How To Evade Coordination Tax By Organizing Around Outcomes

Help me think through how this episode applies to my situation. Start by asking what I am trying to change. Separate the episode's claims from your suggestions, and say when the notes do not support a claim. Use the transcript to find passages, then check the audio before quoting. Transcript: https://yuvalyeret.com/podcast/episodes/how-to-evade-coordination-tax-by-organizing-around-outcomes/transcript.md ## Published episode notes Yuval discusses how companies can avoid the hidden costs of coordination tax by organizing around outcomes rather than traditional structures. He provides a case study of how Gillette successfully created a virtual value center for their exfoliating razor project, leading to faster development and market entry. Key strategies include focusing teams on strategic initiatives, optimizing for work flow, and being flexible with roles and processes. Yuval emphasizes the importance of making conscious trade-offs and improving focus to enhance innovation and productivity within organizations. 00:00 Introduction to Coordination Tax 00:08 The Coordination Challenge 01:35 A New Approach: Virtual Value Centers 02:42 Prioritization and Trade-offs 03:19 Success Story: Gillette's Exfoliating Razor 04:18 Optimizing for Flow 05:08 Overcoming Constraints 07:21 Practical Interventions 09:25 The Goal: Conscious Focus 10:21 Conclusion: Organizing Around Outcomes The Scaling w/ Agility Newsletter - yuvalyeret.com/insights Yuval's Linkedin - https://www.linkedin.com/in/yuvalyeret/ Cut Coordination Tax: Organize Around Outcomes – https://yuvalyeret.com/blog/how-to-evade-coordination-tax-by-organizing-around-outcomes ## Transcript Automatic transcript of the published podcast audio. Recognition errors are possible. Speakers are unlabeled; do not attribute a passage to Yuval or a guest without checking the audio. Episode: https://yuvalyeret.com/scaling-ai-podcast/how-to-evade-coordination-tax-by-organizing-around-outcomes/ Source RSS GUID: substack:post:164652105 Source: published Riverside RSS audio enclosure Transcription: faster-whisper base.en, English ## Transcript [00:00:00] How can we evade coordination tax by organizing the wrong outcomes? [00:00:04] Welcome to a Skilling with Agility on Evolve here. Picture this. [00:00:10] You have a break for a strategic initiative that's tied to one of your [00:00:13] company level goals that impacts 10 teams across two product groups, [00:00:18] as well as your go-to market organization. These are all busy overloaded teams [00:00:24] that are also juggling five other initiatives [00:00:28] and the business as usual will lead. You pull this work into the backlogs and [00:00:33] roadmaps for all of these teams, structural slices of people across these teams [00:00:39] will work on this initiative, which means it will take a while. [00:00:44] Probably many months. Leaders involved with all these teams will need to be [00:00:49] involved as well in order to coordinate. How lucky are we that we have [00:00:53] nickelisms in place to coordinate all of this? [00:00:57] Whether it's a complex network of cascaded OKRs, planning increment or [00:01:03] quarterly planning, tools like JuraAlign, product owners with team backlogs, [00:01:09] solution trains, choose your poison. Does this sound familiar? [00:01:16] This is what I call the coordination tax. The hidden cost of trying to innovate [00:01:21] across organizational boundaries that weren't designed for the outcomes that [00:01:25] you're currently pursuing. They were designed around a functional [00:01:30] structure than your product architecture. [00:01:35] When we worked on the geotextfoliating razor, we tried something different. [00:01:40] Instead of accepting the coordination nightmare, we asked a simple question. [00:01:45] If we had free rein, what's the minimal number of people [00:01:49] would need if they could really focus? [00:01:53] The answer was about 55 people from across the R&D commercial, [00:01:58] marketing, finance, platform manufacturing teams. [00:02:03] Instead of fitting the work into the teams all these people belong to, [00:02:08] we created what you might call a virtual value center or a scale scrum. [00:02:15] A certain number of virtual teams that existed solely to figure out a [00:02:19] winning proposition and get it to market. Same amount of brain power spread [00:02:25] over fewer people, concentrated to a shorter time, [00:02:30] with less managerial overhead, both because people were already working with [00:02:35] the people they needed to coordinate with, as well as the shorter times that. [00:02:42] This requires some top prioritization trade-offs. [00:02:46] It highlights some islands of knowledge where you have a certain person [00:02:51] that is needed on this program but is also needed on five other initiatives [00:02:57] and there's nobody else that can do what they're doing. [00:03:01] So you need to make a choice. Do you delay other work in order to prioritize this thing? [00:03:09] Do you ask this person to work on multiple things? [00:03:12] Those are the kind of choices that this forces you to make. [00:03:17] But it was worth it. The exfoliating razor became one of Gillette's most successful products [00:03:24] in many years. They developed and brought it to market faster than anything they done recently. [00:03:33] And it's not about the process. It's not about agile ceremonies that we introduced or new tools. [00:03:38] Those were useful but the biggest impact, the order of magnitude impact was the coordination [00:03:45] and collaboration architecture. Designing the team topology, the team structure or architecture [00:03:53] so that people can concentrate on the work. They spend as little time as possible [00:04:01] coordinating with other people. It's much easier to coordinate with people that are [00:04:07] on the same team with you, than people that are on the neighboring team, not to say [00:04:12] another division where you need to go through different leadership layers to get things done. [00:04:18] Most organizations strive to optimize resources. Keeping everybody engaged across multiple initiatives [00:04:26] just to try and get everything done. They think about it like a Tetris picture, [00:04:34] where maybe there's a hole and we can fit one more piece into the hole [00:04:40] so that we can maximize the amount of work that we're doing. But innovation and knowledge [00:04:47] work requires optimization for flow. Getting the most valuable outcomes through the system [00:04:54] as quickly as possible. And what that means is optimizing for flow of the work and defriding [00:05:01] the organization so that the people are closer to the people that they need to work with. Now, [00:05:08] let's be honest about the constraints. Carving out these focus teams isn't trivial. [00:05:13] You'll hit knowledge islands where somebody needs to split their time. You'll face resistance [00:05:19] from leaders who don't want to lose their people to a cross-functional network. And you'll discover [00:05:24] dependencies you didn't even know existed. Some of the time there are dependencies that you know [00:05:31] exist, but this would just reinforce how big of a dependency it is. And maybe re-indigorate you to try [00:05:40] and decouple these dependencies, build some stronger knowledge spread, the knowledge across [00:05:49] more people or change the architecture of your product to make it possible for more people to [00:05:54] do the work. And like we had some advantages, executive colleague named these trade-offs possible. [00:06:02] Even then, certain specialists couldn't focus 100% and had to play floater all across initiatives, [00:06:09] which laid it hard for them and made it hard for the team members that depended on them. And [00:06:15] we needed to be flexible with the processes and the events that we used to make sure that we don't [00:06:22] actually make life even harder for these people by forcing them to participate in a lot of coordination [00:06:30] efforts that were very valuable to the team. One of the things that helped us was that we did it [00:06:36] just for one strategic priority at that time, not across the board. This made it an easier [00:06:43] intervention to swallow at the beginning. And that's an intervention pattern that I've seen work [00:06:48] identify a strategic priority that requires intense cross-functional collaboration, [00:06:55] face of significant feasibility or desirability risks, making it a more complex initiative that [00:07:02] benefits from being adaptive, more tightly collaborative, and experiment with this approach for that [00:07:10] initiative, where there's clear concern that the current ways won't deliver the desired outcomes [00:07:16] or would be too painful to manage because of the spread. If you're not even ready for that, [00:07:23] here are some easier interventions that I've seen work that can help you identify and build a [00:07:28] conviction for more meaningful interventions. One is to knock your current people to the initiatives [00:07:37] that you're running and count how many people and teams are working on multiple efforts in [00:07:43] all 10. You can even send that as a KPI, maybe call that your focus factor. [00:07:50] And work to improve it over time. Please track it over time to see that it's stable, [00:07:55] is it improving through some interventions that you're trying? Would most of the time improve your [00:08:02] focus factor is to use a portfolio level con land that looks at all of these initiatives that [00:08:08] you're working on? And over time, start conversations about managing the amount of [00:08:15] progress, especially those that cut across the organization. [00:08:20] What we know about work in progress is that when we start to limit the amount of work in progress, [00:08:29] the first thing that it does is it what we know about limiting the amount of work in progress is [00:08:37] if you look at Little's Law, it tells you that on average the lead time, the cycle time [00:08:47] for the work in a system where there's fewer things in progress, the lead time would be faster. [00:08:55] What that would do is it would compress the amount of time that people need to be involved in these [00:09:01] initiatives leading to the fact that on average people will be involved in fewer initiatives at [00:09:11] a time, which would have a secondary effect of they are more focused on the initiative that they [00:09:18] are working on. There's less coordination tax and the cycle time is accelerated even further. [00:09:25] Remember, the goal here isn't perfect focus. We're not talking about one piece below the [00:09:33] entire organization focused on one strategic initiative or everybody in the organization only [00:09:40] working on one initiative at a time. That's a nice North Star, but probably unrealistic. [00:09:48] A more realistic goal is to aim at conscious focus, to make conscious explicit decisions about the [00:09:56] trade-offs between focusing on fewer things and working on a larger set of initiatives. [00:10:06] When you start to have more visibility to your level of focus, you can start to make better decisions [00:10:13] about when and where to accept those coordination costs and where to ease it in. [00:10:21] This isn't about implementing a new methodology, new processes, new roles. It's about organizing [00:10:26] around outcomes rather than work charts. The processes I'm talking about, the practices [00:10:34] I'm talking about, whether it's a portfolio level Kanban or using strum or some other pattern [00:10:45] across those teams can support this. Whether you call it value streams and power teams or virtual [00:10:52] pods, the processes that you don't really matter. What matters is creating the conditions [00:10:58] where people can deliver on what you've asked them to deliver. The experience that Gileta taught [00:11:05] to me that sometimes the biggest cause strain to innovation isn't a technology or the market, [00:11:11] it's how we organize ourselves to do the work. When you align your structure, even the virtual [00:11:17] structure around the work with what's strategic for you, remarkable things become possible. [00:11:23] Thank you for listening to this episode of Scaling With Agility, Anuvall. ## Source boundary These are the published show notes from the podcast feed. They are a starting point for discussion, not a verbatim record of the conversation. The transcript is machine-generated and may contain errors or unlabeled speakers. Check the audio before quoting anyone.