GUILLERMO WECHSLER

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Service Architecture

Here I would like to explore the emerging field of Service Design. I'm going to track interesting conversations and developments within the field, mainly in areas related to health, education, retail, finances, and software development.


February 16, 2007

On Management

Managers are in the game of organizing work for the sake of delivering recurrent value to a set of customers and constituencies:
  1. Managers design organizational structures, cross-functional horizontal processes, extended open networks, action pathways, management systems & a wide variety of business practices.

  2. Managers design, implement, and develop business roles.

  3. Managers mobilize action by exchanging commitments, caring for others' concerns, anticipating breakdowns, re-interpreting contexts, and assuring customer satisfaction on-time and on-cost.

  4. Managers declare priorities, declare breakdowns, manage risks, and reconfigure capabilities.

  5. Managers develop trust and cultivate productive and creative moods.

  6. Managers contribute to their communities by mentoring people, developing meaningful work, and honoring ethical principles of extended communities.


All that managers do happens in conversations, in a dance of speaking and listening. Productive conversations produce productive managers, and vice versa. Management is fundamentally based in traditions of historical linguistic practices.

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February 15, 2007

Ontological Design

In the early 80s, an engineer captivated by the emergence of PCs and networks, working at Stanford University and completing his PhD at Berkeley University, produced a historical philosophical insight. After many years of working with his theoretical breakthrough, he hesitated on how to name it. He tried “hermeneutic pragmatic”, and after a while “pragmatic hermeneutics.” He abandoned both, and never persevered in creating a definite name for his contribution.

His work wasn't particularly theoretical or abstract. On the contrary, he chose very practical issues as the terrain to develop his thinking: software design, management, organizational & processes design, education & skill development. In engineer Fernando Flores' view, most of the difficulties related with productivity, quality, and innovation were rooted in modern understandings of work. His critique didn't target particular management traditions, such as bureaucratic administration, scientific management, rational decision making, or the cybernetic approach. His critique was directed at the philosophical underpinning of all those theories at once.

Inspired by Martin Heidegger – or better, by Hubert Dreyfus' interpretation of Heidegger – and by John L. Austin – in professor Searle's version – Flores claimed that modern understanding of work missed one fundamental piece: a phenomenology of action. It sounded simple, but with that claim, he was turning up-side down a wide variety of management assumptions, organizational development criteria, and software design principles. Furthermore, he was spotting a historical cognitive blindness.

As an illustration, I'm going to point out a few of his claims. He claimed that the essence of work is communication, that human communication in a business context is about engaging in conversations and exchanging commitments, and that commitment always happens in the listening of the involved actors (including the situations in which I'm listening myself). Consequently, he developed a wide variety of theoretical papers that reinterpreted traditional thinking, putting at the center this new perspective language and human coordination. He and his team wrote on a wide variety of subjects including: managing networks of conversations, linguistic ontology of organizations, conversations for action, conversations for possibilities, ontological reconstruction of discourses, team leadership, focalization of strategy, and even subjects that seem closer to psychology than to business, like cognitive emotions and moods.

While exploring the possibilities of his theoretical insight, Flores assembled a diverse team that included computer scientists, biologists, physicians, philosophers, politicians and a variety of business professionals. Among the most active contributors were Francisco Varela, Michael Graves, Richard Owen, Rachelle Halpern, Chauncey Bell, and Bob Dunham. They simultaneously built a company – Logonet, Inc., set up a lab for designing networked social practices (Ontological Design Course ODC), and created a discipline that they named Ontological Design.

In many respects, Ontological Design was a reaction to a pervasive orientation in education, psychology, and management unbalances to be extremely prolific in explaining the past, and extremely weak in shaping futures.

The basic premise of Ontological Design was that the primordial foundation of human realities and human existence is the historical stability of patterns in a wide variety of interplaying and autonomous phenomenological domains. Using technology and networking for distinguishing patterns, observing patterns, assessing patterns, and creating new patterns was at the core of the game.

Flores' insight was that there are a set of linguistic patterns configured and evolved out of human social life, that allowed human beings to share historical worlds and to create new worlds. He called those patterns commitments, and he distinguished four basic forms: Request, Promises, Declarations, and Assertions. The original intuition on this matter came from previous works of Adolf Reinach and John Austin; however, Flores hermeneutic interpretation of these linguistic patterns gave them whole new dimensions. Probably, the change is equivalent in magnitude to what Karl Marx did in reinterpreting G.W. F. Hegel's dialectic.

These linguistic patterns – commitments – become the primordial principles of Ontological Design. Basic human practices like communicating, learning skills, managing a team, dealing with money, or developing careers were complex unities whose components were simple commitments. Consequently, those practices were reconstructed as structures of recurrent conversations built out of commitment.

Following the same approach, valuable historical disciplines like management, finances, education, manufacturing (TPS), politics, software design, among others, were reinterpreted as discourses and practices whose essential value rested in its capacity to synthesize patterns of commitment, and by that, able to disclose possibilities and disclose action pathways to effectively address specific business, social, political, spiritual or any other historical human concern.

The notion of commitment empowered the Ontological Designers to put most of their attention on inventing patterns to shape the future, and to overcome the often wasteful explaining-the-past habit.

The notion of commitment seems obvious, and for that reason is most of the time unnoticed or overlooked. Commitment patterns have some very striking aspects.
  1. Commitments are social practices that allow us to bring forth new futures, by virtue of being celebrated in the present, based in past consensual conventions. We produce action in social networks based in our capacity to invent and celebrate commitments. Basic patterns of commitment are few; they exist in every culture – in their own way; they exist with independence of idioms; and they produce enormous simplicity and focus at the moment of producing action.

  2. Commitments are at the heart of language, and make us sensitive to the facticity that, in speaking and in listening, we are never describing an objective-independent world. To the contrary, we are socially co-configuring – better to say disclosing – a shared world based in consensual distinctions and a shared background of practices and habits.

  3. The ultimate grounding of our commitments is our communal humanity that grants modern human beings the freedom to bring forth commitments – out of traditions, nothingness, and will – and the obligation to cope with the consequences.


So, going back to our story on Ontological Designers, I said that the core of their design work was designing commitment-based practices, and exercising them. In doing so, they produced new practical skills. They were able to build paradigmatic practices to modify individual and collective styles or cultural orientations – a rather existential exploration, and they were able to articulate – reconstruct, and make visible – and modify social habits, emotional patterns, and moods.

There are three valuable sources for this story: Understanding Computers and Cognition by Terry Winograd and Fernando Flores, Disclosing New Worlds, by Charles Spinosa, Fernando Flores, and Hubert L. Dreyfus, and Building Trust: In Business, Politics, Relationships, and Life by Robert Solomon and Fernando Flores

I was an early participant in this experiment and I will share with you my view about what was produced in that prolific social lab and I will also elaborate on what I have produced out of my work with ontological design.

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February 13, 2007

Software as Services

Everything is about services. Products are mere service platforms. Good products are ready-to-hand capacities, without the associated risks, logistics issues and maintenance of the "thing". Take a look at this post: I Love Software as a Service.

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February 6, 2007

Universal Health Care: A New Business Paradigm?

I recently went to a discussion on Universal Health Care.

Ronald Preston, Former Secretary of Health and Human Services in Massachusetts, brought that sharp humor that evaporated the romanticism which can be dangerous when you are trying to overcome real problems. He warned people not to think that universal coverage was only a humanitarian initiative to make health accessible to people. He also said that, essentially, this initiative is trying to save an industry that is in an acute crisis with an explosive mix of rising costs, over-capacity, and decreasing quality. In summary, he said that more insurance may help to keep this expensive industry alive. That's why we need more people inside the system. On the opposite end, Ruth Liu, Associate Secretary for Health Policy in California, glamorized the human side of Schwarzenegger's proposal.

The complexity of the challenge looks overwhelming with the variety of concerns and the different actors. What nobody in the forum seems to tackle is how poring more resources into the system that has already produced the negative results we are seeing is going to produce a different system than the one we have. The predominant service design principles underlying the discussion seem to be that health care needs to be managed top-down by the insurance companies, health care providers, and HMOs, keeping the government and politicians as the arbitrators of this complex system. I asked many of the participants, including Mary Ann Thode, President of Kaiser Northern California Region, and Ronald Preston, about the Teisberg/Porter approach on redefining health care by empowering the patient to make health conditions life-cycle value-based decisions in transparent, open markets with homogeneous quality measures and by ubiquitous access to medical records. Olmstead & Porter built their proposal from radically different theoretical design principles. Unfortunately, their book and their approach wasn't known, even though, after a short conversation I discovered that some speakers of the forum were sympathetic to it.

Although interesting, this universal health care debate lacked a radical new perspective able to simplify the overwhelming complexity of a highly regulated, hierarchical and opaque system.

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Scaling Innovation in Biotech

The Berkeley HAAS School of Business did very interesting work at their annual Business of Health Care Conference. In one day, they pass you through a variety of interesting topics, with super speakers on the future of biotech, VCs and innovations in healthcare, healthcare policy, IT or HCP strategies for improving health, as well as a panel on universal health care, which opened a discussion about Schwarzenegger's health proposal. Dr. Craig Parker, head of Biotechnology Equity Research at Lehman Brothers conducted an interesting conversation with Suzy Jones from Genentech, Erik Bjerkholt from Sunesis Pharmaceuticals, Ajay Bansal from Tercica, and Mark McDade from PDL BioPharma, on the topics of scalability of innovation. He framed the discussion with simple questions: What is innovation? How do your companies promote innovation? How can we measure innovation?

Overall, the obvious consensus was that innovation is any new offer that increases value to patients. So innovation can come from basic science, improved business models, or new services, but the test unvariably will be differential value-added to customer. The other interesting consensus is that the biotech industry is already a mature industry. This means that there isn't much room for disruptive changes. Only innovative products will drive growth and revenue. So the challenge for the biotech companies will be to expand product and service innovations with shorter life-cycles of development and more efficient processes. Producing innovation with an efficient operating model becomes a key issue.

Perspectives on Innovation

Dr. Parker pointed out that, after reviewing the industry, he discovered that the innovations per employee are significantly lower in biotech companies that have grown based in acquisitions in comparison to biotech companies that have grown organically. A key example of this is Genentech.

Suzy Jones' story about Genentech was simple and powerful. She said “We're innovative because we know how to partner with scientists, the academic community, and with other interesting small companies doing good research. We are just starting our Genentech Fund to promote interesting research with our network of partners. There are a few design principles that are relevant to expand these collaborations:

The model has paid off. They invariably receive the first call of their partners informing them about potential interesting ventures. High quality networking, based in what Yochai Benkler could articulate as the best traditions of collaborative production, has been leveraged by this not-too-young company which has this unusual mix of scientists in top business positions.

Another angle was brought by Erik Bjerkholt, who plays in a smaller company. One of the points that caught my attention is that he is trying to build a business model in which he can leverage expertise in the basic components of the biotech business by building global partnerships. One of the strengths of his company is a manufacturing facility that, instead of being coupled with the research department and headquarters like in Genentech's South San Francisco facilities, is being built in India where they have an extremely talented and vigorous partner. So, he brought up the subject of decentralization, major partnerships, and focalized innovations. His approach has resemblances to Michael Dell's early discovery that the computer industry was mature, that vertical integration is a dangerous liability, and that the horizontal, flexible organization of the supply chain was a fundamental dimension of a new business model.

Ajay Bansal and Mark McDade somehow reinforced Erik's perspective in the sense that they made two or three important assessments. One is that the opportunities for them are not in basic research but in discovering niches in the industries in which they can develop innovations that enhance treatments or services that were created by the big players of the industry, or in co-investing or buying patents from the big players that have been postponed by strategic priorities in the portfolios of the major players.

The charismatic Kevin Young from Gilead Sciences, a keynote speaker of the event, added a new perspective, claiming that in order to keep Gilead's super performance and innovation, the company should focus on leading the social networks that support their business, and adjust their research, products, and services as much as they need to to increase value to the customer. They are actively involved with a wide variety of constiuencies promoting price reductions based in scaled market needs, payment capacities, and aggressive prevention. One example he gave was an HIV program in the prison system -- requiring tests upon entrance and exit from the jail -- which puts some responsibility on the prisons to prevent the spread. Another example he gave was they opened up an operation in Turkey to prevent Hepatitis B. Young claims that innovating to promote change in practices in vast social networks is a fundamental capacity.

I left that discussion with a feeling that the spirit of science and academics, which fueled the emergence of the collaborative culture of the Internet, is also renewing critical dimensions of our health care industry.

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posted by guillermo m wechsler @ 2:24:00 PM 20 comments