward.


Peter Moore (00:14:51):

While, the, the people that work in that culture is very, very clever and they would put more into the system then the system could handle. And so for three years, the three previous years that I was, when I started working with them, the QA people in QA and testing never had Thanksgiving Day or Christmas Day off.


Gene Kim (00:15:12):

(laughing)


Peter Moore (00:15:12):

Not the day before the day after that day. And it just, I think it speaks to this issue that we need to create mutual respect in a system that says, look, we have an outcome we want to achieve, if we try to game the system, somebody who's going to suffer and why should it be QA and testing because you or you, you know, you change your requirements halfway down to the project. And we had to go back and redo some work and all that stuff. But it was an example of where, and I think ultimately it was to the detriment of FedEx not to the benefit.


Gene Kim (00:15:43):

(laughs)


Peter Moore (00:15:43):

I think they've now sorted it out, not the least of which is they've had a lot of grumpy people who missed Christmas and Thanksgiving, but I think it is, it's a good example of some of the points you made in, in, in, in the, uh, Unicorn Project. It also began the start of their version of the rebellion and we, we can talk about that later on. But one of the things I loved about the Unicorn Project was all the meetings at the Dockside Bar and how people will, through their own instincts say, this isn't the right way to do this.


Gene Kim (00:16:18):

Right. And specifically use these words, uh, you know, the goal are, the mission is really to escape the past. And yet you have a great example of like organizations that can not seem to escape the past.


Peter Moore (00:16:30):

Yeah. Now, the, the biggest challenge for, for IT is that they are, they have been the legacy mindset and every company has IT as a cost center support function. And so they're gonna, you know, put them down in the basement, make sure nothing breaks, everything's fine, compliance, but for God's sakes, don't bring them up to the bridge and ship, steer the ship. And so if IT accepts that, and if they talk about themselves as a cost center support function, then they're not going to get, but to be a meaningful and very much needed strategic partner for the business, they have to free their future from the pool of their past.


Peter Moore (00:17:02):

And they do that by changing the way they engage with all their internal constituents and business partners. And by the way that the external customers and everybody out there as well. So, a lot of the work we do now is turning IT from an inward facing organization to an outward facing organization. And, and a lot of, some of the really good CIOs, um, you know, like Cynthia Stoddard at Adobe and people I had, they really have figured this out. And the benefits are huge. And I think-


Gene Kim (00:17:33):

And the inability to escape our past, right, that's not just a technology issue. You had a really great example of a very famous business leader who couldn't escape the pull of the past.


Peter Moore (00:17:42):

Yep, yep. No. What you're talking about is, is Steve Ballmer, who when he became the CEO of Microsoft in 2000, the Microsoft stock was trading at $40 a share. When he stepped down in 2014, the stock was trading at $40 a share during the entire, during the entire 14 year tenure as CEO of Microsoft, the stock never traded over $40 a share. And you're going, how is that possible? Because they generated in free cash flow like there was no tomorrow.


Peter Moore (00:18:13):

But to the point that in zone, this is where really zone to win comes into play, when Satya Nadella took over in 2014, the very first thing he did was to send an email to all employees of Microsoft across the world and say from this day forward, we're cloud first mobile first. He pivoted the company, he used the zone to win framework. So stock is trading at $186 a share today. (laughs)


Gene Kim (00:18:38):

And, uh, by many measures, the world's most valuable company.


Peter Moore (00:18:41):

Yes, exactly.


Gene Kim (00:18:42):

That is so great. So in the Unicorn Project, uh, the first ideal was really intended as a way to describe to what extent teams are able to independently develop, test and deploy value to customers independently without being shackled to five, 10 or even scores of other teams. Uh, and that really represents, uh, the non-ideal case when in order to get something done, teams have to communicate, coordinate, prioritize, de-conflict, synchronize, uh, match with everybody else, uh, when they may not even know who we are.


Gene Kim (00:19:12):

So in the Phoenix Project, uh, my favorite metric was the bus factor, uh, which is, you know, how many people need to be hit by a bus in order for the project, service or organization to be in grave jeopardy. And in the Phoenix Project, uh, the bus factor was one because of Brent. So if Brent got hit by a bus, we wouldn't be able to fix an outage. We would be able to complete any complex work, uh, because the entire organization was solely reliant upon the knowledge and expertise that was only in Prince head.


Gene Kim (00:19:40):

And so obviously we want a bus factor much larger than one. We want it to be reside within a team or multiple teams so that we can have the ability to be resilient and have capacity. So in the Unicorn Project, yeah, I think the corresponding metric is the lunch factor, to get any piece of important work done. How many people do we need to take out the lunch?


Gene Kim (00:19:57):

Is it the Amazon ideal of the two pizza team where every team is able to independently create value and to do what customers want? Or is it the not ideal case where if we want to get something done, we need to take out the entire building out to lunch. Uh, so Mik, so much of this was informed by our years of biweekly conversations. Can you describe why you think the first ideal is so important?


Mik Kersten (00:20:19):

Absolutely. And so in the many conversations I've had since then, Gene, the, the first ideal is the one that I am most worried, uh, with, with leaders simply just not understanding. So it is such a critical thing to us. I think it's, I think the reason it's so critical and so profound is because it ties together two key things that are necessary to become a, a software innovator on, to really strive through digital disruption.


Mik Kersten (00:20:45):

And that's the fact that you need to have your software architecture, your, your basically your digital assets aligned to your organizational structure and aligned to your business. As Peter was saying in the end, this is about the alignment of business and technology. And in every organization that you know and that we visit, we see this misalignment, right? You see, and the reason this idea was so popular and so, so quick for people to talk about as soon as they read the Unicorn Project is because you see constant symptoms of it within organizations.


Mik Kersten (00:21:17):

And that the symptoms of it come from this kind of misalignment. So a high lunch factor where again, to make any meaningful change for the business. Remember, everyone's just trying to deliver value to the business. If you need to take out 15 people to lunch, you know, you've blown either your slush fund or at least your pay cents by the end of that journey. And in the meantime you've delivered nothing to the business. And it's that, that horrendous experience that Maxine has as she's trying to, you know, start being productive on, on what she's doing for parts on unlimited, and so it's in the book.


Mik Kersten (00:21:51):

And the Unicorn Project is exactly what so many people are, are living day to day. So this one to me is it's just visceral that our organizations have gotten stuck in a place where this doesn't exist. There is no locality, there's no simplicity and leadership needs to understand how they get there. So Peter just mentioned IT as a cost center. You have no chance of getting to this ideal or anywhere near it if you treat IT as a cost center, because the only way to align at the larger scales that, that get, that get where this is actually difficult and that get interesting. The only way to align your software architecture and your team structure is your, your org chart to the business is around the customer, and this round how business value flows to your customer.


Mik Kersten (00:22:37):

And if you're treating your delivery as a set of projects related to cost centers, track with, um [inaudible 00:22:45] plans and Gantt charts, you not be further disconnected from customer value. And you could not have your teams, your contributors, uh, further disconnected from customer value. You look at the flip side where the product portfolio is defined. Every, every single person, your organization, every specialist, every developer, every-


Mik Kersten (00:23:03):

Every single person or organization, every specialist, every developer, every, every tester as Peter was just talking about, they have the same customer goal of innovation. They will actually structure the software architecture in a way that supports innovation for the business. So there, there are many things that got us here. One of them I think actually is IT as a cost center. Another one is enterprise architectures that try to make this beautiful, elegant Visio diagram of how software should function in the organization. Uh, where were customers on those diagrams, right?


Gene Kim (00:23:29):

(laughs)


Mik Kersten (00:23:29):

Where were the [inaudible 00:23:30]? Never quite steamed them. You know, we've got these silos and assets and um, and many layers, but they're not a- aligned around the customer experience on the, around innovation, around business. So I think, I hope Peter actually touches on this at some point soon, but we've got approaches of breaking through this, right? In terms of how I've personally, uh, approached this because I think every organization goes through innovative dilemmas and changing markets and, and disruption and so on is actually through, through zone management, right? Through carving out different zones of your business, each of which is aligned to a customer and a market, uh, and where every single person within that zone and delivering the products within that zone is actually aligned to, to delivering value to that.


Mik Kersten (00:24:14):

But right now, this first idea, like again, if, if you're a business leader, a technology leader or some combination of both, uh, if your organization doesn't understand the value of this, you've got a profound problem.


Gene Kim (00:24:27):

And, and buy their movie ticket concrete in, in the unicorn project. I mean, (laughs) the first third of the book is about, a- as you said, make, uh, the plight of Maxine. This incredible engineered-


Mik Kersten (00:24:36):

Yeah.


Gene Kim (00:24:37):

At the height of her powers, uh, you know, at the height of her profession is tossed into the Phoenix project and cannot get anything done, can't get a bill done, can't get write tests, can't run tests, can't deploy code to customers. Uh, a- and so in my mind it is like, um, Tom Hanks in Castaway where (laughs) despite all her skills and gifts she can get nothing done without the help of others, right? To a ridiculous fact. Um, and there was a, a point in uh, the review process, Mik that you said, as they're trying to do is this deployment of the Phoenix project, uh, you said it is like the worst case architecture. You couldn't design a worse system to enable people to get work done. That wasn't an exaggeration to you Mik. And, and so can you confirm that and tell us why you think that's so important?


Mik Kersten (00:25:21):

No, it, it wasn't an exaggeration because when you've, no, the thing that concerns me is that it's not the only one like this I've seen. But again-


Gene Kim (00:25:28):

(laughs)


Mik Kersten (00:25:28):

This is why, this is the great, and the scary thing with unicorn project is how much of it will resonate with, with its audience. Because the symptoms that you see on the opposites of these five ideals are just everywhere. But again, the point of the five ideals is that at least they give you a, a vision and a path for identifying this and moving in, in a better direction. But just to reflect on, on that point, Gene, that you get innovation when people can deliver value independently and where there's a decoupling between them and let's say providing them some data that they need to create some new screens or some new, you know, some eh, new mobile experience and so on.


Mik Kersten (00:26:05):

And so what happens with software if we don't understand or appreciate the dynamics of software, like the fact that when developers take shortcuts to get a feature out the door, because everyone cares about time to market, those shortcuts then cause technical debt to accumulate, that accumulates, you've now got dependencies between parts of the code that are all completely tangled. Uh, I think the unicorn project does an amazing job of actually saying how key a part of those dependencies the data is because the data flows access to the latest customer's data. Unlike the experience I had a couple of weeks ago where, you know, the large financial institution it would take them seven days to get some batch processes to finish, to get at the right kind of data-


Gene Kim (00:26:46):

(laughs)


Mik Kersten (00:26:46):

Um, for this one team to, to innovate on. So you've got this, this incredible coupling of multiple systems, of course, thrown to that the legacy systems and gets more and more visceral in the unicorn project to the point where it's, you know, I'm almost getting sick, but, but that coupling means that to make a change, to add value to, you know, to create, um, some of those new widgets so that your functionality is almost impossible and take someone with the emotional and intellectual fortitude of Maxine to get through. And I, I don't know how many Maxines we can all count in our organizations, right? So if you don't get to the locality and simplicity where a normal employer, a newer employer, a new hire who could have gone to Facebook is actually able to deliver value, again, y- you're not going to make it.


Gene Kim (00:27:31):

That's amazing, right? Uh, like every new engineer Facebook, does it deploy within their first week? Uh, uh, at Etsy, uh, engineers deploy code to production even if it's just a picture on the first day, board member's deployed, their dog's deployed-


Mik Kersten (00:27:45):

(laughs)


Gene Kim (00:27:45):

Right? They just, that shows what extent they push that, you know, uh, as, as, uh, an important value to the company. So Peter, you know, uh, one of the things that so much excited to me about our first conversation was that you had your own stories that, uh, showed how much this resonated with your own experience. Can you tell us about how you stumbled upon this and how common it is for technologists to have created or co-created these software architectures where it's nearly impossible for anybody to get anything done?


Peter Moore (00:28:13):

Yeah, no. I, I, I, and listening to Mik's description I mean, it really fit this one example that I'll give you, it's, I've spent, um, most of, uh, 2018 working with a large software vendor. We went into a little bit of 2019 and it was a business applications group. There were 140 people in the group. The first statistics, and I'll give you, blew me away. Maybe you, this isn't surprising to you and Mik-


Gene Kim (00:28:36):

(laughs)


Peter Moore (00:28:36):

I've got 40 people on the team. 100 were eccentric contractors.


Gene Kim (00:28:44):

(laughs)


Peter Moore (00:28:44):

I don't know about you. I'm not a technology expert. That just doesn't make a lot of sense to me. Anyway, the issue though, that goes back to what Mik was talking about, the whole alignment thing and creating the need to create independence within, within teams and then align those teams with businesses. What we discovered when we looked at the structure of this business applications development team, they were all structured around, um, different vendors. So there was a, there was a Salesforce stack, there was a net suite stack. There was a bunch of other pieces like that. Um, and we wanted to get rid of that.


Peter Moore (00:29:18):

So, um, you know, we, we just wanted to find a way to, to, to take those vertical stacks and create six cross functional team, which we did. And we aligned those teams up with the different key internal partners and, uh, constituents. So we had a team that supported revenue and marketing. We had a team that supported product, cloud, et cetera. And then what we did was instead of going in the typical meeting that IT normally has with and either an internal or a client or even an external customer, is they've got their little Excel spreadsheet and they've, they've got their little red, green and yellow, you know, uh, project, uh, assessment things and they worry about where they are on, on the, on the project timeline and everything else and can this project move faster? et cetera. We didn't do any of that.


Peter Moore (00:30:08):

We sat down with the chief revenue officer and her team and we said, "What is currently making it difficult for you and your team to achieve your desired business outcomes?" Totally open-ended question. And what we discovered very quickly, because we asked that question was, if you were in sales at this company and you wanted to get a 360 degree view of the, of how much what the customer was doing you had to open up five separate applications and that immediately triggered a program called one click, one view. And within nine months we had collapsed the five down to one. And not only did we get a much better outcome, but we turned adversaries in the sales team into advocates for us. So it's, I think a great example of you need to understand where your internal business partner and ultimately the customer is coming from and respond to that.


Gene Kim (00:31:01):

And, and, uh, Peter, ju- just to land this point very concretely, uh, you, you said that it was, you needed to get away fro- you had this need to get to six, uh, team to capability. What was so bad about not having six teams of capabilities and having these teams really focused around the technology stacks?


Peter Moore (00:31:19):

Well, two things. One, from a development point of view, all you had was people who only knew how to do one sort of, if you will, vendor. So the Salesforce people could do sales, Salesforce, but they couldn't do any other, they couldn't do NetSuite or they couldn't do Workday. But the other part of it was, is that when you went into a conversation, you went into it with that sort of, if you will, what I'll call, I guess the way I'd phrase it is a vendor mentality as opposed to starting with what the business or the customer was looking for. And I think that's what got us sort of, I think got them sort of stuck in these individual vertical silos and didn't give them the ability to think more broadly about a potential solution, like how do we go from five applications to see a total customer view down to one. You would not have, that question, wouldn't even have come up if we'd stayed in the old structure.


Gene Kim (00:32:11):

And I, I, I loves this, right? I mean, uh, the notion is in the ideal, right? If you need to make a, uh, deliver capability, you can do it in one place, right? Uh-


Peter Moore (00:32:19):

Exactly.


Gene Kim (00:32:19):

Uh, versus, uh, having to bring in 40 different people and touch it in 40 different places. Now you have to communicate, coordinate, signal, prioritize, marshall, right?


Peter Moore (00:32:28):

Yeah.


Gene Kim (00:32:28):

Bring in project managers. Right? Uh, I think this leads to horrendous outcomes. And I think, uh, this was definitely felt, uh, in this example, right, Peter?


Peter Moore (00:32:35):

Yes.


Gene Kim (00:32:36):

Yeah. Uh, uh, and Mik, you make this pretty audacious claim that it is this absence of locality and simplicity that is one of the reasons why, you know, large digital disruption initiatives fail. Uh, can, can you talk a little bit more about that and substantiate that audacious claim?


Mik Kersten (00:32:50):

Absolutely. So these, these large transformations and the ones I've, I've said most closely they tend not to be constrained on, on budget. So there's [inaudible 00:33:00]-


Gene Kim (00:32:59):

(laughs)


Mik Kersten (00:33:01):

Some of them are, uh, a lot of them want to result in the like the IT budgets have gotten to the point where the goal of the transformation can be to reduce that, that bloat in IT. And there's, there's, as we know, um, and from what Peter said earlier, there is a, a ton of bloat in IT, but there's a lot of money being invested, a lot of scale, a lot of, uh, talent being invested in these b- in these, in these transformations. So the question is, is if you have not def- if you're not investing it in an, into a, basically a model, a structure that can take that money and business results, what are you investing it in?


Peter Moore (00:33:36):

(laughs). Right. Right.


Mik Kersten (00:33:36):

And what it is invested in is what in project the project I call it local optimization of the, of the value stream. But basically these very elaborate structures of turning those dollars into project initiatives and budgets and outsourcing efforts, as you just alluded to Peter, uh, but you're basically pouring money, pouring very large sums of money, which is your job if you're supporting them and leading at one of these transformations, uh, into the structure that can't turn it into value. And that's why those, those factors you get are of nearly a $1,000,000,000,000 going up in flames are so problematic.


Mik Kersten (00:34:17):

So when I digested, you know, the, the data that we saw around this, some of the cases that we saw in industry, uh, what's happening is that money is being poured in, it's a lot of efforts going into either improving the architecture or improving some part of the delivery process or training everyone in the company, including, uh, you know, including the trainers on agile and, and it's not producing results. And it's because the right structure, the right investment structure within the company of having customer centric problems [inaudible 00:34:51] for which you measure the value in the customer, customer centric way don't exist. So that, that locality has a placing.


Mik Kersten (00:34:58):

The thing I find so beautiful about it is it works at every layer of the organization, right? So right down to Maxine, the individual contributor when slacking she can't add value and then reasonable amount of time, right? She realizes when she had locality in the first day, she was 100 or 1000 times more productive than the, her first experiences working on the Phoenix project. So then, uh, it actually works at the team level, which is the rebellion builds and the rebellion's trying to, you know, basically blast through, um, this quagmire of tech debt to create something where they actually do have the locality, um, and um, and simplicity and show the company a better way.


Mik Kersten (00:35:35):

And it works at the organization level because if you have not structured these investment buckets as these, as customer centric product value streams where you can put dollars in and get customers value out, get business value out, again, you're just throwing good money after bad and you're investing blindly without any discipline or sensible metrics to determine whether y- you're getting something for your customers, for your shareholders, for your business, and for your employees at the end of the day. So I think the, the lack of this is of locality and simplicity is why digital transformations fail.


Gene Kim (00:36:09):

Th- that's awesome. In fact, before we go onto the next half, I mean, I also want to land this point with, uh, Peter to confirm, right? When you put money in, we should have higher expectations, right? You put one dollar in you shouldn't get like 85 cents out, right?


Peter Moore (00:36:19):

(laughs)


Gene Kim (00:36:20):

It shouldn't even be two dollars. We want five dollars out, right? That we're going to create a value creation mechanism where, you know, we can, uh, you know, there'll be winners and losers, but, uh, the winners will be five X. I, I mean, does that resonate with you Peter?


Peter Moore (00:36:32):

Oh yeah, but, but the other one of her fingers as, as I listen to Mik is, is there's a story that I want to share with you again, back to Edmunds.com this CIO is now moved on to Amazon and then Phil Potluck was just extraordinary. When he's, when he went to Edmunds about six years ago he inherited a ERP software license from Oracle that the maintenance fee was $2,000,000 a year. Okay. So he and his team went in and looked at this and they said, "At best we're getting fi-" to your point about oral hygiene, "We're getting $500,000 worth of value."


Peter Moore (00:37:08):

So they went back to Oracle and said, "We need to renegotiate this contract." And Oracle, of course had said, you know, "Thanks, but no thanks." So what would normally happen normally happen-


Mik Kersten (00:37:18):

(laughs)


Peter Moore (00:37:19):

What would normally happen, and, and Mik correct me if I'm wrong, and your, what would normally happen, see, I was, "Well, we just have to absolutely wait it out." Well, no, what this, what this, what Ph- what Phil did. He went to the CEO. He said, "I need $500,000." And the CEO says, "What for?" He says, "Let's go back to now, let's talk about loca- locality and simplicity. I want to pay our very best developers on their own time of over and above what we're paying f- for them to do their day job and we'll build our own ERP system." And so the CEO says, "Well, how long is that going to take?" And he goes, "I really don't know." (laughs)


Mik Kersten (00:37:54):

(laughs)


Peter Moore (00:37:54):

So it, it could take a year. Four months later, they released the first version of their ERP system with 80% of what they needed and they went back to Oracle and said, "Buzz off." (laughs) And I think it's a perfect story. Um, if you recognize, if you free up that talent, if you give that talent the capability of doing what they do, not only do you not have to be at the Beck and call of the predator, Oracle or whoever, but to really set the, the tempo and the stage to do the kind of work that you know Maxine wants to do, that's what you wanted to do.


Peter Moore (00:38:33):

(music)


Gene Kim (00:38:33):

Hello everyone, you've been listening to the inaugural episode of the ideal cast with me Gene Kim. This podcast is brought to you by the same people who put on the DevOps enterprise summit, the conference for leaders who are transforming technology in the world's largest and most complex organizations and the same people who publish many of the books that we all know and love, such as project to product, team topologies, making work visible, the upcoming agile conversations and many more, which includes all the books I've coauthored such as the phoenix project, the units project, accelerate, and more.


Gene Kim (00:39:10):

And given the topics and ideas explored in this episode, I'd highly recommend project to product by our incredible guest today, Dr. Mick Kirsten. He is the foremost expert in value stream networks and works with massive companies untangling tremendous complexity. If you're going to learn from anyone, make sure it's him. For updates on IT revolution publishing and events follow them on Twitter at IT rev books and IT rev does. This podcast is brought to you by the 2020 DevOps enterprise summit London, which will be a virtual conference due to the global pandemic upending almost all aspects of our daily lives.


Gene Kim (00:39:48):

For seven years, we've created the best learning experience for technology leaders, whether it's from listening to experience reports from large complex organizations, talks from the experts we need or through the peer interactions that you'll only find at DevOps enterprise. For my entire career, I've benefited so much from conferences, whether it was to learn what I need to learn or meet who I needed to meet. In fact, I've met almost all my coauthors at conferences. At IT revolution our goal is to create the best learning event possible for technology leaders. So the DevOps enterprise mission goes on.


Gene Kim (00:40:25):

We will have the same great programming with the same great talks and we are working furiously to create the most engaging and effective learning environment for you so you can learn what you need to learn and meet who you need to meet in order for you to achieve your own goals. You'll be signing up for three days of learning, which will be so much more than just watching talks in front of a computer screen. We will feature the best ways that we found to encourage the best interactions, including lean coffee, birds of feather sessions, virtual happy hours, and much more. To register, go to events.ITrevolution. com.


Gene Kim (00:41:03):

I love that because it really is about, it matches so many stories coming out of the DevOps enterprise summit where, uh, they are creating greatness within their organizations and getting away from, uh, vendors whose business models are actually jeopardizing (laughs)-


Peter Moore (00:41:16):

They're predatory.


Gene Kim (00:41:16):

Their own.


Peter Moore (00:41:16):

They're predatory. [inaudible 00:41:18].


Gene Kim (00:41:18):

Uh, in fact, uh, I think, uh, one phrase was that if we got to get away from dangerous vendors-


Peter Moore (00:41:23):

(laughs) right.


Gene Kim (00:41:23):

So the, the first ideal, uh, around locale and simplicity was really meant to highlight that, uh, you know, it's not enough to move box around on the org chart. We need a software architecture that's congruent to it, that's almost isomorphic to it, that allows teams to be able to work independently. And, uh, one of the things Mik, I learned from you is that, you know, that's actually the story behind the famous Jeff Bezos memo in 2004 when he said, you know, "The only way that teams can talk to each other as do networked APIs to really force that separation between teams so they can work independently." Um, so, which leads us to the second ideal, uh, of focus, flow and joy.


Gene Kim (00:41:58):

And, and for me, uh, this was so much influenced by me rediscovering the joy of coding. Um, that revelation came from learning the closure programming language. It's a list that runs on the JVM, uh, and it's a functional programming language. And it was without a doubt, one of the most difficult things I've ever learned. I probably studied for 60 hours reading books, watching videos, uh, before I even got to write my first program. And it was so difficult for me because as a functional programming language, everything's immutable. You're not allowed to change variables. Uh, you can only make new ones. Uh, and it really showed me how much simpler programs can be when we eliminate state.


Gene Kim (00:42:37):

Uh, which is a source of so much complexity. And I also learned how much you can build these days with so little and how productive you can be if you really create these simplicity in your architectures and your systems. And that's what really led to this notion of focus, flow and joy. It's, uh, to me the ideal is when we're spending our best energies focused on solving the business problem and we're having fun, uh, solving the problem that customers need us to solve. And, and the not ideal case, uh, we're just, sped, uh, we're just stuck in the muck trying to get other people to do what we need them to do, pestering them. Or we're mired in, uh, solving problems that are so far removed from the actual problems we need to solve, like having to figure out how to make correct YAML configuration files.


Gene Kim (00:43:19):

And, uh, Mik you and I have a, a common love of, of the work of Dr. Mihali. She sent me Holly, uh, who wrote this incredible book, flow, the state of, uh, optimal experience, uh, and he describes how flow is a state where we lose track of time when we're working, maybe even lose a sense of self, that, that transcendental experience when we are truly loving what we do. Um, uh, Mik, do you want to talk about, uh, flow and how important that is to you? You said it's, it's not an exaggeration to say that, uh, you spent decades trying to, uh, help engineers achieve a state of flow.


Mik Kersten (00:43:55):

Yes. So that's, and I think that, that, that journey for me continues and whether it's again, individuals, teams or organizations, but that, let's, let's talk about the individual level because one thing I, I, I'm convinced that leaders do not understand today is how bad the current state is. So this is again, why I think that the depth to which unicorn project goes at walking you through on this, you know, uh, lean thinking style, gemba walk, this walk we're actually seeing the assembly line for the first time because a lot of businesses have not seen how software is built, right? It's, it's a harder thing to see and it's a bunch of editors on, on developer screens. But the conversations are there and it truly is about creativity and conversation.


Mik Kersten (00:44:43):

So the first thing is we need to admit and understand that what we're managing here, uh, and what, what our staff are doing is a creative process, right? And a creative process. And this is what Mihali [inaudible 00:44:58] talks about the creative process requires a state of flow. When you're in a state of flow, you're not 1.5 times more productive, you could be five times more productive or 20 times more productive. And the longer you can sustain it, uh, the more value you can deliver to your, to your customer, to your organization, to your stakeholders. So as I started working on larger and larger scale software, I started realizing that as, as things got larger and more complex, uh, I would get into a flow state less and less. And this is, this is over 20 years ago.


Mik Kersten (00:45:31):

And so I started, I started missing that flow state where I'd be writing code, you know, a- a- as quickly as I could be, you know, writing a blog post or, um, or, or an email message. But whereas, when you're, when you're writing code and Gene, you know, this feeling, it's, it's just that this incredible feeling of, of creating something that wasn't there before, solving puzzles. Uh, and then every time something gets in your way, it's, it's just so annoying-


Gene Kim (00:45:52):

(laughs)


Mik Kersten (00:45:53):

Um, especially when you spend the next two hours trying to deal with, as you said, the YAML configuration file or some other point of friction that, that gets in the way of your flow. So-


Gene Kim (00:46:03):

And your-


Mik Kersten (00:46:03):

The point of friction that, that gets in the way of your flow. So-


Gene Kim (00:46:03):

And you're spending all your time on Google or Stack Overflow just, uh, trying to solve something that you don't even care about. (laughs) Right?


Mik Kersten (00:46:08):

... Exactly.


Gene Kim (00:46:09):

Trying to make an error message go away.


Mik Kersten (00:46:10):

Exactly. And, and it's all that friction and distraction that gets in our way. And to me, when I was, you know, spending the kind of, uh, stereotypical 80 hours a week coding, I s- I started realizing that the things... I started getting RSI, repetitive stress injury in m- in my arms. And it got to the point where, uh, where my boss was telling me if I didn't, you know, take paid, uh, paid time off, um, it would end my career, because he'd seen it happen twice to other people at Xerox PARC.


Mik Kersten (00:46:37):

So I got really freaked out, and I started looking at all the things that were friction in my day to day work, uh, and all the things that were flow. And I did this by inst- writing some software that instrumented my, my computer and my development environment. Uh, and then I started finding these, these sources of friction.


Mik Kersten (00:46:55):

And it's exactly what, what you relate in, in the Unicorn Project, Gene. And it's, uh, Peter, I've heard you talk about this. It's, it's when we're switching between different requests, because the load of work that's coming, say, from the business onto the IT people, is causing so much thrashing.


Mik Kersten (00:47:10):

And then not only are you thrashing between the work that you're doing day to day, but you're actually thrashing between different projects, because you're s- probably assigned to 16 different projects, because your IT has been treated as a cost center for the last, uh, couple decades. So, uh-


Peter Moore (00:47:22):

[inaudible 00:47:22].


Mik Kersten (00:47:22):

... The, the amount, if you look at the ratio, and by the way, both my univ- the university I w- I did my PhD at, the University of British Columbia, um, other students of Gale Murphy's, I was a student of Gale Murphy's, they've continued studying flow.


Mik Kersten (00:47:35):

Um, so we actually study it on our developers. There's a research study being done right now, which is how often they're s- and for how long they're in a state of flow. They all get Apple Watches, so they're happy, because it's, it's how we can actually measure their heart rates and things-


Peter Moore (00:47:47):

(laughs)


Mik Kersten (00:47:47):

... Because these things are actually evident to that level in your work. So the, the reality out there today is we could have our developers in s- in basically a, such a minuscule time of flow that if we d- could just increase flow by 1%, by 5%, again, just get a, a little bit of that journey that Maxine had, but at the organization level, the, the productivity benefits are, are immense.


Mik Kersten (00:48:14):

And we're right now in a, in a context where some companies have figured this out, right? You've got tech giants out there. You've got tech startups. You've got, uh, you know, d- a pretty recent crop of unicorns whose developers do get to stay in the flow. They have the right kind of parachutes in their testing, in their approaches to testing. They can, and, and a, approaches to shipping software that they can just be in the flow of their work.


Mik Kersten (00:48:36):

The, just one last factoid, because we, we just got this data recently, um, we've been studying flow data, uh, a, a [inaudible 00:48:43] that we get from our customers, and you start seeing this, a 1% increase in, in flow efficiency, one of the metrics in the flow framework. Well, that's approximately a 10% reduction in time to market. So the-


Peter Moore (00:48:55):

(laughs)


Mik Kersten (00:48:55):

... The focus, flow, and joy, they mi- might sound soft, but if you can increase them by one or two points across your organization, you'll pull way ahead of your competition. And if you had any sense for how bad it is, these very expensive, often, developers, they're being paid how little time they spend building value and how much time they spend frustrated with technical debt and legacy and, you know, some of the story that Peter just told. Uh, I, I think we'd have a lot of people crying listening to this podcast, so-


Peter Moore (00:49:22):

(laughs)


Gene Kim (00:49:22):

A- A- A- And Mik, you said something to me very recently, um, that I, I I forgot came from, uh, Csikszentmihalyi's work, which is about the economic cost of trying to regain flow. Uh, can you say, can you remind us what that is?


Mik Kersten (00:49:35):

Right. So the, okay, so this is, this is the really big part of the problem, is that it takes a fair amount of work and distraction free work to get into the flow. And once you break it, you have to redo all of that again.


Mik Kersten (00:49:48):

So every time something breaks your flow, there's, it's very expensive to regain that flow. So if you've got things breaking your flow, on average, every 12 minutes, you never will have gotten to the state of flow that day, that entire work day. And then keep in mind, you're 10 times more productive when you are.


Mik Kersten (00:50:08):

So this tells you this, you know, uh, y- I don't think we have the exact right data on this. We've been trying to collect it as much as we can. But, but anecdotally, I can tell you that when I see individuals and a team working with flow on a code base, we're talking two, three, four orders of magnitude more productivity than, than when you're living the story of the Unicorn Project.


Gene Kim (00:50:29):

A- And by the way, that totally resonates with me. Um, you know, I've kept a daily work log for almost 11 years, and, uh, no, so it's a spreadsheet. Uh, it's the day, what I'm working on, what the word count before and after are, and, uh, you know, what I did. And I found that I cannot hit my word count objectives, uh, if I don't, uh, if I'm not in a specific Starbucks, um, and if it's not in one sitting. (laughs)


Gene Kim (00:50:52):

And so, you know, I learned that, you know, I need three to five hours, um, of uninterrupted time. And, uh, this is when you have to play games with yourself saying, " I'm not going to let myself have lunch or even go to the bathroom until I hit the word count target." (laughs) Because, uh, you know, uh, once you, you know, get out of that seat, right, your ability to hit that word count target is basically, you know, has gone down to zero.


Gene Kim (00:51:11):

Uh, so, uh, Peter, you know, uh, this all sounds so soft, right? Focus, flow, and joy, right? I can imagine a business person saying, you know, "Our job is not, we don't pay people so they can be happy." (laughs) Right?


Peter Moore (00:51:22):

(laughs)


Gene Kim (00:51:22):

We, we pay them to do work. And yet you've come to the opposite conclusion, so can you motivate that and prove to us that, you know, this is not about just, uh, this is not out of charity or, uh, you know, uh, funding someone's hobby. There is a mercenary business advantage for creating these conditions.


Peter Moore (00:51:37):

Oh. Absolutely. In fact, uh, there's a lot of very interesting, uh, statistics that, um, I put together, again, for a year end blog in December, around the fact that if your employees aren't happy, your customers aren't happy. So I think the way we make the business argument to the business side is, it's one thing to have happy employees, but by the way, if they're unhappy, it's not just an unhappy employee. You un- you more than likely have an unhappy customer, which impacts the bottom line.


Gene Kim (00:52:05):

(laughs)


Peter Moore (00:52:05):

And some of the statistics I've found pretty, pretty stunning. Uh, Gallup has got a study that says that over 66% of American workers are not fully engaged in their work. The Conference Board said that over 53% of Americans are currently unhappy at work. And Kansas State University did a study that showed that 100 unhappy plo- employees cost companies $390,000 per year in lost productivity. So those are just three of a bunch of examples.


Peter Moore (00:52:35):

And I think the key thing is, and you guys have a better feel for this, because you've done the coding. I've never done it. But our oldest son is a co- he's, he's a software developer. And he's just gone through an interesting transition from being an individual developer to now running a team of nine. And his primary job right now, Gene, you'll be happy to know, because I had him read the book, is to create-


Gene Kim (00:52:57):

(laughs)


Peter Moore (00:52:58):

... Is literally to create focus, flow, and joy. And what he explained to me, but I had to learn this a long time ago with him, because I would call him up, and he'd be in the middle of writing code, and he would be upset that I called him on the phone.


Gene Kim (00:53:10):

(laughs)


Peter Moore (00:53:10):

I'd say [inaudible 00:53:11] father, I want to t- he said, "No, Dad. You don't get it. When I'm doing code, I cannot be interrupted."


Peter Moore (00:53:17):

So we need to somehow, uh, and maybe, Mik, I don't know, you've seen where they... I don't understand why people who don't do this job don't realize you can't just walk into a developer's office in the middle of writing code and say, " I have a question," because the minute you do that is, uh, just as Mik said, you can't, you ca- it's not turning it on and turning it off like a light switch.


Peter Moore (00:53:38):

And so I think part of what this is is educating them to what this job really means. I mean, my, the way I, the relevance I draw to it or the comparison, I started off in the advertising business. So you w- you can't interrupt a copywriter or an art director when they're making advertising, okay?


Gene Kim (00:53:55):

(laughs)


Peter Moore (00:53:56):

Because you're going to (laughs) get junk. You're going to get junk. And so part of what, what I want to try to do is to try to, and I say to business people all the time, "Before you even email that person, text that person, knock on their door, whatever you're doing, understand if they're doing something for you, you're going to make it much harder for them to do it if you knock on that door." [crosstalk 00:54:16] would make the business [crosstalk 00:54:18].


Gene Kim (00:54:18):

Gene here again. Both Peter and Mik make a very compelling case here for developer flow, which enables someone to be orders of magnitude more productive than when they're not in a state of flow. Of course, we must always balance individual productivity with team productivity. In other words, not allow developers to talk to each other just because we don't want anyone to be interrupted is certainly not what we want. Individual productivity and team productivity should not be mutually exclusive.


Mik Kersten (00:54:44):

So I think Peter just brings up a really interesting point, because we know how to manage talent, how to manage talents in, uh, in advertising and writing and digital publishing and so on. So I think the problem is that where our managers are, you know, many of today's managers are actually managing to an operating model that made sense for mass production, which is, again, one age ago, and does not make sense for creative work, which is why, again, understanding the second ideal.


Mik Kersten (00:55:11):

If you don't understand why this ideal is so important to the hundreds of millions or billions that you're spending on technology, you're managing your technology to the wrong model, and you're, chances are, you're throwing good money after bat, because if you've got developers who are not in the flow, and you think you need to hire more developers, you're wrong. You actually need to reduce the tech debt so that you can... an investment in developers produces that, you know, better than an 85% ei- 85 cent outcome as, as you mentioned.


Gene Kim (00:55:39):

(laughs)


Peter Moore (00:55:39):

(laughs)


Gene Kim (00:55:41):

Put a dol- put a dollar in, get 85 cents out. (laughs)


Peter Moore (00:55:43):

Yeah. Right. (laughs)


Mik Kersten (00:55:43):

But, but that's, that is what's happening. And then, of course-


Peter Moore (00:55:45):

That's true.


Mik Kersten (00:55:46):

... [crosstalk 00:55:46] are f- are, are then frustrated and, again, you're, you're, you've, you're just operating to the wrong model. But now, of course, we need to assume that no one wants that. Everyone wants their organization to win. Even Sarah, I think, wanted the ag- organization to win in your c- Unicorn Project.


Mik Kersten (00:56:01):

So what is it that's going wrong? Because developers know they need to stay in the flow. Their first line managers know they need to stay in the flow. And then we've got this massive mismatch between the way the business operates and throws things over the fence to these cost centers or other broken structures that's actually constantly ripping people out of their flow as they go from, you know, from ticket to ticket, to request to request, to meeting to meeting.


Mik Kersten (00:56:23):

So, again, understanding why this is not just, just some soft, uh, uh, New Age psychology, but completely fundamental to your success as a software innovator, I think is pretty important.


Gene Kim (00:56:36):

A- A- And, and Peter, you said something very encouraging to me in the last stages of the development of the book. And, and Peter, I had shared with you that, you know, we had sort of doubled down on making the audience of the Unicorn Project the developer, right? And I had shared with you my, my fears and concerns that maybe in doing that, it's not going to ever be read by engineering leaders, and it certainly won't be read by business leaders.


Gene Kim (00:56:58):

But you said something very, uh, poignant and, uh, reassuring to me. Peter, can you share that, um, and maybe substantiate why you think this, uh, topic is so important for every business leader?


Peter Moore (00:57:10):

Yeah. I b- I think the c- the, the, the education part of it is, and I, and I s- I predicate it by saying, you know, you wrote this for red shirts. I'm not a red shirt. Okay? But what I do-


Gene Kim (00:57:19):

By red shirt, this is like the, in Star Trek. The red shirts are the-


Peter Moore (00:57:21):

(laughs)


Gene Kim (00:57:22):

... People in the engine room who go down the way party and get killed by, you know, all sorts of things, Alterian blood worms, Klingon blasters, et cetera, right? (laughs) The red shirts-


Peter Moore (00:57:29):

Right, but-


Gene Kim (00:57:29):

... As opposed to the [inaudible 00:57:30].


Peter Moore (00:57:32):

... But, but, I mean, th- most business executives grew up understanding the functional disciplines of their organization. They understood manufacturing. They understood finance. They understood marketing. They understood sales, for the most part. Okay?


Peter Moore (00:57:46):

Most of 'em had a, at best, a cursory understanding of technology in its early stages. So go back to the days of mainframes and all that stuff, you know, and passing, you know, cards through windows to people locked in, you know, in rooms stuff. They had no idea what it was about.


Peter Moore (00:58:02):

By the way, today, unless they put some time in on it, they're equally uninformed about a lot of this digital technology, what it is, what it takes to produce it, deliver it, develop it, get a good return on it. And who are the people that do it?


Peter Moore (00:58:18):

And so part of what I think we have to do is to say to them, "You don't have to understand how to write the code, but you have to understand what it takes for that code to be done properly so you get the outcome."


Peter Moore (00:58:31):

So if you, if you're a bank and you want your customer to have a mobile application, it isn't going to happen without code, period. Not going to happen. Okay? So don't talk about somebody running around with a cute little thing on their hand going, "Oh, yes, I can do all these things." No, you can't, because you have to have the code to make it work.


Peter Moore (00:58:47):

So, and when I get into these conversations with business people, now, if they're over 50, there's a lot of furrowed brows, okay, because they're not digital, I mean, if they're over 40, they're not digital native, in some cases. But forgetting that, they're all, I think, the common denominator is you want a business outcome. This technology can get you that business outcome.


Peter Moore (00:59:10):

You need to understand those people. Those people are the only people you have in your organization that can do it. Okay? HR can't do this for you.


Gene Kim (00:59:19):

(laughs)


Peter Moore (00:59:20):

[crosstalk 00:59:20] can't do this for you. (laughs) Okay? They can't. Not that they don't want to. They just don't have the skill set.


Peter Moore (00:59:26):

But the other problem now, and I don't know whether, and I'd love to, to hear Mik's thoughts on this, the biggest challenge I hear now, even from ones who don't have a good understanding, but the ones who do have it, they can't find the talent. And I think the other, I mean, so not only is it important for you, if you don't know what you're looking for, you're really lost. If you know what you're looking for, you've got a big uphill challenge, because there's, you know, there's more demand than there is talent at the moment.


Peter Moore (00:59:51):

And so I think that a lot of what this work that the Unicorn Project is talking about is making it easy for them to understand what that talent should be, how that talent really should be engaged and operate, and, and ultimately, what the benefit is if you let them do that as opposed to opposing it, because-


Gene Kim (01:00:14):

A- And, and Peter, you had made this astonishing claim that you said, "Every CEO needs to know that those red shirt developers may be the most valuable people in your enterprise."


Peter Moore (01:00:22):

... No question about it. No question about it. No question about it. I mean, the thing that's, I mean, uh, if you look at someone like, uh, Elon Musk, um, I did wor- I did a lot of work with the CIO at SpaceX. You don't have to convince him the technol- he doesn't even think about SpaceX as a, as a, as a space exploration company. He thinks about 'em as a technology company.


Peter Moore (01:00:44):

And the best example I can give you is when NASA sends a rocket into orbit, they have 450 people in the control room monitoring the flight. When SpaceX sends a rocket into orbit, they have 40 in the control room on their way to two, because he knows the technology is doing much more of the work.


Peter Moore (01:01:05):

Same thing. He's got the only car company in existence that's never had a recall. Never had a recall, because-


Mik Kersten (01:01:13):

Uh.


Peter Moore (01:01:14):

... If something's wrong, he sends out a software update, and it fixes itself. So it's, those are the kinds of stories that we have to start getting people who aren't as close to technology as a SpaceX or a Tesla to understand.


Gene Kim (01:01:27):

And by the way, there's this great article that just came out in the Nikkei Times. Uh, a bunch of engineers did a tear down of the Tesla Model 3, uh, including engineers from Toyota, and they, uh, marveled at the fact that there's only one component that's driving all of the auto drive capabilities. And (laughs) the Toyota engineer-


Peter Moore (01:01:43):

(laughs)


Gene Kim (01:01:43):

... Said, "We can't do this. This is six years ahead of, uh, where we are."


Peter Moore (01:01:47):

Right.


Gene Kim (01:01:47):

I mean, it just shows, uh, that this is a core competency that can't be delegated to suppliers.


Peter Moore (01:01:53):

Exactly.


Gene Kim (01:01:53):

Um, (laughs) like I said that to you over the weekend.


Peter Moore (01:01:54):

Exactly. Okay. Great. Thanks.


Gene Kim (01:01:57):

Uh, okay. Let's l- do a little... oh, Mik, do you want to respond to that, or, uh, [crosstalk 01:01:59]?


Mik Kersten (01:01:59):

I do. I do, because you know, I think we, we could have, and I hope we have a lot of listeners who, who wish they understood code better, right, who wish they were, you know, they, they s- had more conversations with Elon Musk or people who'd had conversations with Elon Musk.


Gene Kim (01:02:12):

Mm-hmm (affirmative).


Mik Kersten (01:02:12):

Um, but we have a lot of people who've grown up around traditional businesses who feel the need, pressure to innovate. And, you know, I think, Peter, you mentioned, uh, like, should they, should they learn how to write code?


Mik Kersten (01:02:23):

Well, you know, that, it's, A, when I get asked by a senior business leader, "Should I take a coding course?" My answer is actually, you know, "No. There's, there's, there's a lot more you can do with that time."


Mik Kersten (01:02:33):

So if you've got extra time, do it. It's fun. It's interesting. But any day, I will recommend just reading the Unicorn Project, get a sense for what software delivery is like, rather than-


Peter Moore (01:02:44):

Yeah.


Mik Kersten (01:02:44):

... Learning one tiny fragment of it, which is-


Peter Moore (01:02:47):

Yeah.


Mik Kersten (01:02:47):

... [crosstalk 01:02:47] write some basic Swift on your iPad, which, which is fun to do with your children, admittedly, but it's, it's not really going to give you a perspective for what your staff are dealing with, because in the end, just having that perspective for your staff, um, is what's going to allow you to do the thing that you need to do, which is to make conditions for that talent that you have to thrive, right?


Mik Kersten (01:03:07):

There's talent there. Um, you know you need more talent. As you're mentioned, Peter, there's, there's definitely going to continue to be, uh, competition for technical roles for developers and, and for others, right? As we move more into AI, there's going to be more, more [inaudible 01:03:21] for mat- machine learning, data pipelines, data modeling, so on, right? It's just going to continue.


Mik Kersten (01:03:26):

So really, again, just back to that ideal. If you from an HR and a talent management and a recruiting perspective, if, if you don't prioritize that focus, flow, and joy, you won't be creating the conditions for that talent to thrive. You won't-


Peter Moore (01:03:40):

Yeah.


Mik Kersten (01:03:41):

... [crosstalk 01:03:41] people out there at recruiting fairs saying, "No, you know, even though we seem like a stodgy business, we're doing this amazing innovation here." And, and showing someone a, a, a demo and convincing them to come work for your company.


Mik Kersten (01:03:50):

So I think, again, it's that appreciation by leadership, right through to HR, um, of the fact that it's, it's that focus, flow, and joy that, that allows technologists to thrive, because in the end, when you get enough of them in a room as, as the guy assembling the rebellion, they'll do great work. So as a leader, it's, it's your job to create the conditions that allow them to do that and get-


Peter Moore (01:04:11):

Yeah.


Gene Kim (01:04:11):

That is so fascinating. And in fact, yeah, uh, uh, to that, uh, uh, leader, right now I think the advice would be, um, yes, use all your influence and your authority to guide and remove obstacles, to enable (laughs) right? And I think that's-


Peter Moore (01:04:25):

Yeah.


Gene Kim (01:04:26):

... Really, uh, in the book Maggie did, was, uh, she understood how critical technology was to the achievement of the largest aspirations of the organization and then did everything to eliminate obstacles and make it possible for, uh, the rebellion and the, um, uh, the project, the Unicorn Project to do everything that it was actually able to do. Uh, that is awesome.


Gene Kim (01:04:48):

So we talked about the first ideal of locality and simplicity, the second ideal of focus, flow, and joy. We're going to skip the third ideal of improvement of daily work and the fourth ideal of psychological safety so that we can talk about, uh, the fifth ideal of customer focus.


Gene Kim (01:05:02):

And, uh, Mik, you were there for this aha moment. Uh, you and I were in Detroit, Michigan, uh, because we were going to spend the day hanging out with Chris O'Malley, the CEO of the famously resurgent mainframe vendor, Compuware. And, you know, for a year and a half, we were dazzled by what he had to teach the devOps enterprise community about how to get business leadership on board, how to get conservative, stodgy CFOs on board.


Gene Kim (01:05:25):

And, uh, I remember walking to the Compuware building in the morning, looking at the agenda and, and suddenly feeling embarrassed. Uh, I remember, uh, saying, "Mik, I'm so sorry. We had such high hopes for this day, um, but I'm so sorry. Looks like the first thing on our agenda is a data center tour." (laughs)


Gene Kim (01:05:42):

And I remember feeling so bad because I, I didn't know what we were going to learn by, you know, seeing their Halon Extinguishers. And yet that was the source of one of the biggest professional aha moments I've had in my career, because you walk into the data center, and it's basically empty, right?


Gene Kim (01:05:54):

You see two Z mainframes, and then you see tens of thousands of square feet of empty data center space. You see, uh, these green outlines like in a murder scene of where the server racks used to be, and in the middle of each one of those, uh, uh, outlines is a tombstone that showed what business process and application used to reside there and how much money, uh, they save each year by getting rid of it.


Gene Kim (01:06:17):

And over the many weeks it took to process this, uh, I think this was just one of the most stunning, uh, visual examples of, um, reallocation of context into core. Uh, so by getting rid of $8 million of things that customers didn't care about, things like ERP systems, uh, like, uh, desktop support systems and, and, um, uh, on premise email, uh, you know, these are things that are important but did not create lasting, durable business advantage. These are things that customers actually do care about. They were able to reallocate that $8 million and put it into R&D, creating things that customers do care about.


Gene Kim (01:06:55):

Um, so, uh, I think this was just so great because the f- s- fifth ideal is really about, to what extent can we take a look at the work that we're doing and really unflinchingly and courageously ask, "Is this creating value for the customer? Is this creating lasting, durable business advantage?" Uh, meaning is it core? Or is it context? And if it's context, to have the courage to be able to say, "Is this work that we should be doing at all?"


Gene Kim (01:07:17):

And I think d- uh, the, the book Zone to Win, more than any other, really show how important of a problem this is, uh, and this really faced by every modern enterprise. So Peter, can you teach us about Zone to Win, The Three Horizons, and tell us why it's important and, uh, what tools we can use to think about this problem?


Peter Moore (01:07:40):

I said previously, "How does a CEO balance funding the businesses they have and the functions and activities that they carry out, and have enough other resources that they can materially fund a new business that could scale?" To 10, our, our threshold is 10% or greater of the current revenues.


Peter Moore (01:07:58):

And part of what they do, and the thing that I love most about, you know, the picture you have of the Compuware and your description of the data center, uh, at, at, at its core is in, in the produ- there are four zones. There's a productivity zone, a performance zone, an incubation zone, and a transformation zone. And I'll get, I'll briefly get to each one in a minute.


Peter Moore (01:08:17):

But the productivity zone is where all the systems of record reside. ERP system, CRM, et cetera. And what O'Malley and his team did is what we call a trapped value recovery program. And it's not a cost reduction exercise. It's a redeployment exercise.


Peter Moore (01:08:34):

He took the money by either consolidating, modernizing, or eliminating systems that were no longer bringing value to the company, took those resources and budget, and redeployed 'em against things that would add increased value. It's spectacular.


Peter Moore (01:08:48):

I want to use, I'm going to see if I can get permission to use that (laughs) that visual-


Gene Kim (01:08:51):

(laughs)


Peter Moore (01:08:51):

... Because it's a perfect example of it. And so what the, what the Zone to Win thing does, then, is so each zone has its own charter, so the productivity zone is charged with making the performance zone more-


Peter Moore (01:09:03):

...Productivity zone is charged with making the performance zone more efficient and more effective. Okay? By optimizing the cost of all those support functions. Finances in there, IT compliance, all the- all the parts of the organization that don't have a revenue bogey. The performance zone is all those operating units within the company that generate the revenues margins and profits. That allows it to not only [inaudible 01:09:26] but make new investments. And then the incubation zone is where you're looking at what the new opportunities are for the company. Are there new products? Are there new services? Are there new markets? Are there new technologies? And then, finally, the transformation zone is really one of two things. It's either a "zone offense" zone, where, like Marc Benioff, disrupted the old license maintenance model with software as a service. So that's called "zone offense." Satya Nadella did the reverse called "zone defense." As he saw all three of his core businesses where under existential threat. And so he pivoted them all from on desktop- on premise, on desktop to cloud-first mobile-first and made that.So what it does is it allows you to look at the different aspects of your organization and be very precise about what you wanna do. And to an earlier point that-that Mik made about metrics, the other problem that a lot of companies have is they adopt two or three core metrics, mostly from the performance zone. So it could be [inaudible 01:10:30], or whatever you want. And then they take those metrics and apply them on innovation and incubation projects, and it just doesn't work. So, part of it is being able to look at your organization and say, "On the right-hand side we're sustaining our business with performance and productivity. And on the left-hand side we're disrupting or it's a discontinuous innovation because we're trying to do something new."And it really has turned out to be something with very, very powerful because Jeffery's great gift is that first and foremost he's an English teacher. And so the vocabulary is very straight-forward, and it's easy to understand both on the business side and the IT side. So, it- again, for me it's great. And I took it and adapted for CIOs into a [inaudible 01:11:18] for them, because it's the perfect connector between IT and business.


Gene Kim (01:11:23):

And Mik, you got to see something, uh, these dynamics deploy at the BMW plant. That's a bigger [inaudible 01:11:30] for me, in terms of, like, what kind of outcomes do we want? Is, uh, the goals for the three series at BMW is very different than the I8s series. Can you talk about that?


Mik Kersten (01:11:40):

Yes, absolutely. I think I just wanna reflect something that-that Peter just said. Which is the way, so- use of the wrong metrics, for metric software innovation or delivery and so on, is, I think, one of- one of the things taking so many organizations astray right now. (affirmative) Uh, and the-the problem that I saw is that so many of the metrics are internal to the companies activities. And their proxy-metrics for, um, you know, project completions and milestones, and how long it takes a developer to-to finish work, and so on. They're not customer centric metrics. And I actually think, you know Peter, potentially this is-this is actually reflected from the fact that, uh, IT most of it has come from productivity zone initiatives that were call centers to keep the businesses systems of records running. (affirmative) If you are now adopting practices that work for the productivity zone, uh, and- (laughs) And those to be innovative... You know, obviously there's a really big mismatch there.


Gene Kim (01:12:42):

You get 85¢ for every dollar you put in. (laughs)


Mik Kersten (01:12:45):

But-but the numbers look good. Now, so, but- you know, value, you know, new value is not generated. So, what I noticed, uh, at the BMW plant was the way that, first of all, these concepts of horizons or zones, I really- in the book project [inaudible 01:13:01] in terms of the four zones. Uh, how profoundly those are ingrained. Not just in production and the mastery of production, but in the business. So, the customer centricity and the understanding of what the customer is and what the results for that customer are, uh, is-was critical. So, the- of course we understand BMWs performance zone, 'cus it's all very high-performance cars that-that-that look good and go fast, and deliver sheer driving pleasure.But what was so interesting to me was, when I walked in this plant, was that the I and II series; those, uh, those nice performance zone cars. Uh, they were- their manufacturing was just on this massive scale. Uh, you know, it was [inaudible 01:13:50] told me 70 seconds. The line was- I-I walked about 7 miles of the line, according to my watch. Uh, and then I had the shock. Which, similar to the shock I had with-with Gene looking at these tombstones of, uh, productivity zone things that shouldn't have, you know, that should not have existed. At this point in-in the age of mobile and cloud. Um, I saw the I8 line and the I8 line was really, really short. And I just thought this was the most complex car that they had made to date, and so on. Because the- this was, you know, truly somewhere between transformation and incubation. And Peter, I love that 10% revenue mark. Um, I don't know if it works that same way in manufacturing, but it was where BMW was learning to build an electric car. Right?So it did not [crosstalk 01:14:38] same business plot line requirements, that I feel is kind of in the middle. A lot of carbon fiber should probably make some money. Uh, so, but with it- so, it actually had much- it had, uh, the I8 30-minute manufacturing steps made by generalists. So super short line to really learn how to manufacture of the cars. So, its business result was not only the market and the customer, it had this really important internal customer of the BMW group itself learning how to make, uh, electric vehicles. And play disruption defense on that front.So, unless we make this the customer understood by everybody. 'Cus everyone making the I8 understood exactly what the goal was, because of course their- even the people doing the manufacturing are thinking about, "Oh, can we... How should we do this manufacturing step? How could we improve this manufacturing step?" They have way more flexibility. So, the-the organization is not customer centric unless the customers are defined. And in any sufficient and complex business, they need to be defined somehow along these different zones; because you simply have to deliver for your own internal productivity systems. Uh, at a very- you know, in a very different way, with a very different talent pool lending it to- in where-where you have to innovate in the transformation and incubation zones.And I think the biggest pitfall that I see is-is the one that you alluded to Peter. Which is using metrics from the productivity zone and sometimes the performance zone, to measure all of that. Because (affirmative), after the second ideal, if we're not measuring flow and how flow relates to business results along customer centric value streams, again, I think it's-it's just driving the wrong set of business decisions.


Gene Kim (01:16:18):

Peter, you had mentioned something very profound to me. In fact, it was one of the reasons why one of my immediate things I said was, "I need to get us, you know, the three of us on a phone call together." And you talked about some of the, maybe the disappointments around zone to win. I mean, it's clearly true and it's clearly relevant to every modern organization. But in many ways you share some of the disappointments in terms of how organization have not adopted this way of thinking and planning. (affirmative) Can you talk a little bit about that in your own assessments of business and technology leaders?


Peter Moore (01:16:50):

Yeah. It- as I said, I took the-the core framework that Jeffrey developed, and created this floor zone model particularly for CIOs and their leadership teams. To address this intersection between business and IT, and see how we can get it towards better, and more collaboratively and more productively. I was well. Because, as I said, the first CIO I worked with was Rob Carter at FedEx. He was terrific, he was a leader. He reported [inaudible 01:17:17] And he sat on the senior management committee, so he had access, et cetera. But what I discovered is I probably talked to, either individually or collectively, well over a thousand CIOs in the last five years, easily. And what frustrates me, is the fact the well over 90% of them, for one reason or another, is- don't feel they're able to or want to take on this leadership challenge.And it- I mean believe me, I-I got a lot more gray hairs than I did six years ago because I just- it's so, it's so frustrating. Because you say to them, "Look it. You have two choices. You're running a big part of the organization, it's becoming more and more critical to the success. 80% of your resources are getting allocated to maintaining what you have. And 20% to doing something new or changing the business. And if you talk to any CIO today, very few of them will tell you that they've made any measurable progress on changing that ratio. In the last five years. If I had-if I had the skills to be a CIO, which I don't, my first job would've been to flip thirty-twenty to twenty-eighty. And that to me is our real challenge to say- you have to think like an entrepreneur. Like a line of business person, and say, "It doesn't make sense to spend eight out every ten dollars on something that the company is getting very little value for."I mean, we have to have them, yes. But we don't have to spend the amount of money, time, and effort in maintaining them. And in some cases modernizing them. It's- I don't know, so... [crosstalk 01:18:54] Helping the community you don't need to do something to me to have more of- wanna go do that! ( laughs)


Gene Kim (01:19:00):

And, uh, I think the comment I made was that the [inaudible 01:19:02] Community is at the set of courageous leaders. Uh, who are working tirelessly to overthrow an ancient, powerful order to do what they think is right for the long term interest of the organization. (affirmative) And I think [crosstalk 01:19:13] (laughs)


Mik Kersten (01:19:13):

Well, and Gene, the- I think one of the reasons you love this [inaudible 01:19:18] so much is because Peter's personality at [inaudible 01:19:22] he did flip the 80%, right? He was so aggressive working with the CIO at taking those productivities and systems, and getting them hosted in the cloud, and redeploying that capitol to innovation that- he's a great example of the fact that even-even at those scales you can change this game.


Gene Kim (01:19:44):

And-and it's not just the applications, right? The businesses processes of which it enables, right? (affirmative) And changing the treasury function, and the, uh, you know, every major business process in the organization. It was just astonishing to hear him present, uh, and talk with, uh, his CFO about how they were driving complexities out of the organization. And making it easier for people to do work within the business, and to do business with others (affirmative) (laughs) That's a dazzling, dazzling story. Peter, so, uh, another thing that you, uh, that sort of have very much startled me when you asked me, uh, this one question. Uh, was-was- you asked me whether it was an accident that the fifth ideal came last. I thought it was so startling because it wasn't something I really, explicitly thought about. And I had related to you that, um, it was really sort of driven by I think the order of the outcomes that ones are floating to the other. Peter can you describe why you asked that question, what your reaction was?


Peter Moore (01:20:43):

Yeah. I thought it was fantastic that you put it fifth because everybody wants to put the customer first. (laughs) And I'm not against putting the customer first, but in effect the thing that made this story compelling to me, not just another story about, "Okay, we got dysfunctional people doing IT, and we'll find a way to make them more functional." You know, in order for IT to truly be customer focused, they have to be able to do the first four ideals as well. It can't be those well, it can't even begin to approach to become- to be customer focused. So, don't put that at the head of the- But we'll work our way there. We'll earn our way there, and then when we're there we will know why we deserve to be there. Rather than-


Gene Kim (01:21:28):

And just to rephrase something you said is, uh, you know, we're on this quest to get a seat at the table, right? We all want a seat at the table, and you said something so pithy. You said, "Until we get the first four done, we don't even belong at the table." We can't- we can't execute our obligations and promises until we get those four taken care of, right?


Peter Moore (01:21:44):

Exactly. And if we're at the table- even if we have a seat, if we don't do those we don't even have a voice at the table; because all we're gonna be talking about is the things we're not doing well. (laughs)


Mik Kersten (01:21:52):

But Peter, at the same rate, I think that the exams I've seen of-of very large organizations, who task IT to transform and to transform around the customer and so on. Those are I think are-are equally due. Because if IT does this IT four IT transformations they don't work because the structure IT makes for itself are not around customer valued streams. (affirmative) They are around their own internal value streams, which evolve out of these call centers in ancient European systems, and everything else.


Gene Kim (01:22:21):

I agree 100%.


Mik Kersten (01:22:22):

So, I think it's back to the original point of-of this intersection of business and technology. Um, needs to focused on the customer.


Gene Kim (01:22:31):

And Peter, one of the- the pieces of advice that you, uh, shared, uh, with me was how you advise your clients not to talk like call centers. Which I thought was so amazing. So can you tell me more about that? Why is it wrong? And what does talking like a call center sound like?


Peter Moore (01:22:48):

Well, what I do with most of my clients is a lot fun and it's a good way to make the point. So I say for the first time we work together it's usually a month, or two or three months. If the phrase " call center" comes out of anybody's mouth, in any discussion it costs you five bucks. Okay? And by the end of the first month or two, we have-we have enough money to have a pretty good pizza party. We can come pretty close to inviting the entire building. No, the point is, and-and it's interesting that I'm thinking about doing a blog.It turns out the vocabulary is as important as technology. And if you don't talk about what you do and who you are, and what you wanna do in the right vocabulary people mis- they already put you in a box. They put you in a call center support function box. So if you keep coming to the board saying, "Here's my call center, here's my budgets, here's my XL spreadsheet," as opposed to saying, "Wait a minute. What you have done is you have given us, I'll make it up, 10 million dollars. This is how we're gonna invest it on behalf of this company in 2020. Here's our IT investment portfolio. Not an IT call center budget. Our IT investment portfolio. Which, by the way, okay, has been endorsed by our business partners. Because it's in service to the critical business outcomes that they want to achieve. And that they are on the hope for this year.And it's- there's a whole host of things where we go through all aspects of what IT does, and just, what I call, "change the narrative."


Gene Kim (01:24:19):

Mik you had some thoughts on this.


Mik Kersten (01:24:20):

I think that's the perfect job. Um, that this IT needs to become an investment portfolio. You know, my take on this is [inaudible 01:24:29] That portfolio is composed of product value streams. Each of those has a business result. Whether it's the I8 and the learning the results, or if it's the I and II series as both analogies where revenue is the result. And you've got to measure those results from the point of view of the customer from that-that customer focus. So, these flow metrics that, in the end, that's the great thing about metric from customer point of view, is they deliver both business result and they-they drive that focus and joy in your staff; who want to make an impact on your customers. So, I think it's- that switching to that investment portfolio mentality is key. And using the five ideals to create the conditions that will allow your staff top thrive within that.


Gene Kim (01:25:13):

That's awesome. All right, there's one more last thing I wanna talk about. And that is, uh, Sarah Molton in the Phoenix project. So, uh, she was certainly one of the most polarizing characters in the Phoenix project. Uh, she's the SVP of retail operations, and of course she returns in unicorn project. And not only does she return, she has a very powerful new ally, new board member from a private equity firm. (laughs) It's skeptical that technology could be- ever be a core at parts unlimited. And so instead he wants to break up the company and sell it off into pieces, optimizing for, uh, you know, value thesis of a growth thesis. Um, Peter you had shared something with me, uh, about your thoughts on Sarah. Which I found, again, incredibly provocative. Uh, tell me about what your reactions were about Sarah's ending.


Peter Moore (01:26:01):

Well, I thought it was- I thought it was great. You didn't throw her under the bus. Because everybody wants to throw the Sarah under the bus, because they're the enemy, if you will. They're the ones that don't want progress. They're the ones that don't think new thins are worth pursuing, et cetera, et cetera. You know, I think Sarah had some good motives. I think Sarah didn't really- I guess the way I'd phrase it is she wasn't really open to alternatives that actually could've helped her get what she wanted. But perhaps from a different point of view, or a different perspective. Um, and I think what happens in many companies that I'm involved in, is as long as you allow- as long as you treat Sarah as an adversary she will be an adversary. Okay? So, that software example I gave you earlier on, where we went into the chief revenue. The chief revenue officer and the CIO were adversaries prior to us making this change. Okay? And the FedEx example I gave you, the IT support teams and the business partners were adversaries before we introduced this change.So, the key is is to say, "Look it," and this isn't just turning the other cheek or- it's saying, "We have a common understanding of what we wanna do. And by the way we can do it much better together than we can fighting." And that was, you know, the punchline of the whole FedEx work we did was historically in that company over 40 years, no one- Both IT, and by the way, their business people went to finance separately to get funding. (laughs) Not together. And in 40 years, nobody got more than 25% of what they wanted. (laughs) But what came out of a two-day workshop in our business partners, we picked six projects that everybody agreed of we could only do six, and all six got funded.So, it's- what I liked about the fact that you just didn't discard her, but you said, "Look it." And- and they're there. And if you can't make it work with the Sarah alone, you're not gonna be successful.


Gene Kim (01:28:06):

Right. And I love that I had this observation, right? We can't dismiss the Sarah overall. In fact, we must, uh, if we can't work together with them we are absolutely in competition with them. So, uh, I think that's a beautiful way to-to frame reality. Uh, just one little side note. Um, one of my heroes, Elizabeth Hendrickson, uh, she recently, uh, left Pivotal. She was there for, uh, nearly a decade. You know, we were having a conversation about Sarah and she said, "Yeah, what is Sarah's background?" (laughs) Because all the characters they all have extensive kind of character backgrounds and resumes, and so forth. I didn't actually have one for Sarah. (laughs) And she was kind of a caricature villain. And, uh, you know, I think there's no doubt that she is probably an expert merchandiser. Uh, she's probably been burned by technology before. (affirmative) And we're kind of working on what does her bookshelf, uh, look like. I think she's great at strategy, but not so much a people person. She's not a great leader. (laughs)Her favorite book is probably, uh, "Who Moved My Cheese?" So stay tuned for more on Sarah. Well, uh, thank you so much to, uh , you both for the time today. And I'm so excited that you're both here together to share your unique perspectives with everyone on this podcast. Uh, Mik and Peter, could you tell everyone how they can reach you?


Mik Kersten (01:29:17):

Uh, they can find me on Twitter. It's @mik_kersten. Just Google for Project to Product for the book and to get in touch.


Peter Moore (01:29:26):

You can find me on LinkedIn, or you can email me at [email protected] woellce.com Lead the way!


Gene Kim (01:29:33):

Right. Thank you both.Thank you so much for listening to episode one. Up next, is episode two. Which is the entirety of Mik Kersten's 2019 DevOps Enterprise Summit presentation. Where he talks about his twenty year journey studying developer productivity. Which led him to writing his amazing book, "Project to Product." I know you'll enjoy it as much as I did.The latest IT revolution news. From publishing, "Agile Conversations," by Douglas Squirrel and Jeffrey Fredrick is coming out on May 12th. And from events, DevOps Enterprise Summit London is going virtual. Same dates, same times, same great people, same great speakers.




Conversations with experts about the important ideas changing how organizations compete and win.
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