Thursday, November 20, 2014

Reading :: The Tree of Knowledge

Tree of Knowledge
By Humbert R. Maturana and Francisco J. Varela

Jeff Susna recommended this book to me on Twitter, and later pointed me to this talk, in which he applies the book's concepts to cybernetics. That talk is more valuable than this review will be, I suspect, so definitely take a look.

Are you back? Okay. As the subtitle suggests, this book is about "the biological roots of human understanding." The authors, who are both biologists, seek to provide a discussion of thought and perception that is rooted in biology. But the book is no dry biology textbook—it's full of accessible illustrations, sidebars, and metaphors that help us to grasp tricky concepts.

The central concept is that of autopoietic organization: for instance, in cell dynamics, a "cell metabolism produces components which make up the network of transformations that produced them" (p.44). This network of transformations is limited by a boundary—a membrane. So the two aspects of this unitary phenomenon are Dynamics (metabolism) and Boundary (membrane), each of which produces conditions for the other (p.46). "The most striking feature of an autopoietic system is that it pulls itself up by its own bootstraps and becomes distinct from its environment through its own dynamics, in such a way that both things are inseparable" (pp.46-47). And they add: "Living beings are characterized by their autopoietic organization. They differ from each other in their structure, but they are alike in their organization" (p.47).

What's the difference between organization and structure? In a sidebar, the authors explain that "Organization denotes those relations that must exist among the components of a system in order for it to be a member of a specific class. Structure denotes the components and relations that actually constitute a particular unity and make its organization real" (p.47).

Speaking of structure—in the sense the authors are using the term—the book's structure takes us from the cell level to the level of human knowledge. Since I'm not planning to recapitulate the entire book, I'll skip the next chapter (on history, reproduction, and heredity) and get to the chapter on multicellulars, which describes the phenomenon of structural coupling (p.75). In this phenomenon, two or more autopoietic unities are placed in interaction, becoming the source of each others' interactions: "This means that two (or more) autopoietic unities can undergo coupled ontogenies when their actions take on a recurrent or more stable nature," including "reciprocal perturbations." And "The result will be a history of mutual congruent structural changes as long as the autopoietic unity and its containing environment do not disintegrate: there will be a structural coupling" (p.75). (Side note: I can see the clear influence of autopoiesis on John Boyd's OODA loop.)

Speaking of disturbances, the authors go on to argue that "the changes that result from the interaction between the living being and its environment are brought about by the disturbing agent but determined by the structure of the disturbed system" (p.96). By analogy, they point out that "breakdowns in man-made machines reveal more about their effective operation than our descriptions of them when they operate normally" (cf. Latour on black-boxing here).

Let's skip a lot of good stuff in the interest of the review. By Ch.8, the authors have worked their way up the ladder to social phenomena—although they're still dealing with insects and birds. "We call social phenomena those phenomena associated with the participation of organisms in constituting third-order entities" (i.e., structural coupling across organisms rather than across cells), and "As observers we designate as communicative those behaviors which occur in social coupling, and as communication that behavioral coordination which we observe as a result of it" (p.195). Given what they know about structural coupling, they conclude (as most of us in rhetoric have) that "there is no 'transmitted information' in communication" (p.196)—that is, the abstraction of information is not a thing to be transported. "The phenomenon of communication depends on not what is transmitted, but on what happens to the person who receives it" (p.196). (Again, cf. Latour on the difference between the diffusion model and the translation model.)

The authors also discuss another thing in this chapter: "By cultural behavior we mean the transgenerational stability of behavioral patterns ontogenetically acquired in the communicative dynamics of a social environment" (p.201).

Eventually, we get to the chapter on linguistic domains and human consciousness. Here, although the insights are based on those of the previous chapters, we don't get many surprises from a contemporary rhetorical standpoint. "Language is an ongoing process that only exists as languaging, not as isolated items of behavior" (p.201)—yes. "What we say—unless we are lying—reflects what we live, not what happens from the perspective of an independent observer" (p.231)—sure. "[W]e maintain an ongoing descriptive recursion which we call the 'I.' It enables us to conserve our linguistic operational coherence and our adaption in the domain of language" (p.231)—okay. (Side note: My interest piqued, I googled "Deleuze Maturana" and sure enough, Deleuze & Guattari's A Thousand Plateaus is in dialogue with these ideas.)

Finally, we get to the last chapter, "The Tree of Knowledge." See Jeff Sussna's video (link above) for the implications. The chapter is on the ethics that the authors say emerge from this world view. A few sentences: "we have only the world that we bring forth with others, and only love helps us bring it forth" (p.248); "We affirm that at the core of all the troubles we face today is our very ignorance of knowing" (p.248). And "The knowledge of knowledge compels. It compels us to adopt an attitude of permanent vigilance against the temptation of certainty" (p.245).

And here, to be blunt, I have trouble following the argument. Yes, one could take the previous chapter's lessons as leading to mutual understanding, to rejecting dogmatism in favor of recognizing and honoring each other's viewpoints, and as (I guess) seeing love as the animating feature that brings the world forth. But one could also absorb this insight into the knowledge of knowledge, then use it to compete more effectively, to better understand one's enemy in order to cut him off from his knowledge of his environment, to confuse and disorient him in order to cause his alliances and will to disintegrate. This use seems just as applicable, and certainly seems to have precedent in some of the examples used across chapters (cells, organisms). As I noted earlier, this use was the one that John Boyd applied, and through his work, it has become a highly effective component of military strategy as well as business strategy.

In any case, the book was highly interesting and useful. As you can tell, between the time I read it and now, I've read other books, and these other ideas are overlaid over my second reading. My sense is that it'll become even more interesting on subsequent readings. Definitely pick it up.

Reading :: Innovation Prowess

Innovation Prowess: Leadership Strategies for Accelerating Growth
By George S. Day

When I began reading this slim (107pp) book, I was initially unimpressed. The book is about how to accelerate your firm's organic growth rate, specifically by increasing the "innovation prowess" in your firm. But as I read the rest of the book, I realized how much valuable thinking was packed into this slim little volume.

"Innovation prowess is gained by combining strategic discipline in growth-seeking activities with an organizational ability to achieve the aspirations and intentions of the growth strategy," Day explains. Together, these allow a firm to grow faster and sustain growth more successfully. And they are sustained by three reinforcing elements:

  1. An innovation culture that encourages risk taking and exploration;
  2. The capabilities exercised through innovation processes for acquiring deep market insights, mastering the supporting technologies, and carrying out innovation activities better than their rivals; and
  3. A configuration of the organization and incentives that support and encourage growth-seeking behavior. (p.7)
Day depicts innovation prowess as a process that involves 1. setting the growth strategy, 2. expanding the search for growth opportunities, and 3. converging on the best opportunities—each of which involves feedback loops (p.11). 

To achieve innovation prowess, he says, "the management team has to agree on their beliefs and assumptions" (p.17) and avoid letting "small-i" innovation replace "BIG-I" Innovation in their firm (p.18). He provides several figures to help us conceptualize the feedback loops involved. For instance, figure 1-5 suggests how to integrate inside-out and outside-in thinking to ideate based on changing constraints (p.26). Figure 1-6 illustrates a continuum between inorganic growth ("buy") and organic growth ("build") (p.29), mapping growth mechanisms such as closed innovation, open innovation, internal incubators, external ventures, and mergers & acquisitions. Figure 2-1 illustrates 14 growth pathways, categorized as related to the value proposition (customers, offerings, value profile) or the business model (value-creating systems, value-capturing systems) (p.39). Figure 2-3 illustrates customer experience mapping (p.48)—perhaps the most useful illustration in the book. Figure 4-1 describes three organizational elements of innovation ability: capabilities, configuration, and culture (p.81). 

In each of these figures, Day helps us to conceptualize and categorize aspects of the firm that can lead to an innovation culture. The result is a well-developed, well-explained overview with great practical value. If you're interested in innovations, innovation culture, or value propositions, take a look.

Reading :: Crossing the Chasm

Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers
By Geoffrey A. Moore

"Prior to entering the world of high tech," Moore writes in the Acknowledgements of this book, "I was an English professor" (p.xix). I emailed this quote to one of my PhD students, who is thinking about taking a nonacademic career path, noting that there is indeed hope of success and fulfillment outside the halls of academia.

Certainly Moore has achieved a lot: the book, originally published in 1991, was a Businessweek bestseller and has at least three editions. The one I read was the 2002 revised edition, and it's still full of examples from the late 1980s, but it's still useful for all that. Essentially, Moore argues that in the technology adoption lifecycle, there's a big gap between early adopters and mainstream adopters. The gap—the "chasm" of the title—is tricky to negotiate because it's very difficult to transition to mainstream customers while still holding onto the early adopters, who are key evangelists.

Moore's basic approach is to carefully segment the market so that your product is the only one serving that segment—to be the big (or only) fish in the small pond, to be a de facto monopoly (p.108). To do this, he provides a few different conceptual tools.

The first is the Whole Product Model (p.109), a set of concentric circles that represent perceptions of the product. These are labeled (from interior to exterior): generic product, expected product, augmented product, potential product (p.109). The circles represent a progression from the early adopters to the later ones.

The second is the Simplified Whole Product Model (p.113), in which the generic product is surrounded by segments labeled: standards and procedures, additional software, additional hardware, system integration, installation and debugging, cables, training and support.

As a side note, I was uncomfortable with Moore's metaphors in this chapter, entitled "Assemble the Invasion Force." He describes the task of entering a competitive market as "trying to invade Normandy from England, and the installed market leader is playing the role of the Nazi forces" (p.117). Entering a market without competition is "as if one had landed on a new continent and decided to set up shop selling wares to the natives" (p.117).

Let's get to the third model, the Competitive-Positioning Compass (p.135). It's basically a matrix in which the x-axis is generalist v. specialist and the y-axis is supporters v skeptics. The resulting quadrants are: technology enthusiasts (specialist/skeptics), visionaries (specialist/supporters), pragmatist (generalist/skeptics), and conservative (generalist/supporters). You traverse the matrix in that order, and when you cross from specialist to generalist, you are crossing the chasm, "a transition from product-based to market-based values" (p.135). Moore provides a table contrasting the two sets of values (p.137).

Perhaps because of his background as an English professor, Moore describes the positioning of the product in terms of claims and evidence (p.152). He argues that your claim must pass the elevator test—that is, if you can't articulate it in an elevator pitch, it's not ready (pp.152-153). So he provides a good template for formulating this kind of claim:
For (target customers—beachhead segment only) 
Who are dissatisfied with (the current market alternative
Our product is a (new product category) 
That provides (key problem-solving capability). 
Unlike (the product alternative
We have assembled (key whole-product features for your specific application) (p.154)
And the claim must be backed by evidence, so he provides a beautiful little matrix on how to assemble it (p.157). This evidence is laid over the Competitive-Positioning Compass, with quadrants now labeled by types of evidence: technology (specialist/skeptics), product (specialist/supporters), market (generalist/skeptics), and company (generalist/supporters).

And here's where I think the real value of the book comes in. At its heart, Crossing the Chasm is a rhetoric handbook for articulating a value proposition. At this point in the book, Moore is helping people to articulate their claim in a specific format and provide different types of evidence for it. If you're interested in entrepreneurial communication, writing, and argumentation, it's at this point that the book is clearly worth the price of admission.

Reading :: Value Migration

Value Migration: How to Think Several Moves Ahead of the Competition
By Adrian J. Slywotzky

Suppose you're an entrepreneur who has just come up with The Next Big Thing. Maybe you have followed blue ocean strategy and discovered a new market to exploit, one that has no competition. Nice work! It's as if you're printing money.

But over time, others see that you have a good thing, and they start competing in the same space. Competition means that your margins become thinner and you have to work harder for each customer. More than that, others are innovating too, because your "new" business model has become established. "Value migrates from outmoded business designs to new ones that are better able to satisfy customers' most important priorities" (p.4).

What do you do?

In this 1996 book, the author discusses value migration. "A business design can exist in only one of three states with respect to Value Migration: value inflow, stability, or value outflow" (p.6). This progression has existed for a while, but "Sometime in the 1980s, the game changed, the pace quickened" (p.8). The "new game of business," Slywotzky says, is founded on a different set of assumptions: not revenue but profit; not share of market but share of market value; not product power but customer power; not technology but business design (p.11). So the new task is to locate value and predict where it will move—toward new activities, skills, and business designs (p.12).

To help you locate value and predict where it will move, Slywotzky provides four heuristics aimed at helping you to map changing customer priorities; identify new business designs; compare business designs; and build new business designs to capture value growth (p.84). Much of the book focuses on how to work through these heuristics, and it illustrates the heuristics with 1996-era case studies.

But it also points out other changes. For instance, Slywotzky argues that "in the age of manufacturing, the sales force was the dominant go-to-market mechanism"; if you wanted to sell something, you would rely on a large, disciplined sales force (p.208). But "in the age of distribution, value has shifted to low-cost distribution and high-end solutions" (p.208): the traditional sales force is bypassed, and enterprises either go to low-cost distribution models (Dell's direct-to-customer model as well as bulk sales such as Costco) or high-end solutions (EDS' and Hewlett-Packard's senior-level selling).

Slywotzky closes by arguing that the relative power of customers influences the direction in which value will flow: a unique product gives the balance of power to the supplier, while a pure commodity gives it to the customer (p.253).

In all, I found this to be an illuminating book. The examples are now almost two decades out of date, but the fundamentals are solid and we can easily apply the lessons to modern cases. If you're interested in business model design or value, take a look.

Reading :: Entrepreneur's Toolkit

Entrepreneur's Toolkit: Tools and Techniques to Launch and Grow Your New Business
By Harvard Business Essentials

I picked up this book as a tool for better understanding entrepreneurship. It does a serviceable job of this, although it's less heuristic-driven and therefore less accessible than other books on entrepreneurship I've read. The book aims to be comprehensive, so it covers topics such as:

  • Self-diagnosis: Are you cut out to be an entrepreneur?
  • Finding and evaluating the opportunity
  • Organizing the enterprise (Should it be a sole proprietorship, partnership, C Corporation, S Corporation, etc?)
  • Building a business model and strategy
  • Writing a business plan
  • Financing the business
  • Angels and venture capitalists
  • Going public
  • Enterprise growth
  • Keeping the entrepreneurial spirit alive
  • Harvest time (i.e., cashing out)
This scope is appropriate for providing a broad overview of entrepreneurship. However, some of the details get lost. For instance, readers get to learn a lot about how to organize the enterprise, but they learn comparatively little about the process of designing, ideating, and iterating the value proposition. Similarly, the chapter on writing a business plan discusses some of the main sections, but doesn't provide a model to follow or analyze.

If you're looking for a broad overview of entrepreneurship, this may be the book for you. But you'll want to supplement it heavily with other sources. 

Reading :: Value Proposition Design

Value Proposition Design: How to Create Products and Services Customers Want
By Alex Osterwalder, Yves Pigneur, Greg Bernarda, and Alan Smith

I just reviewed Osterwalder and Pigneur's Business Model Generation, which I thought was terrific, although so simply presented that the style may be offputting to some readers. Its sequel, Value Proposition Design, takes things to a new level—on both fronts.

This book introduces a new heuristic, the Value Proposition Canvas (VPC), which is composed of the Value Map and the Customer Profile. These components draw on a number of other tools and frameworks with which readers may be familiar, such as Design Thinking and Jobs to be Done. And the book leads readers through the basic steps: Canvas, Design, Test, and Evolve. The authors do a good job of discussing how to develop a value proposition, what its components are, and how to evolve it in response to feedback.

But the authors also take things to a new level in their illustrations, which (to my eye) resemble Fisher-Price's Little People:

I'm not gonna lie: I had a hard time taking this book seriously because of the disturbing illustrations, which are never more than one page away. These illustrations are (I suppose) meant to make the subject matter more accessible. But I had a hard time getting past them. Not only do they make the book seem childish, they also seem bizarrely sinister. Customers are often represented as disembodied heads (top photo), as anatomically correct human hearts ripped from the bodies of living customers (bottom photo), as disembodied heads in a large beaker (cover), as victims menaced by furry monsters (p.118), and as marionettes animated by other stakeholders (p.50). After pages of these Peanuts-Lovecraft hybrids, I began to feel a little paranoid.

Is the book useful? Sure: I think the VPC and the integration with Design Thinking and JtbD are helpful. Will I skim it again? Sure, after the nightmares stop. Would I use it in a class? No. I just don't think the students would be able to take it seriously. However, I might find a way to introduce the VPC when I teach students about the Business Model Canvas. 

Reading :: Business Model Generation

Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers
By Alexander Osterwalder and Yves Pigneur

The Business Model Canvas (BMC) is a lean, rapid alternative to writing a business plan—basically a heuristic that guides the budding entrepreneur through the complex argument s/he has to make in order to develop a viable business model. Although it's been popularized by Steve Blank, the BMC is credited as originating with this "handbook for visionaries, game changers, and challengers." But the BMC is not the only heuristic in this lean, readable, and valuable handbook. If you're an entrepreneur, you'll find a lot of accessible insight in these pages.

I have called it "readable" and "accessible"; some readers, especially academics, may find the style off-puttingly simple. But push past that. The book is written so that readers can pick it up, read just part, then go do. Although it is arranged in a specific arc, I could see people picking it up at almost any point and finding it to be valuable. But let's go through the arc.

In this arc, the authors discuss the following:

  1. Canvas
  2. Patterns
  3. Design
  4. Strategy
  5. Process
  6. Outlook
Each contributes to the development of a business.

Canvas is the starting point: it provides "a shared language for describing, visualizing, assessing, and changing business models" (p.12). Essentially, the authors assume that you already have an innovation in mind, and now you will build a business around it. A business model, they say, consists of "nine building blocks that show the logic of how a company intends to make money," covering "the four main areas of a business: customers, offer, infrastructure, and financial viability" (p.15). These building blocks all interact, and putting them on a canvas—a heuristic that is meant to be collaboratively assembled—allows the entrepreneur to see their relationships and address weaknesses. These building blocks include:
  1. Customer segments: "the different groups of people or organizations an enterprise aims to reach and serve" (p.20)
  2. Value propositions: "the bundle of products and services that create value for a specific customer segment" (p.22)
  3. Channels: "how a company communicates with and reaches its Customer Segments to deliver a Value Proposition" (p.26)
  4. Customer relationships: "the types of relationships a company establishes with specific Customer Segments" (p.28)
  5. Revenue streams: "the cash a company generates from each Customer Segment" (p.30)
  6. Key resources: "the most important assets required to make a business model work" (p.34)
  7. Key activities: "the most important things a company must do to make its business model work" (p.36)
  8. Key partnerships: "the network of suppliers and partners that make the business model work" (p.38)
  9. Cost structure: "all costs incurred to operate a business model" (p.40)
By laying these out in a canvas, the authors allow us to see the relationships spatially. The left side of the canvas focuses on efficiency, while the right side focuses on value (p.49). 

In the next section, Patterns, the authors discuss three core business types (product innovation, customer relationship management, and infrastructure management) in terms of three aspects (culture, competition, and economics) (p.59). They use the BMC to parsimoniously describe different business cases and patterns, including free offerings, fremium services, and open business models. This section is lengthy, perhaps overly so; you can find a summary on pp.118-119.

In the following section, Design, the authors discuss design techniques and tools "that can help you design better and more innovative business models" (p.125). These tools include customer insights (including another heuristic, the empathy map), ideation (including SWOT analysis), visual thinking (including affinity diagrams, although they don't use the term), prototyping, storytelling, and scenarios—familiar tools to those who have been involved in UX/UI, participatory design, and related approaches. Essentially, the authors use these tools to increase customer empathy and adopt the customer's perspective. 

The Strategy section introduces another set of heuristics. The Business Model Environment describes "context, design drivers, and constraints" (p.200) by showing four categories characterizing the business environment: key trends, market forces, macroeconomic forces, and industry forces (p.201). Here, they return to the SWOT analysis to assess the business model—but this time, they overlay SWOT over the BMC, providing a set of questions (pp.217-223) to guide the SWOT. 

They then turn to blue ocean strategy, declaring that the BMC is a "perfect extension" of it (p.226) and using one example from Blue Ocean Strategy, that of Cirque du Soleil, to illustrate how BOS and the BMC can complement each other. 

In the last section, Process, the authors summarize the entire process of developing a business model. As you may have guessed, the process does not follow the order of the sections. They describe the process as 
  1. Mobilize (Setting the stage)
  2. Understand (Immersion)
  3. Design (Inquiry)
  4. Implement (Execution)
  5. Manage (Evolution)
and they helpfully provide tools and page numbers under each stage. Naturally, 1-3 make heavy use of the Design section, while the BMC is evolved throughout. 

Two more things. First, the authors also discuss "beyond-profit business models" (p.264), essentially what is elsewhere called social innovation. That is, the principles laid out here can be applied not just to businesses but also to nonprofits.

Second, the authors briefly discuss how the BMC and other heuristics are translated into a formal business plan (pp.268-269). This small section reminded me of my favorite proposal writing book, which similarly helps people work through various heuristics in order to assemble a complex argument. However, the authors don't take the next step and demonstrate the concrete steps of writing the business proposal. 

In all, I found this book intriguing and very useful. As a professor of rhetoric and writing, I'm interested in how people assemble complex arguments, and this book essentially helps budding entrepreneurs to understand that argument-building process. If you're interested in becoming an entrepreneur, or just understanding how entrepreneurs write and communicate, definitely take a look.