Triangulation refers to a dysfunction within a team, where team member A complains about team member B to the team leader rather than to team member B directly, so that the team leader is forced to be the go between for the two. Triangulation is a form of corporate infantilism.

Forgiveness: The Intelligent Choice

However, the concept of free software is similar to the concept of free air, free water, free lumber, and free healthcare. When there is a vast quantity of it, it seems free. When we depend on it, we believe it should be a human right.  And software is sufficiently abstract and conceptual that it tempts us to believe it might indeed be free.

Software can be thought of as the fruit of a tree. Often, a tree yields fruit seemingly for free. Yet, we know that significant energy and resources go into the production of fruit, and that environmental conditions have an enormous effect on the yield. Thousands of years of agriculture have taught us how to nurture a tree, how to provide optimal environment and optimal quantities and quality of energy and resources to produce the ideal fruit. There have been countless trial-and-error experiments, including farms that went bankrupt due to mismanagement of environment, energy, and resources.

I submit that agriculture is far ahead of software development (agri-culture ahead of cyber-culture) in this regard.

Trees continue to reproduce by yielding fruit without human intervention, and this can be a source of wonder, but we no longer believe that fruit, especially top-quality edible fruit, is “free”.

Economic factors necessarily create significant costs along the line between conception and productive use of everything that was thought to be (or that was thought ought to be) free, including software. These costs include distribution, packaging, marketing, installation, customization, operation, and maintenance. Human beings necessarily perform some manual activities from conception to productive use of software. There are costs for providing them with life’s necessities.

It is tempting to believe that these costs are “external” or negligible, but it is foolish to believe so. They are no more external or negligible than the costs of providing fertilizer and water to trees in a farmer’s orchard.

I am not saying that free or open-source software should not exist. Indeed, buyers and sellers must question and justify payment for software when open-source equivalents, meeting the same requirements, are freely available. But by understanding why and how those equivalents exist, we can make this justification rationally. (Note: “buyers” does not refer only to end-users of software, but to developers who integrate software–operating systems, databases, web servers, etc.–into new products.)

When we engage in test-first development, it is as if we are writing the rules in a way that cannot be forgotten. When we write code, and the tests pass, proving that the requirements and constraints have been met, the code possesses elegance and beauty.

There is a tremendous and valuable freedom in being able to make large-scale changes in code without breaking any rules. We frequently find that rules are too strong. They have sufficient exceptions that they must be weakened.

We frequently find that rules are too weak. They allow undesirable effects to occur.

There is also satisfaction in understanding that the rules (tests) are written by us. We are free to change them if requirements change, but there is value in writing them nevertheless.

This is why the IT infrastructure must

• first support and automate the existing process. This avoids knee-jerk wholesale rejection of change. It creates the “early win” that makes an organization receptive to changes.
• also support the reengineered process. Otherwise, there is no destination for the vehicle that is the IT infrastructure.
• also support a smooth transition from the existing to the reengineered. Discontinuous transitions are traumatic and destroy good will.
• also support the transition from the reengineered process to the existing one. The ability to press “undo” makes people more receptive to the risks of change.

The late Michael Hammer, in his seminal Harvard Business Review article on BPR, wrote

Reengineering cannot be planned meticulously and accomplished in small and cautious steps. It’s an all-or-nothing proposition with an uncertain result. Still, most companies have no choice but to muster the courage to do it.

I disagree with this statement. Innovation, including process innovation, is less about revolution and more about evolution.

Reengineering Work: Don’t Automate, Obliterate

CSS Zen Garden: Interesting imagery all along the side makes you want to look further down.

CSS Zen Garden: Images at the top of each sidebar section create a 3D effect.

• Direct additional revenue. “We get paid for doing this.”
• Cost reduction. “We spend little or nothing on this and/or we stop spending after doing this.” Value is subtracted instead of added whenever your costs (investment) exceed your revenue (return).
• Immediacy. “We benefit sooner rather than later.”

Indirect additional revenue also adds value, but adds risk that must be managed. Therefore, the following are value additions that go together:

• Indirect additional revenue. “We could get paid for doing this.”
• Risk reduction. “Make it more likely that we will benefit.”

The ideal product development effort adds value in each and every way. You build something that multiple customers could use, thereby ensuring potentially large indirect revenue at the (lesser and limited) cost of producing the first instance. By finding a customer who will pay for the first instance, you derive direct revenue, and you simultaneously reduce the risk that a 2nd customer will pay for the second instance.

Custom development does add value in the form of immediate direct additional revenue. Risk is minimal, being limited to risk of non-payment by the customer. Cost could be high, but a minimal margin is easy to earn. However, indirect additional revenue is, by virtue of it being “custom” development, zero.

A manufacturing business will generally have a fixed investment in a factory with fixed production capacity. The business will be wary of adding capacity. Production capacity is always associated with fixed costs (maintenance, rent, etc.). When business is slow, machines in the factory become idle. This is what is meant by excess capacity. The fixed costs continue, and this rapidly erodes the value of the business. Similarly, in a high-tech business, the development organization is associated with fixed costs (salaries and benefits). To avoid “excess capacity,” high-tech businesses will be wary of hiring additional developers.

The choice between custom development and product development is analogous to the choice between a factory producing a low-price (low-value) product or a high-price (high-value) product. Value is maximized if the factory chooses to produces the highest-price product whenever possible. Similarly, value is maximized if the high-tech business chooses product development whenever possible.

In both cases, the choice may not always be available. For example, the factory may be forced to commit itself for a long period of low-value production. During that time, it may miss opportunities to produce high-value products. Similarly, a high-tech business may be forced to commit itself for a long period to custom development. During that time, it may miss product development opportunities.

Options, by definition, ensure choice. A business that possesses options can exploit opportunities. Therefore options have value and the business may have to pay for them. For example, a factory may keep some capacity in reserve. This gives it the option to produce high-value products when opportunities arise, at least in small runs. The cost of the option is the fixed cost of this capacity.

High-tech organizations often have R&D departments actively exploring new opportunities for product development. They represent options for the business. (Regrettably, as articulated in The Innovator’s Dilemma, businesses do a poor job of exercising options, preferring to continue with low-value production at the expense of high-value opportunities.)

Sales personnel are typically given incentive in the form of commission, meaning a portion of direct additional revenue. In an attempt to add value by ensuring immediate direct revenue, the sales organization of a young, immature company will typically close deals without regard to cost.

While at such a company, I raised this issue to the VP of Sales. I said, “I question revenue that comes attached with a high cost.” He smiled knowingly and answered, “Milind, even so, revenue solves a lot of problems.”

I later asked the CEO, “Why do you de-value our products by giving them away for free, while over-valuing our professional services by charging a premium?” His answer was, “Because if we valued things correctly, we would risk losing the deal entirely.”

This is why at some companies, there is a close relationship between sales and professional services. The professional services organization is less likely to walk away from a deal.

Another trap companies fall into, one which they rarely survive, is developing a product in a vacuum and then trying to sell it.

It is a difficult discipline to discover a product defined by a market and then deliver it to that market. It requires your sales organization to sell your product only, to walk away from deals that come at a high cost.

“Toyota execs believed their system would turn bad workers into good ones.”…and it did.

[MP3 for download]

Now that my company has some successful projects behind it, I’m going to do the following:

1. List the business problems we solved in our projects. I’ll keep the list in the 5-10 range.
2. Make each solution a column in a spreadsheet
3. Go through my contacts: 1,491 in SalesForce.com and 560 in LinkedIn. (The latter are more likely to be fresh and up-to-date.)
4. Make each contact a row in the spreadsheet
5. Note which contacts might be interested in which solutions. “Interested” means they have the same or similar problem and would pay for a solution.

This will give me qualified leads. This is a time-consuming exercise, but I think it is valuable for a number of reasons:

• I will have to carefully articulate my solutions. If I am too general, then lots of people will be very mildly interested (excessive false positives). If I am too specific, then people who would benefit from them will not realize it (excessive false negatives).
• I’ll re-visit (initially, only in my mind) people I have not met in a long time. I may spot patterns that suggest particular marketing/promotional activities.
• If I get a lot of qualified leads, that’s always a good thing.
• If I get very few qualified leads, well at least I know where to focus!

Bill Gates

Well, I’ve gotten a lot of great advice from Warren. I’d say one of the most interesting is how he keeps things simple. You look at his calendar, it’s pretty simple. You talk to him about a case where he thinks a business is attractive, and he knows a few basic numbers and facts about it. And [if] it gets less complicated, he feels like then it’s something he’ll choose to invest in. He picks the things that he’s got a model of, a model that really is predictiv and that’s going to continue to work over a long-term period. And so his ability to boil things down, to just work on the things that really count, to think through the basics–it’s so amazing that he can do that. It’s a special form of genius.

…Warren is so nice to everybody–how does he say no in a nice way? Or how does he think about priorities and have that explicitly in mind? And he turns down an unbelievable number of things, and yet everybody feels great about it. His grace in talking to people where he’s always saying, “You know, you probably understand this better than I do, but here’s how I messed it up when I first got involved in this.” You know, that’s a special talent, and I do find myself thinking, Hmm, how would Warren say this in a friendly fashion?

There was a case at the annual meeting where somebody asked a question about should you sell the stocks that have gone up and keep the ones that have not? And he sort of said, “No, you look at the value of the business.” and then Charlie [Munger] added, “He’s telling you your conceptual framework is all wrong.” Which is in fact what the answer had been, but there wasn’t one element of, “Hey, dummy…”

Jim Sinegal, Co-founder and CEO, Costco Wholesale

…[FedMart’s] founder, Sol Price, taught me a lesson that was pretty simple, but also true: If you’re going to go to the trouble of hiring someone, it’s because you can’t do the job yourself, so you better show them how you would do it.

Tory Burch, Co-founder and Creative Director, Tory Burch

When I worked [at Ralph Lauren], first in public relations and then in advertising as a copywriter, I learned the importance of having a complete vision for the company, from product to marketing to store visuals. My company is an extension of me, so when I designed my stores I wanted people to feel that they were in my home.

 Scott Boras, Sports Agent, President, Boras Corp.

…I had hired my formar law professor…He said that if you are really effective at what you do, 95% of the things said about you will be negative. Keep your head on straight, don’t get emotional, take the heat, and just make sure your clients are smiling.

Colin Powell, Former Secretary of State, Retired Four-Star General

There was a brand-new second lieutenant who was very ambitious and wanted to be a general. One night at the officer’s club the young officer spotted this old general sitting at the bar, and he went up and said, “How do I become a general?” And the general answered, “Son, you’ve got to work like a dog. You’ve got to have moral and physical courage. There may be days you’re tired, but you must never show fatigue. You’ll be afraid, but you can never show fear. You must always be the leader.” The young officer was so excited by this advice. “Thank you, sir,” he said. “So is this how I become a general?” “No,” said the general, “that’s how you become a first lieutenant, and then you keep doing it over and over.” Throughout my career, I’ve always tried to do my best today, think about tomorrow, and maybe dream a bit about the future. But doing your best in the present has to be the rule. You won’t become a general unless you become a good first lieutenant.