Confronting the “Risk vs. Innovation Dilemma” Don Stanford

1. Confronting the“Risk vs. Innovation Dilemma” Don Stanford Cartoons courtesy of Scott Adams

2. My approach to this topic • Draw on my real life experience • Stick to basic principles • (most of which you are already familiar with) • Inject a little humor • (after all, process discussions can get pretty dull after awhile, especially after lunch) • Try and keep you awake

3. My Background • For 23 years (1979-2002) I was the CTO of a publically traded company that grew from 8 employees to over 5000 (GTECH Holdings) • Global leader in on-line transaction processing for the public gaming industry with 70% market share • Developed, deployed and operated large complex systems which handle $100’s of billion of public funds on behalf of governments in 30 States and 50 countries • Highly regulated and audited environment • High visibility and subject to large liquidated damages for non-performance

4. What did we do for a living? • Designed, installed and operated very large, secure transaction processing systems • Integration of: • Proprietary Transaction software • Proprietary Applications software • 3rd Party software, middleware • Various network technologies • Leased line, Packet, VSATs, UHF Dataradios • Custom designed POS terminals • Applications Software • Firmware • Custom Devices

5. My Qualifications as a “Process” Advocate • Absolutely None, Nada, Zilch! • I have committed all of the cardinal sins during my career, but managed to survive and learn from them all • I have plenty of scars from the arrows in my back • Now that I’m retired, it’s easy to talk about how it should have gone down!

6. Some Assumptions • For the purpose of this discussion Project and Product are interchangeable since in many cases they are one and the same thing • The customer may be either internal or external to the company • Participants are assumed to be acting in good faith and “trying to do the right thing” until explicitly proven otherwise

7. Innovation • We all like to think that we are Innovators • Innovation is generally associated with “New” and “Exciting” • New and Exciting is generally attractive to creative and motivated individuals • New and Exciting holds the potential to be attractive to customers • However, New and Exciting may not be universally valued by everyone involved since it is also associated with RISK

8. Risk • Risk is generally held in a negative context • Companies spend a lot of money “managing risk” • Risk makes management uneasy and uncomfortable • Risk needs to be “mitigated” • Risk needs to be assessed relative to possible gain • Risk is potentially dangerous for the customer and all other stakeholders

9. So, how do we innovate and reduce risk at every step along the way?

10. Note: Although projects involving innovation usually incur more risk, risk awareness and mitigation applies to almost any significant undertaking

11. Initiation Planning Execution Evaluation Correction Closure Enthusiasm Disillusionment Panic Search for the Guilty Punish the Innocent Reward the Uninvolved Let’s start by looking at the classic PM model

12. Initiation Planning Execution Evaluation Correction Closure Enthusiasm Disillusionment Panic Search for the Guilty Punish the Innocent Reward the Uninvolved Where is most of the risk? HERE! So that’s were we will focus most of our discussion!

13. Initiation – “Enthusiasm” • This is where new ideas and concepts are born….the fuzzy front end…. • Oftentimes constructed on the back of an envelope during lunch or in a bar after 3 Golden Margaritas • At first blush, looks and sounds exciting, profitable and a better way to deliver value • The elevator talk is convincing and quickly finds adherents who want to proceed! • Those who raise questions are quickly labeled as dinosaurs and told to get out of the way

14. The Business Case a/k/a “The Promise”

15. Over Promising / Under Delivering • Innovation Projects often “over sell” themselves at the get go • W set expectations too high before basic planning has even begun • We set the project up for distrust by management when unexpected challenges present themselves later on • We put the project team at greater risk and stress from the outset (they are in disbelief at what they have been asked to achieve)

16. What can we do here to minimize risk? • Conduct an intense evaluative process wherein the concept is discussed, examined, beat on, torn apart, improved and generally tested by both friend and foe • Construct a rational business case to assess value as fairly as possible (best, worst and in between) • Solicit and consider outside opinion from external stakeholders (customers, suppliers, consultants, etc.) • Perform all of the above in a timely and unbiased fashion without dampening the enthusiasm of the champions • After all, we don’t want to discourage Innovation!

17. Planning – Where trouble usually begins.. • The plan is sometimes based on emotion rather than reality • The plan often ignores obvious hazards and challenges and is based on unfounded assumptions • “Why are you being so negative?” • “Don’t confuse winning the job with doing the job” • The plan is incomplete and/or generalized and doesn’t adequately address specific details and issues • “We’ll figure it out as we go along” • The plan is pushed through in spite of warnings from knowledgeable sources • “We gotta have this for strategic reasons….” • “Don’t worry, this is going to be great”

18. Plan – “Disillusionment”

19. Planning – Risk Mitigation I • Requirements, Requirements, Requirements • Schedule, Budget and Resource allocation are all highly dependent upon Requirements, but oftentimes don’t wait for a rigorous requirements analysis • The Requirements Process needs to answer: • Market (Customer) – What are we solving and for whom and at what cost in what timeframe? • Function – How will it work? (Feature/Function Matrix, Use Cases) • Technical – How do we implement it?

20. Planning – Risk Mitigation II • Requirements review, agreement and signoff by all stakeholders is mandatory • Marketing, Engineering, Proj Mgmt, Finance, Manufacturing, Senior Mgmt., etc. • A less than rigorous requirements process almost always results in an unsatisfactory project that misses one or more of its benchmarks • Very importantly, requirements define a project’s Scope, and Scope drives schedule, budget and resources required • The people who plan the project should also be intimately involved in DOING the project

21. Risk Mitigation III • Reduce Complexity (KISS Principle) • Complexity is the enemy within • It undermines the best efforts of all players • It is hard to understand, even harder to fix

22. Execution The Death March Begins

23. Execution Risks – “Panic” • Inadequate resources • Wrong skill sets • Incomplete understanding of the requirements and objectives • Inefficient decision making process • Lot’s of Silos and Handoffs • Organizational discord • Bad Behavior – No Team ethos • The Email culture • Environmental and Geographical Issues • Lack of accurate and reliable feedback and data • No end to end accountability • Requirements Change, Scope Creep

24. Risk Mitigation in Execution I • Identify the best resources early on in the plan and ensure that they include the right skill sets • Remove the resources from their “departments” and create a multi-disciplinary team that is largely self managing and free of any departmental politics or agendas (eliminate silos and handoffs) • Provide the team with “leadership”, not management • Every project should have an executive sponsor whose job it is to clear roadblocks, eliminate bureaucracy and support the team • Ensure that the project bonuses are shared by the whole team and contingent upon clearly defined and articulated success criteria ( we succeed or fail together)

25. Risk Mitigation in Execution II • Bad behavior not permitted, no email flaming, no personal agendas tolerated • Maintain an open and honest line of communications between the team, the leadership and senior mgmt. • (no surprises, don’t shoot the messenger, listen, listen, listen…) • Ensure that there is clear shared accountability among the team members, their leader, and the corporate sponsor (brother’s keeper) • Guard the requirements with your life! Scope changes require approval by all stakeholders and appropriate changes to the plan! • Continuous evaluation of performance against the plan and adjustment to account for intangibles or the unexpected • Keep management informed! No surprises late in the game!

26. Risk Mitigation in Execution III • Distance is NOT your friend! • Provide a work environment where the team can operate and communicate effectively with minimal wasted time and effort • Put as many members of the team as possible in close physical proximity to each other • Eliminate lots of “meetings” since impromptu discussion between members should occur at any time • Avoid situations where geography and time zones separate the critical team members • Knock down the walls….physical as well as psychological Breaking down barriers, real or imagined, allows Innovation to thrive!

27. An Example of Workspacetransformation to improve project performance

28. Anti Collaboration Space

29. Knocking Down Walls! Ice cream party where employees got to participate in wall breaking in preparation for a workplace transformation

30. Going from this……

31. To This !

32. No High Walls

33. Easy to communicate No place to hide…..

34. Bad things can and will happen!

35. Anticipate the Unanticipated • Sh#t happens on every innovation project • Contingencies need to be part of the initial plan • Risk assessment must be updated and communicated regularly based on actual results • Don’t use this as an excuse, after all, you committed to managing the risk! • Don’t ever be afraid to ask for help….

36. Search for the Guilty

37. Evaluation – “Search for the Guilty” • By the time we get here, the project has either substantially succeeded or already failed to deliver on its promises • Rework at this stage is expensive but sometimes necessary • A comprehensive Project Post Mortem is almost always useful to identify the processes that worked and those that need improvement • Conducting a “witch hunt” is almost never productive and does nothing to improve future project performance

38. Correction – “Punish the Innocent” • Correction should be focused on improving the processes that were identified as having failed earlier in the project • Projects should be documented as their own Case Studies so that they can be used as training tools for the future • Institutional Memory is an incredibly powerful resource but it is only useful if it is recorded in a manner that is made accessible to current and future project leaders and team members

39. Closure – “Rewarding the Uninvolved” • Rewards must be bestowed on those who successfully achieved or exceeded expected results in projects, especially those involving innovation and risk • This sends a clear signal to the organization that taking on risk and controlling it while achieving extraordinary results is a cherished core value • It may even get the “uninvolved” involved in the future

40. Final Thoughts • Keep the project team led, lean, mean and focused on the mission • Run interference for them so that they are not distracted or frustrated by bureaucracy, politics, etc. • Keep them “together”, mentally and physically • Base their rewards on the collective achievement, not individual heroism • Celebrate the small victories along the way • Constantly communicate with all stakeholders • Have some fun along the way…..

41. The “Big Dig” (Boston) Denver Int’l Airport Windows OS (all versions) The Chunnel Boeing 777 The Macintosh and Mac OS The iPod (all versions) My List The UGLY The Elegant

42. Thank you….. Questions?