Host Intro (Gene Kim)

This gets to our last speaker, which is Jon Smart. I met him in 2016 at our first Enterprise, I do not know if we called it DevOps Enterprise Summit back then, in London, when he headed up the ways of working at Barclays, a bank founded in the year 1690.

Jon had this incredible reputation of doing things that were very different than the traditional norms there, and inside of an organization that had one of the most highly evolved bureaucracies on the planet. This is one of the reasons why I am so happy that he is on the programming committee for this conference. And I am so delighted that he puts his learnings into a fantastic book called Sooner Safer Happier, which is also the name of the consulting and training firm he has created to help teach and operationalize this.

Like so many of us in this community, he has been thinking about how to create organizational structures that are conducive to, as opposed to corrosive to, the outcomes that we want. I got to see him a couple weeks ago in Huntsville, Alabama, which is here in the United States. It is the birthplace of the U.S. space program. We were talking about his new book, where he is delving up centuries of advancements in the ways of working.

Up next is Jon sharing some of the amazing things that he has learned, which so much mirror my own learnings leading up to Wiring the Winning Organization. Jon, over to you. I can see you, I can see your slides, and I can hear you.

Jon Smart

Awesome. Thank you, Gene. Thank you. Good afternoon. Thank you very much for having me. And I hope all the watch parties are going well.

As Gene said, I have been doing some research around previous ways of working because I think it is important to understand where we have come from. As I have been doing this research, there have been a few consistent themes that have surprised me. So I am going to share with you the top three patterns from past ways of working that you need to know. This is without you having to relearn it the hard way. A deliberately clickbaity-type title.

We need to study the present in the light of the past for the purposes of the future. To quote John Maynard Keynes, a very famous economist, it is very important for us to understand where we have come from and understand the past.

What I find fascinating is generally at school, at college, at university, we do not study ways of working. We spend so much time at work, but we do not study how we got here, which I find fascinating. So I have been doing a bit of digging.

This is from Carlota Perez. Every 50 to 60 years there are repeating technology-led revolutions. This is not the first time that this content has been presented at the Enterprise Technology Leadership Summit. We have the first industrial revolution, then the age of steam and railways, then the age of steel and heavy engineering, then the age of oil and mass production, and now the age of digital. Every 50 to 60 years, there is a repeating technology-led revolution, starting in 1771. Prior to that, it was mostly agriculture and medieval guilds.

With each of these technology-led revolutions, there is management innovation. There are new ways of working. We have factory systems in the first industrial revolution. For the first time, we have a thousand people working in a factory together.

Then we have middle management in the age of steam and railways. For the very first time, due to the distance of the railroads, you cannot manage by walking around. So there is innovation around middle management. There are multidisciplinary teams, there is autonomy.

Then we have scientific management. We have Taylor, Frederick Winslow Taylor. We have scientific time study, which was what he called it originally. We have Gilbreth, who came up with motion study, reducing the number of human motions for bricklaying. We have much more of a scientific approach to the work.

Then we have Fordism and the Toyota production system. Fordism is a bit more over on the left, around 1918, 1920. Toyota production system is from the 1950s and reached the full scale of Toyota from 1962, where it continued to evolve.

Now we have agile and lean in the latest technology-led revolution. It is both agile and lean. Agility suits complex, unknowable work. Increasingly, the work we do is unique and unknowable rather than repetitive and knowable. The previous four technology-led revolutions, the context of work is mostly repetitive, knowable work with humans as a cog in a machine. Now we have more automation. We have computers. We automate a lot of the work, just like lots of talkers have been talking about today with AI taking it to the next level.

And we have lean. Lean is another word for the Toyota production system, evolved in the context of repetitive work with continuous improvement. Agile and lean have a lot in common.

So our current ways of working today, the how we do what we do in large companies, has been heavily influenced by the past 250 years. The starting point is we still have role silos. We have people whose identity is their job role. We have incentivization within the role silo.

Many organizations have gone on a journey of multidisciplinary teams. Quite often, it is still multidisciplinary within technology. Rarely do I see multidisciplinary business plus technology together. Right now, I am working with and talking to about 55 companies, so I have a lens over roughly 55 companies. Still, there is always room for improvement on business and technology working together.

With middle management, we have this formalized notion that your reporting line is your ordering line, i.e. your boss gives you orders. Now, obviously that happened in the past. There were overlooks in the first industrial revolution. However, it was more formalized from the 1850s onwards. And that is changing. We are no longer necessarily given orders from the person we report to. If we are in multidisciplinary teams, we might have shared OKRs, shared goals to achieve.

And then we have project management from two technology revolutions ago. We have Henry Gantt, who worked with Frederick Winslow Taylor, and that is where we have the Gantt chart. It comes from a deterministic domain, a knowable domain of repetitive manual labor.

So that is where we have come from, and we still see some of these ways of working today. I am going to share with you the top three relearnings from the past ways of working. This is from 1771 to 1950, and I am going to feature some unsung heroes from the past.

I am not going to talk much about Taylor, and I am not going to talk much about Toyota. Both of those are well-trodden paths. But I have discovered some things which I found fascinating, which I am going to share with you.

Number one is a data feedback loop. The first character unlocked is Daniel McCallum. Daniel, born 1815, lived to 1878. His particular strength as a character was in the second industrial revolution, the age of steam and railways. His occupation was general superintendent for the New York and Erie Railroad. He got to pretty much the top of the shop for running a railroad.

His claims to fame: number one, he created the world's first organizational chart. Number two, he was a ways-of-working innovator. His superpower as a character is disrupting the status quo. He was the chief rebel.

Here is the world's first org chart, and it is a work of beauty. You can see that the senior leaders are at the bottom, not at the top. It is like a plant. We are seeing nature here, and that mirrors the railroads.

If we take a closer look at this and the writing from McCallum, what we see is that in 1855, in the annual report of the New York and Erie Railroad, he articulates some management principles, some ways-of-working principles. The first one is clear responsibilities. The second one is delegated autonomy. This is the first writing on delegated autonomy with multidisciplinary teams. The reason was because of the distance of the railroads. Again, you cannot manage by walking around.

The next principle is a fast feedback loop. The fourth principle is information to be obtained through a system of daily reports. To quote McCallum: officers should be in full possession of all the information necessary to judge industry and efficiency, with a complete daily history of details in all their minutiae.

He goes on to say, the comparison of division accounts will show the officers that conduct their business with the greatest economy and will have the effect of exciting an honorable spirit of emulation to excel.

I love this because this is gamification. McCallum in 1855 is writing about gamification: getting data of different divisions in the railroads and having a bit of healthy competition. I read this and then realized that this is something I learned myself in the past when I was leading ways of working at an organization with 80,000 people. That is exactly what we did. We got the data, we showed the vector metrics, and we had the most improved value streams and business lines at the top, and the least improved at the bottom. We allowed human nature to do the rest.

So there is a key learning here about data feedback loops.

The next character unlocked is Professor Robert Thurston, 1839 to 1908. The industrial revolutions that he was primarily part of were the second and the third, steam and steel. He was the first professor of mechanical engineering at the Stevens Institute of Technology.

This kind of blew my mind. He taught a young Frederick Winslow Taylor when Frederick Winslow Taylor was 24 years old. Henry Gantt also studied mechanical engineering at Stevens Institute of Technology, so was also taught by Robert Thurston. Aha, light bulb moment for me as I came across this research.

He was also the first president of the American Society of Mechanical Engineers, which was instrumental in sharing learning, much like the Enterprise Technology Leadership Summit. And number three, he was a founding figure in scientific management. He had an international reputation for treating mechanical engineering as a science.

Am I mispronouncing Erie? Erie, New York and Erie Railroad. Thank you, Stephen. So I think the real father of scientific management is Robert Thurston, even though Taylor got all of the publicity. Not positive publicity; most of it was negative at the time.

This is the Stevens Institute of Technology, and this is from the inaugural address of the American Society of Mechanical Engineers in 1880. In his inaugural address, Professor Thurston says the first step in any such work is the careful collection of facts and the patient study of phenomena systematically and completely, such that their values and their relations shall be detected and quantitatively measured. And this was in 1880.

Now, the reason these characters are British and American, Luca, who has asked the question in the chat, is because it was British industry that led in the first industrial revolution in textiles. The UK led largely as a result of the previous colonial approach, in terms of protection of trade, being able to import goods cheaply from colonies and then export them expensively back out to the same colonies. That is why Britain was leading the first industrial revolution. Then America took over. The UK started the lead in the second industrial revolution; the U.S. overtook in the third industrial revolution. That is primarily the reason for British and American.

Here with Thurston, he is advocating a data feedback loop over laissez-faire.

Number two out of three is continuous improvement. Back to Daniel McCallum. The reports furnish the officer with a fund of information which assists in directing the business. This information is in its practical application, pointing out the impediments which prevail, thus enabling us to remedy them. And that is where its real, real value exists.

Daniel McCallum was driving a culture of continuous improvement at the New York and Erie Railroad. Did I get that right, Stephen? He was driving a culture of continuous improvement. He was driving a data feedback loop and people using that data to improve. Interestingly, at the time, the shorter railroads were more economical, more profitable than the long railroads. It should have been the other way round. That was because the long railroads were inefficient, badly managed, with slow communication and coordination costs, to quote Gene.

The next character unlocked is Andrew Carnegie, 1835 to 1919. He, like McCallum, was a Scot by birth and then immigrated to the U.S. and grew up in the U.S. Andrew Carnegie immigrated to the U.S. when he was young. He started out in a textile mill as a child. He then made his way to railroads, made his way up to be a superintendent on the Pennsylvania Railroad, where he would have known Daniel McCallum at the time. Then he was a leading character in steel, in the steel industry.

Andrew Carnegie actually learned from Daniel McCallum. His occupation: he was the founder of Carnegie Steel Company, which was sold to U.S. Steel. He almost certainly learned from Daniel McCallum. He was 20 years younger than McCallum. During the U.S. Civil War, they both worked together, one looking after the Eastern Railroad and one looking after the Western Railroad. He was a leading figure in the third industrial revolution. He became the richest person in U.S.A. Even when you normalize the value of money throughout history, he has been the second most wealthy person in U.S.A. ever after John D. Rockefeller. Elon Musk does not come close yet. And he gave most of his fortune to charity.

This is the Edgar Thomson Steel Works, still going today. This was the very first one. In terms of continuous improvement, Carnegie hired a German chemist to find out what was going on in the blast furnace, which significantly increased efficiency. A new rolling mill was designed that could roll steel rails more efficiently. Carnegie ordered the existing rail mill, which was only three months old, to be ripped out and a new one replaced. When there was a pivot from the Bessemer steel process to open hearth, Carnegie was very quick to replace the furnaces.

Also, they innovated on processes so that the molten metal did not need to cool down. A British observer at the mill said he would like to sit on an ingot for a week and watch the mill operate. A manager told him that if he wanted an ingot cool enough to sit on, he would have to send to Britain for it.

And Carnegie innovated on vertical integration. He ended up buying the iron ore mines. He bought railroads that transported the iron ore and the coal, and also transported the steel out to ships. So he massively innovated. He ended up optimizing for end-to-end flow. That is why he went upstream and he went downstream and ended up buying the companies.

By 1890, it was the largest and most profitable steel company in the world. And this was where U.S.A. overtook Britain in terms of industrial revolutions.

Next character unlocked is Charles E. Sorensen, 1881 to 1968. His primary industrial revolution is the fourth, the age of oil and mass production. His occupation: he was a principal at Ford Motor Company, and he was actually the originator of the moving assembly line, not Henry Ford himself. His superpower is translating random sketches from Henry Ford.

Henry Ford was famous for not giving anyone a job title and not writing anything down. I think he liked people to be on their toes. Sorensen was a number two to Henry Ford, but there were about six people that claimed that they were number two to Henry Ford.

Here we have the moving assembly line. This is a quote from Sorensen. The job of putting the car together was simpler than the handling of the materials that had to be brought to the car. What they realized was that it was a bigger problem to move the materials around than it was to actually build the car.

So the idea occurred to me that assembly would be easier, simpler, faster, sooner, safer, happier if we move the chassis to the parts rather than move the parts to the chassis. You have all these workers going back to the storeroom and getting parts and bumping into each other. One Sunday morning they put the frame on skids, hitched a tow rope to the front, and Sorensen pulled the frame along on the skids and added the axles and the wheels. We put together the first car that was ever built on a moving assembly line.

Continuous improvement, relentless continuous improvement. The time to build a Ford Model T went from 12 and a half hours to 93 minutes. Ford doubled the day rate of most people working there, and he reduced the working hours. People thought he was crazy. He clearly was not crazy. He managed to make automobiles affordable for the workers. And so we see the beginning of mass production.

Number three is humanity. Next character unlocked, you might not expect this one: Henry Gantt, 1861 to 1919. Industrial revolution is the third industrial revolution. He was an efficiency consultant, creator of the Gantt chart, and he was Frederick Taylor's assistant from 1887. His superpower is predicting the future with a Gantt chart.

To quote Gantt, and I got goosebumps when I read this, and I am nearly done, Gene, one more slide after this: it is undoubtedly true that efficiency methods have failed to produce what was expected. The reason is we have to a large extent ignored the human factor and failed to take advantage of the ability of the ordinary person to learn and improve his position. These efficiency measures have been applied in a manner that was highly autocratic. This alone would be sufficient to condemn them.

So Gantt is condemning scientific management, which I find fascinating. I am going to skip over Matsushita because I am out of time. And I am going to give a quick how. How do you get there? If you are today, how do you apply this today?

Do not be too busy pulling the cart with square wheels. Instead, be clear on your desired outcomes. Have a data feedback loop. Incentivize and reward continuous improvement. Nurture humane ways of working. Impediments are not in the path; impediments are the path. And experiment and enjoy the journey.

All of these problems are alive and kicking in organizations today. These are lessons we have learned from the past. Thank you very much.

Host Outro (Gene Kim)

Fantastic. Thank you, Jon. And I love this. I was posting screenshots the whole time. Fantastic. Thank you again, Jon. And I will catch you soon.