Economies of Expertise

Access to talent worldwide, broadband connectivity, powerful collaboration tools, and fierce global competition are causing a recalibration of thinking about sources of economic advantage.  Traditionally, the key sources are associated with economies of scale and scope, so let me start by defining those:

Economies of scale: cost advantages gained from efficiencies when a firm produces a lot of the same product – when production increases the average cost per unit falls due to fixed costs being distributed across a larger number of units.

Economies of scope: cost advantages gained from efficiencies resulting when a firm produces a variety of products that draw on the same resources. For example, research & development, design or marketing costs being used across product lines, and not just one.

Are these still important?  Yes, absolutely!  But as the world around us changes, so must our thinking.

A prime candidate for being factored into the economic equation is economies of expertise, although you won’t find many references to this concept on the Internet.  I first came across the term in a blog posting by Rod Brown (http:investmentinnovation.wordpress.com) in which he summarizes a speech in Sydney by Michael Cannon-Brookes (IBM VP – Business Development, China and India). Some essentials of the speech are:

·         Work flows to places where it is done best

·         Economies of expertise describe firms that take advantage of skill sets wherever they are

·         The horizontalization of business needs collaboration to deliver maximum results

This isn’t about reducing costs by finding cheap labor overseas to perform low skill jobs. In a speech given by Glen Boreham, also of IBM, he says “Global sourcing . . . once purely a cost play . . . is now an expertise play.” 

One response to leveraging skill sets has been the creation of centers of excellence. These centers can be located where the skills are. IBM Asia has HR functions mostly in Manila, procurement in Shenzen, accounts payable in Shanghai, accounting in Malaysia, and help desk/customer services in Brisbane, Australia where there is a significant multilingual pool of expertise.

Locating a function where specific skills are advanced and abundant certainly can yield economic benefits – possibly lower salaries (although salary gaps between the developed and developing economies are closing all the time), but also economies of scope in that each specialist function provides services across businesses and product lines.  A concentration of skills will also generate higher levels of productivity and quality.

Before continuing, let me say that I see the economies I’m talking about here as being combinations of efficiency (producing results quickly with little wasted effort or resources) and effectiveness (producing the desired effect). You can do something efficiently, but without producing the desired effect. You can also do something effectively, but in an inefficient way.  It is the optimal combination of the two that generates powerful results.

 If we take the essence of economies of expertise to be: Taking advantage of skills sets wherever they are (which I believe to be correct), we can distinguish between at least three sources of economic benefit:

Individual Expertise (IE): Utilizing the expertise of a specific individual in completing a task most efficiently and effectively - no matter where that individual is located.  

Distributed Expertise (DE): Utilizing the expertise of two or more individuals - at different locations - in efficient and effective collaborative efforts to produce outcomes that no individual could have produced alone.

Concentrated Expertise (CE): Utilizing the combined expertise of a specialized, defined group efficiently and effectively across multiple business areas.

Accountability for achieving global economies of expertise lies principally with the Chief Learning Officer, but responsibility lies with other senior executives, managers, and project team leaders who make frequent decisions about the organization of work and leveraging of expertise.   Scale and scope economies must make room for another family member.   

Beyond Selfishness

Occasionally, I come across a piece of writing that makes me want to punch the air and shout, “Yes!”  That happened just recently when I read Professor Yochai  Benkler’s article – “The Unselfish Gene” in the July-August 2011 edition of the Harvard Business Review.  What Prof. Benkler does so well, is to counter the pervasive and pernicious view that we are all born selfish; that we are driven by a narrow rationality focused only on advancing our own material interests.

I first met this view of humankind – homo economicus – many years ago in undergraduate economics classes.  I remember telling my professor at the time that I thought that this was a highly reductionist and false assumption, and a very crude platform on which to base economic theory. But what professor listens to undergraduate views?

One consequence of the self-interested rationality theory is that when building human systems we assume the worst of everyone.  We develop incentive systems based simply on self-interest, the carrots and sticks approach. Prof. Benkler gives a number of examples where self-interest doesn’t adequately explain behavior – Wikipedia, Yelp, TripAdvisor, and open source software like Apache. The Web is full of cooperative activities that offer little in terms of personal gain.

As well as common examples, Prof. Benkler also points to growing evidence that cooperation is not an aberration.  One interesting study, showed that in experiments about cooperative behavior, about 30% behave selfishly.  About 50%, “systematically and predictably behave cooperatively. Some of them cooperate conditionally; they treat kindness with kindness and meanness with meanness. Others cooperate unconditionally, even when it comes at a personal cost. (The remaining 20% are unpredictable, sometimes choosing to cooperate and other times refusing to do so.)  In no society examined under controlled conditions have the majority of people consistently behaved selfishly.”

What this means is that most of our incentive systems based on rewards, punishments, and monitoring are optimized for only 30% of the population!  We need systems that stimulate intrinsic motivations, engagement, and a shared sense of purpose.  This doesn’t mean looking at the world through rose-colored spectacles; it means having a deeper, more complex, appreciation of human nature.    

I Wish There Were More Fools in the World!

What do I mean? Aren’t there enough fools in the world?

I can only describe some of the corporate cultures I’ve worked in as toxic.  For example, during the first week in my first job in the U.S., my manager gave me two guidelines for working effectively in the organization (a Wall Street firm):

1.       Trust no one, and

2.       Murder before suicide

I was expecting a different kind of new employee orientation, but at least it was honest.  It wasn’t one of those orientations where only the public ‘sweetness and light’ face of the organization is on display.  Medieval royal courts were not so dissimilar from some modern organizations – powerful monarchs surrounded by fawning courtiers wheeling, dealing, backstabbing, and manipulating to gain favors from the king or queen.  They are typically ‘survival of the fittest’, bullying cultures where anything goes and winner takes all. There is often, however, something missing from the modern organization – the Fool or Court Jester.

The Fool wasn’t in the Court simply to amuse – speaking truth to power was a dangerous job, but a necessary one. The Fool in Shakespeare’s King Lear continually points out the mistakes made by the King (until he disappears mysteriously in Act III).  Elizabeth I rebuked one of her Fools for not being severe enough with her, and it seems that James VI of Scotland was tricked by his Fool into abdicating his crown for a number of days. The Fool was making the point that the King’s habit of not reading documents before signing them could lead to unintended consequences.

We’ve seen the aftermath of toxic cultures in the recent banking crises, and the goings-on in the Murdoch media empire. 

Make sure your collaborations can tolerate a Fool – someone able to uncover and challenge unexamined assumptions and beliefs, prick overinflated egos, attack conformity for its own sake, and deflate preposterous delusions of grandeur.

We are award winners!

Stop press! I am delighted to announce that together with our client ArcelorMittal we have won an Excellence in Practice Award 2011 from the European Foundation for Management Development (EFMD).

Everyone at TMA World and ArcelorMittal is very excited by the recognition that this win provides to the transformational enterprise wide learning partnership that we have undertaken together.

When ArcelorMittal merged to form the world's largest steel company, among a number of competing priorities were two substantial learning and development challenges; the upskilling of its management population across the globe and the need to support organizational change and alignment on an enterprise wide basis.

Through our strong and ongoing partnership with ArcelorMittal's Corporate University and global learning and development network, together we've made significant progress in addressing these challenges. You can read the details of this partnership here.

More details about the awards are available here.

The Awards ceremony takes place in October, when it'll be time to dust off our dinner suits and ball dresses!

We are emotion workers as well as knowledge workers

• Human beings are great imitators and mimics, In groups - whether face-to-face or virtual - we often 'catch' the strong feelings of others and converge, or synchronize, emotionally. Emotions can be triggered by what we see, what we say, how we say it, what we don't say, what we do or don't do, and how often. There are multiple emotional triggers and reactions which make our emotional lives complex and tangled - rather like my photograph of trees on the left which itself can trigger a mix of emotions (or so I'm told). But because emotions are complex and messy doesn't mean we can ignore them. No matter how rational and objective we try to keep our professional activities, we all know that emotions impact our team decision making, engagement, actions, cohesion and performance. What's interesting is how unconcious emotional contagion can be.
  
  Very recently, Facebook data scientist Adam D.I Kramer analyzed postings by about 1 million English speakers and their roughly 150 million network friends in many countries. He found that people who used emotionally powerful words like 'happy', 'hug', 'sick' and 'vile' in their status updates generated similar emotions in later postings by their friends; friends were using more negative or more positive words (or at least fewer negative words) for up to three days after the original posting. Were people concious of this emotional contagion? Perhaps, some.
  
  Other research indicates that negative emotions are more powerful than positive emotions, and, of course the emotions of the leader of the can have great influence. Distance can reduce awareness of - or even caring about - our emotional impact on others on the team, which is a problem. Whether we lead or participate in virtual teams, we must become more aware that we are engaged in 'emotion work' - work aimed at creating a productive emotional climate.
  
  What does performing this 'emotion work' involve? Increased:

- Self awareness about our moods, our emotional triggers and their possible negative and/or positive impact on others

- Self-awareness about how our moods are demonstrated in our verbal, non-verbal and written virtual communications

- Ability to switch from one mood state to another - from negative to positive

- Awareness of how culture can influence the impact of emotional triggers

- Sensitivity to signals that emotions - positive or negative - are being transferred virtually and how to redirect, if necessary

- Caution about our judgement of other's ideas when under the influence of strong negative or positive emotions

- Resistance to the strong emotion of others

Some might say "Isn't this emotional intelligence stuff a bit passe?" That suggests emotional intelligence can be treated as a passing fashion, and that perhaps we need to get back to the real work of generating team performance - like setting up effective rules, processes and systems. Well, those are important, but they are only part of the performance equation. Emotions can be difficult, tangled, unpredictable, a real challenge; but it's in such challenges that profound opportunities for a team - and individual - development reside.

What Color(s) Describe Your Virtual Team?

Anyone who has read my book 'Where in the World is My Team?' knows that I identified six key performance zones for successful global teamwork

• Cooperation


• Convergence


• Coordination


• Capability


• Communication and


• Cultural Intelligence

While effective virtual and face-to-face operational performance is critical, I've been thinking lately of the underlying emotions that support or hinder levels of performance in these zones. Can a team be given insights into its emotional profile as well as its operational profile? The two are surely related.

Obviously, there isn't one positive and one negative emotion that impacts performance in each zone, but rather a range of positive and negative emotions that impact performance across the zones. The negative emotion of fear, for example, will degrade performance in all six zones.

People often associate emotions with colors, and although I am partially colorblind, I've decided that color (and associated emotions) might be a useful way to visualize a team's emotional profile.

And so, if we take four basic colours - Red, Yellow, Blue, and Green - we can categorize positive and negative emotions associated with each one. In general, the four basic colors would be associated with these high level emotions:

Red: Desire
Yellow: Energy
Blue: Confidence
Green: Well being

Positive emotions would be signified by a light shade of each color, and negative emotions by a darker shade. If we take the color Red, a positive emotion would be excitement, while a negative emotion would be aggression. With Yellow, a positive emotion would be happiness, while a negative emotion would be frustration. For Blue, a positive emotion would be calmness, and a negative emotion would be anxiety. A positive Green emotion would be growth, and a negative emotion would be stagnation.

By identifying the type and weight of positive and negative emotions on the team, we can go deeper into the underlying dynamics of what makes the team effective or ineffective in relation to the Six Cs.

I'll continue thinking such thoughts, and will update in later posts.

The 11th Mind

I recently came across the work of Fred Keeton who is Vice President for External Affairs and Chief Diversity Officer, Harrah's. Harrah's is the world's largest gaming company.

While Mr. Keeton ensures there is diverse representation of identity groups in the business, he also has another intent - cognitive diversity. His goal is to 'yield-manage' diversity to generate views radically different from the norm, and generate solutions to customer needs in new and compelling ways. He says in one interview, "The performance potential of any team depends upon the number and relevance of diverse cognitive tools it possesses".

The approach to collaboration at Harrah's can be summed up in the phrase - Diversity by Design. The term 'design' points to the fact that to yield-manage diversity a structured approach is needed, rather than simply putting a diverse team of people together and saying, "OK, show me the magic." The approach consists of the following steps:

1. Have a clearly defined business goal
2. Put together a diverse team with relevant dimensions of diversity considering the business goal
3. Create a safe environment - no fear of repercussion
4. Ensure all team member ideas are heard. The best idea wins
5. Ensure a formal structure and process to both synthesize and distill from the many ideas an actionable, scalable and sustainable solution

What struck me most was not so much the process, but an image (which, perhaps, tells you something about my own cognitive processing style). It is the image of the 11th mind.

Suppose you have a team of 10 diverse people, what the collaboration should produce is a collectively generated team member - the 11th member resulting from the active collaboration. A mind smarter than the other ten; the mind holding the best business solution.

To end with more words from Fred Keeton - "Rather than simply counting heads, our approach ensures that we make heads count."