1. Fractals, Innovation, and Organizations
Steve Gladstone
November 3, 2012

2. Agenda
• Today, we’ll look at some seemingly disparate concepts, and draw them
together:
– Innovation and motivation
– Detour I…The “Innovator’s Dilemma”
– Detour II…The “Fractal” mindset to drive innovation in the context of the organization
– Time-permitting, we’ll discuss fractals and artificial life as a potential model for
organizations
– “The Godfather” as a model for driving innovation and change
– Lessons learned at the frontline: Culture and situational awareness
– Project, product, and solution companies
– Bringing it all together through “joined-up” thinking
– Please feel free to interact as we go

3. So, You Want to Have an Impact?
• Explore deeply and personally what “impact” means to you
– Is it: Execute on established paths for change and innovation?
– Is it: Define & shape change and innovation?
– Is it: A seat of considered wisdom at the C-level table?
– If not, what does impact mean to you?
• Surprises in motivation…
– Money? Yes…and no.
• For creative tasks, higher rewards can lead to lower performance…
– Impact
– Mastery
– Self-direction
• Optionally: RSA Motivation Video

4. Intrapreneur
Defined
• In 1992, the American Heritage Dictionary acknowledged the popular use of a new
word, intrapreneur, to mean:
– “A person within a large corporation who takes direct responsibility for turning an
idea into a profitable finished product through assertive risk-taking and innovation”
Source: Wikipedia
But, why is change/innovation so difficult for many organizations?

5. Detour I…The Innovator’s Dilemma (ID)
• Ground-breaking book by Clayton M. Christensen:
– How “good” companies can do everything “right” and still lose market leadership, or
disappear altogether!
– Incremental vs. disruptive innovation:
• Incumbents tend to pursue incremental (“listen to customer”)
• New entrants pursue disruptive
– Low-end disruptions eventually gain market share:
• New entrant, inferior at first, crawls “up-market”
• Later, incumbent loses market share, and often misses opportunity
– Examples:
• 5.25”  3.5” Disks
• Minicomputers  PC’s
• Desktop publishing

6. The Innovator’s Dilemma Visualized
$ (Cost, Price, etc.)
Features,
Value,
etc.
Incumbent
New
Entrant 10% Growth = $100K
10% Growth = $10M
• Listens to the customer
• Incremental innovation
• Organization optimized for high price point
• Inferior product…at first
• Mostly ignored by market and incumbent
• Pursue low-end features
• But, add more over time…

7. The Innovator’s Dilemma Visualized
$ (Cost, Price, etc.)
Features,
Value,
etc.
Incumbent
New Entrant
• Perceived as legitimate in mid-market
• Converts some customers from
incumbent…others notice and may follow
• Eventually begins to threaten incumbency
• Inertia, too slow to
change
• Loss of Market
Share

8. Another View of the ID End State
Typical Incumbent Strategy:
- Sustain Market Share
- Sustain Customer Satisfaction
ID Impact:
- Lose Market Share
- Decrease Customer Satisfaction
- Struggle to Recover
Organizational Scale (Typically, Time)

9. Detour II: Fractals…First, some math…
Kidding – only an elementary math background needed today

10. Fractals and Artificial Life: Describing Companies?
 What’s a Fractal (for our purposes)?
 A simple concept or structure that is repeatedly applied
 Amazing, beautiful, “self-similar”, complexity emerges
 Example: The Mandelbrot Set
 Optionally: PBS Video on Fractals
 What’s Artificial Life (for our purposes)?
 The simulation of a complex living structure and its functions
 Based upon atomic, simple rules, sometimes neural networks
 Complex behaviors “emerge”
 Example: Conway’s Life Simulation and Predators and Prey

11. The Game of Artificial Life: Emergent Complexity From Repeated, Simple
Rules
 Life is played on a grid of square cells--like a chess board but extending infinitely in every
direction. A cell can be live or dead. A live cell is shown by putting a marker on its square. A dead
cell is shown by leaving the square empty. Each cell in the grid has a neighborhood consisting of
the eight cells in every direction including diagonals.
 To apply one step of the rules, we count the number of live neighbors for each cell. What
happens next depends on this number.
 A dead cell with exactly three live neighbors becomes a live cell (birth).
 A live cell with two or three live neighbors stays alive (survival).
 In all other cases, a cell dies or remains dead (overcrowding or loneliness).

12. Detour II…Fractals: Emergent Complexity from Recursive Simplicity
The Koch Snowflake & Coastlines
“Self-similarity”

13. Fractal Examples In Nature

14. Fractal Examples In Practice
Social Networks
Cell Phone Antenna
Programming/Project
Methodologies
Digital Image Compression

15. Fractals: Not Always What You Might Expect
Fractal geometry will make you see everything differently. There is a danger in reading further. You
risk the loss of your childhood vision of clouds, forests, flowers, galaxies, leaves, feathers, rocks,
mountains, torrents of water, carpet, bricks, and much else besides. Never again will your
interpretation of these things be quite the same.
— Michael F. Barnsley
Fractals Everywhere (2000)

16. Fractal Behaviors of an Organization Drive Emergent Results and Culture
Elementary
Behaviors
Organizational
Structure
Emergent
Outcomes
 Emergent project results (Good or Bad)
 In retrospect, can observe small factors that
compounded to the final result (Good or Bad)
 Can observe self-similar behaviors at differing scales
 Company “culture” is emergent
 Executive Sponsorship vs. Sleepership
 Information/Knowledge Silos
 Roles and Responsibilities
 Responsibilities and Authority
 Commitment and Accountability
 Performance Metrics
 Etc.

17. Question: Do Fractal (Self-Similar) Organizations Make More Sense?
Replace With? To Get

18. Question: Can We Apply This Thinking to Organizations?
• Optionally: Video on the Surprising Math of Cities and Corporations
• The same way we can reduce a digital image to it’s fractal equivalent, can we do the same to an organization?
– Build up a model of the organization using artificial life
– Then, use aspects of the “Collage Theorem” to self-discover thee root causal factors of the outcomes
• If so, the possible outcomes are:
– The elementary fractal organizational “drivers” and pathologic behaviors would be apparent
– The life of the organization and probable evolution could be visualized (in a monte carlo sense)
– Possible IT/HR tools to diagnose, measure, and materially cope with the fractal drivers
– Similar implications in social networks, family dynamics, and many other fields
Fractally Represent
Image
Fractally Represent
Organization
• Emergent Outcomes
• Root Causes

19. OK, so you want to be an Agent of Change
• Regularly evidence deep understanding to Execs/C-levels
– What it takes to execute an idea in a company/industry context
– Know thy personal and company culture
– Create a shared “sense of urgency” through communications
– Gain awareness of “fractal” behaviors and weigh against desired project outcomes
– Only “joined up” thinking makes it happen
• Generate results…tangible and intangible
– Projects, products, and solutions execute with highest success probability
– Company and deliverables are crisply branded
– Build resilient trust with Execs/C-levels
– Executive sponsorship vs. “sleepership”
• “The Godfather” consigliere as a model

20. Execution and Communication in Context
• Understand
– Industry trends and causal relationships
– Competitive, revenue, profitability, and growth impacts
• Get into stakeholder’s heads
– The CEO’s
– The customer’s
– Others (internal and external)
• Navigate any dual/mixed C-level roles
– CIO reports to CFO
– Dual CTO/CEO role
• Who really drives change/innovation?
– Engineering vs. product management (projects vs. products)
• Be forward thinking, but balance tactics and strategy
– If you only listen to customers, then you will only be as smart as them
– For disruptive innovation, paradigm shifts must be “on the table”

21. Know Thy Personal and Company Culture
• Alignment is essential in any organization
– Clear definitions of roles and responsibilities
• Project administrators vs. project managers
• Useful process vs. worship of process
• “Centers of excellence” delivery and metrics
– Commensurate responsibilities and authority
• Misalignment can lead to overly political environments
– Join commitment and accountability
• The union builds on what we know about motivation
• Is it a Project, Product, or Solution based company?
– Core to understanding what/how change and innovation can/will occur

22. Organizational Maturity Model: Projects, Products, or Solutions?
• Recognize that everyone says they want a solution
• Projects
– Customer says “Jump!”, and company says “How high?”
– Company brand centered in capability to execute
• Products
– Company willing to gently say “no” to customers
– Typically “market” driven
• Solutions
– Company says, “We are all things to all people.”
– Bring together People, Process, Technology
– Professional services consumes/customizes company products
– Typically viewed as “end-to-end” by customer
• So, which type is your personal sweet-spot? Is it aligned with the company’s?
Note: Projects and products do not play well together
if they share execution resources.

23. Project, Product, Solution Visualized
Typical Incumbent Strategy:
- Sustain Market Share
- Sustain Customer Satisfaction
ID Impact:
- Lose Market Share
- Decrease Customer Satisfaction
- Struggle to Recover
“Project”
“Product”
“Solution”
• Build whatever customer specifies
• “Recreate the wheel” several times
• Eventually, claim a “product”
• Suffer code fragmentation
• How do we contend with NRE-based business scaling issues?
• Build what the “market” wants
• OK. We need a “platform” and API gate-keeper
• Truly, have a “product”
• Still, can we service mass customization?
• Core engineering builds product
• Professional services handles customization
• Business scales in products and services
Leadership Changes
Typically Required
Organizational Scale (Typically, Time)

24. Bringing it All Together – “Joined Up” Thinking
• Understand current company projects, products, and solutions
• Leverage knowledge of present “organizational maturity”
– In company cultural context, is the change/innovation realistic?
– Is it worth the professional risk?
• Truly “partner” with people/teams/organizations to bring it about
– Think like a developer, project manager, CEO, etc.
• Politics of change: Create buy-in
– No buy-in = No change
– Assert with passion and create excitement
– Be proactive, not reactive
– Take reasonable risks, but mitigate
– Change is hard: Empathize, but don’t fully sympathize
– Appeal to the “arrogance” of others (by making it their idea!)
– Ultimately, “Developers own the code”
Projects
Products
Solutions

25. Communications: Create a “Shared Sense of Urgency”
• Facilitate joined up organizational thinking/execution
• Partner with Marketing for communications
– Internal communications
• Be crisp and clear about why it is urgent (“an offer they can’t refuse…”)
• Does everyone share the vision, or just versions of it?
• Authorized internal communications can serve as a lock-in
• Care and feed the messaging, don’t abandon it
– External communications
• Media and trade shows must reflect the change/innovation
• Align or revise branding strategy, as required

26. Finally, Claim Your Seat at the Table
• Significant change/innovation rollouts typically have material impact on company
• The stakes can be high
– Successful change agent championing is usually career-making
– Failure to execute (for any reason) can create a stigma for those that championed
• While execution of an idea is almost everything, its not the only thing
– Don’t burn too many bridges, as you will need them to come along next time
– And, contrary to “The Godfather”, a carefully placed horse head won’t quite do it…

27. Today, We Covered…
• Some seemingly disparate concepts, and drew them together:
– Innovation and motivation
– The “Innovator’s Dilemma”
– The “Fractal” Mindset to drive innovation in the context of the organization
– “The Godfather” as a potential model for driving innovation and change
– Lessons learned at the frontline: Culture and situational awareness
– Project, product, and solution companies
– Bringing it all together through “joined-up” thinking

28. Thank You for Participating Today!
• Questions & Answers
• Steve Gladstone, spglad@hotmail.com
– Your comments & suggestions are welcomed