How do you figure out what is truly happening when you can't explain the results. Expectations are being missed and results don't appear to align with the strategy in place. Use The Alien Observer Model. Step 1) Assume you are alien and don't speak the language. Step 2) Observe all the actions. Step 3) Write down a strategy that supports the actions. Step 4) Given the derived strategy, optimize it for the the actual results. The problem or opportunity is the difference between this strategy and you stated strategy.
Hunter Powers: Welcome to the ONE. I'm your host, Hunter Powers, broadcasting live from our nation's capital, DC proper, Washington, DC. Today's one idea is the Alien Observer Model. Have you ever had a situation that you couldn't explain? Something is going on, something is happening, but it's just not quite all adding up?
Hunter Powers: The biggest sign of this is missed expectations. You or others keep expecting certain things to happen, but they don't, and either you can't figure out why you were expecting them to happen or why they didn't actually work out. A situation where it just never seems to work out, but you're not really sure why, or you think you know why, but what you can't figure out is how to change it. You know what's supposed to happen, but it's not happening. You can't put your finger on it. To quote the Bard, "Something is rotten in the state of Denmark", but you can't find the source.
Hunter Powers: And so we introduce the Alien Observer Model. Here's the gist of it. You consider yourself an alien. You don't speak the language. You merely observe the actions that take place. You then derive the strategy that must be in place to support the actions that you see. You then take that derived strategy and optimize it for the derived goal. This then is the model of what appears to be taking place.
Hunter Powers: You then compare this Alien Observer Model with the stated model of how things are supposed to be working. The discrepancy between these two models is your opportunity. Once again, slightly more informal, you observe what's happening, you take note of all of the actions, you write them down and then you try to figure out looking at only those actions what is the strategy that supports them. And now that you have that strategy, you try to improve it.
Hunter Powers: Again, completely set aside from whatever people are saying is happening. You're just looking at the actions. And you're trying to figure out what is the absolute best strategy to get the results that these actions are getting. And then at the end, you compare this strategy with the strategy that's stated. And these strategies are our models. The model is a representation of the structure in place. Even more informal, actions speak louder than words.
Hunter Powers: You've probably heard that one before. And maybe it's a lot easier than the Alien Observer Model, but I believe the Alien Observer Model has some more subtlety than actions speak louder than words. Additionally, when you bring actions speak louder than words to a group of people, they tend to become really defensive because actions speak louder than words suggest that you're lying. And at a minimum, no one likes the suggestion that they are lying and it's not a suggestion of lying. It's a suggestion of a disconnection between the stated strategy and the results.
Hunter Powers: In an attempt to diagnose that disconnect, I'll share an example of using this strategy, the example where I came up with this Alien Observer Model and used it for the first time. In addition to my primary job, I consult with various engineering organizations, primarily on productivity-related issues, which really means the work that they expect to be getting done is not getting done.
Hunter Powers: A couple months ago, I was brought into a scenario where the company was three months late to market, meaning the software that they were trying to release was three months behind. They had 200 engineers working on it. And three months ago they had actually released the software, but in the first week, it crashed all of their servers and the servers are the computers that run the software. The investors were angry. This was a startup where a lot of the money that was running the day to day of the business was being supplied by investors.
Hunter Powers: The customers were angry because the software that they had been using crashed and was down for almost a week while they got the systems back together. And what this company came to me with was a question of whether they were being ripped off on the implementation of this software. And this is where the first layer of additional complexity comes in because you might ask, "How do you rip yourself off?" You implemented this software, your 200 engineers and now you're asking me, "Did we get ripped off?"
Hunter Powers: Well, their 200 engineers or 200 outsourced engineers and they kind of went back and forth between calling them their engineers and stating that they worked solely for them and then also referring to them as outsourced engineers. They were located in another country far away. And the head of engineering was also located in this land far away running these 200 engineers.
Hunter Powers: The reality of the situation seems to be that they contracted a company to set up this team of 200 engineers and then these 200 engineers were theoretically wholly allocated for them. And so when convenient, they would refer to these 200 engineers as employees and when inconvenient or when they were unsatisfied with the results, they would refer to them as these outsourced engineers.
Hunter Powers: So the rip off or the suggestion of a rip off came from the fact that they were paying this organization in land far, far away to deliver this software. They paid them a lot of money and then when it was delivered, it didn't work. It crashed the servers and now they were three months behind in trying to deliver this product. And the question that they wanted me to help them answer was, are they being ripped off?
Hunter Powers: The CEO felt he couldn't be completely confident in the head of engineering in short, because he always had an excuse and that excuse always seemed to kind of make sense and blame was always passed around.
Hunter Powers: There were also a couple of other statements made by the CEO. He talked about really wanting a great product. He talked about customer satisfaction being the most important part of their business, that they bend over backwards to make their customers happy. They talked about believing that this was a billion dollar opportunity, this new piece of software. And I can't give away the specific details, but in short, it was a program to optimize a certain part of people's businesses and there were already competitors in the market that were capturing more than a billion dollars in revenue, and this company already had many of those customers as customers of theirs. So they believed if they could introduce this product, they could easily capture a very large portion of the market.
Hunter Powers: And so I was left with this problem of figuring out, "Did they rip us off?" Now I've seen this scenario multiple times before. There's an old adage that you get what you pay for. And if you don't know, when you take a software project and you give it to a bunch of engineers in a land far, far away, the cost of those engineers is a lot less than employing local US engineers, oftentimes around one-sixth of the cost. So you can get six engineers for the price of one. And if you read the marketing material, these engineers are as good, if not better than the same engineers that you would employ locally in your US office.
Hunter Powers: So companies often see this as a obvious cost savings opportunity. There's no downside. And even if there is a downside, surely we can recover it. And that cost differential, it's only one-sixth of the cost. Even if we were 50% wrong, it would still be only one-third of the cost. Like we have an incredible amount of room for error in this and we can still come out ahead.
Hunter Powers: A casual observation. If this were true, wouldn't the majority of companies be doing this? Why does Facebook employ any engineers in the US? Why don't they send all of their work to these engineers in a land far, far away where they can get apparently the exact same quality at one-sixth of the cost? Why? Why wouldn't they do that?
Hunter Powers: Because you get what you pay for. And so that's an intuition. There's no guarantee that it's true 100% of the time. I know that through a lot of experience with this scenario, but this company does not appear to know that. And there's a problem with suggesting it in that this company has spent a significant amount of time and resources in making this decision that sending this project to a land far, far away to be implemented by 200 engineers is a good business idea, that they are probably asking the wrong question. They're asking did they get ripped off. And I'm asking, why did you ever think this was a good idea? So we need to get from point A of did they get ripped off to point B, why did you ever think this was a good idea. But we need to do it without attacking because attacking just yields defense and no one has time for that.
Hunter Powers: And so comes the Alien Observer Model. And for this we bring together the executive team, briefly explain what the Alien Observer Model is, and ask them to broadly outline the actions that took place. Here is roughly the summary of actions that the executive team put together. The CEO had come up with a long list of features for this new product that he wanted to bring to market and this had taken place primarily outside of the company's product team, which is where these features would normally originate from.
Hunter Powers: The company has an engineering team onshore or a local engineering team, and that team had estimated one year to implement this feature set. And while the local team was working through the requirements, the CEO gave the project to an offshore team. The offshore team had told the CEO that they could get this project done in two months. Again, we go from one year all the way down to two months at around one-sixth of the cost. And you might be saying in your head, "Well, of course that's impossible. How would they do in two months what someone else would take one year?"
Hunter Powers: But the local engineering team was only about 20 engineers and this offshore engineering team would be 200 engineers. So a factor of 10 bigger. So in theory, in terms of basic math, you might assume that they could get it done 10 times faster. So 10 times faster than 12 months would be 1.2 months. And then maybe they round it up to two to give themselves a little buffer.
Hunter Powers: And so the CEO gives the offshore team the project and redirects the onshore team, the local engineers to work on a number of issues that their customers were currently having.
Hunter Powers: Going back to customer satisfaction is the most important part of our business, let's take you folks and have you working on making our customers happier and we'll give this project to the offshore engineers where in two months they will deliver this new product that will bring us tons of new value.
Hunter Powers: So over the two months, the CEO continues to add additional features to the project. And two months quickly turns into six months. Throughout this time, almost no attention was paid to the design or user experience and the company's local design and user experience teams were not integrated with this project in any way.
Hunter Powers: Nothing was really tested beyond the offshore team telling the CEO that, "Yeah, it all works great" and then nothing really worked when it was launched. And it was at this point of launching it and everything failing that the offshore team then came back with a new estimate of six more months in order to deliver the project, giving the reasons that the scope or the features that were originally part of the project kept changing, that there was a lack of communication between their team and the main company, but that now they understood everything that needed to be delivered and they were confident that in the next six months, they would be able to release everything as was originally conceived. And the CEO was still continuing to add additional features to the project, and then finally that this was the third time that this pattern had played out at the company, the pattern being that a project was estimated locally and then given to a team offshore to complete in far less time.
Hunter Powers: And so we have our list of actions. There are some actions in here that are a little bit aggressive towards the CEO. The first action, the CEO came up with this long list of features. The CEO would say that "These were the features that we needed for our customers to be happy, to deliver a product to the market, that would do the things that we wanted to do. The billion dollar opportunity." Of course there's a long list of features. And then the other one about the CEO continuing to add features. Well, as we continue to learn more information, obviously we should address that information. If we determine that another feature must be in this product, in order for it to be a compelling product for the market, we have to put it in there because what's the point of delivering something if it's not going to actually serve our marketplace?
Hunter Powers: And sure, ideally we would have known this before we started, but we didn't and now we do know it. We need to take some sort of corrective action. And those statements are fine. I would say feel free to replace the actions that we have with that version of the actions. It's the same thing at the end of the day. If you listened to my old show, Pick a Side. Start a War, you can get a little bit more on that. Well, we aren't trying to start a war here, so sure.
Hunter Powers: The next step in the Alien Observer Model is to figure out what strategy supports these actions. And it's very important that we separate any statements from these actions. So the statements that they want a great product, that customer satisfaction is the most important part of their business, that they believe this is a billion dollar opportunity, you've got to not consider any of that and focus just on the actions.
Hunter Powers: I'm observing these actions and then I'm going to figure out after watching this, what must the strategy be? What must be going on here? So a couple of things seem to be true. The number of features seems to be very important. Speed of delivery seems to be more important than anything else. They don't appear to trust or properly value their local engineering team, because they're paying them six times as much, but the work that they're giving them is arguably the less important or less technically complex work.
Hunter Powers: And then finally, they appear to be optimizing for a very short lens. This system appears to be optimized for delivering results over a very short period versus delivering results over a very long period. Are you trying to maximize your reward over a two-month period, over a one-month period or over a three-year period? What is your horizon? And these actions suggest a very short horizon.
Hunter Powers: So then the next question, how do you optimize the strategy? How do you take it to its logical conclusion? Because you're an alien and you've observed this, you've determined that this is the strategy that's taking place, but because you come from this alien world, you believe you could do anything better, and so you're going to figure out how do I take this strategy and maximize it?
Hunter Powers: So there were a couple of optimizations that came out of the session. The first was that we should outsource product. If we value features and speed of delivery on those features above all else, then we should give the creation of those features to some outsource team as well, or multiple outsource teams. We have 200 engineers. Maybe we should have 200 product folks in a land far, far away coming up with feature ideas. What if we did this? What if we did that? What if we did this? What if we did that? What are all possible features that could exist?
Hunter Powers: And then as you come up with those features, give them to more and more engineering teams that are also in lands far, far away, where the cost of implementation is hardly anything. And then the other observation was to pre-sell all these features because the supposition was that the value of this product came from the magnitude of features.
Hunter Powers: Now that we had teams generating features upon features upon features every single day, well, let's bring those features to the market as fast as possible. And let's do that by pre-selling them. Pre-selling them is when you go out and you tell your customers about this wonderful new feature and it's not yet available, but you tell them that it's coming very, very soon. And I'd like to sell you the product today. And when you get it in two months, three months, six months, a year... The selling part often comes in around like two months. You'll have it in two months. The reality tends to come in about a year and then it doesn't actually work when you pre-sell at scale.
Hunter Powers: But pre-sell all the features because that's what your customers value. They just value the incredible array of functionality that you will provide. And now we have hyper-optimized our strategy for a very short lens, meaning that we will maximize the return over a very small period of time. And now we can also figure out what are the obvious faults in this strategy, which is that it falls apart over just a medium amount of time, because your features never really get implemented. And when they do get implemented, they don't really work. And then your customers get unhappy and then you don't have customers anymore. And then you don't have anyone to sell to and you don't have any revenue and your investors are unhappy, and you're actually in the exact situation that you're in right now.
Hunter Powers: So once we have the hyper-optimized strategy, the next question for the team is to figure out, well, what's the difference between this strategy and the strategy that's stated, the strategy of we want great products, that customer satisfaction is the most important part of our business, that we believe this is a billion dollar opportunity? Do these statements align with this derived strategy?
Hunter Powers: The answer is no, they don't because you're not taking the actions to create a great product. Customer satisfaction does not appear to be the most important thing because you're cutting corners at every step, and the results of cutting these corners have been seen multiple times before. Remember that this was the third time that this pattern had played out and that you believed that this is a billion dollar opportunity. You don't appear to be treating it like a billion dollar opportunity.
Hunter Powers: And so the Alien Observer Model allows us to get from the original question of did they rip us off to the real question of is our strategy the correct strategy. And it allows you to get there without taking a highly personal approach to it. We don't need to talk as much about who did what and why people believed certain things. It separates us from it. And it allows us to consider the scenario from more of a first principles approach. We can bring it back to basics.
Hunter Powers: Let's set aside all of the metadata about this scenario, all of the little caveats, all of the decorators and forms of these large statements about beliefs and virtues and let's take it back to the basics of what actually happened, just the facts. And then from those facts, let us derive the decorators or the statements about the situation and then we compare those statements with the original statements. And again, at the end of the day, this is really just actions speak louder than words, but it's a way of applying actions speak louder than words, and it's a way of going through this exercise with a group of people that is less antagonistic.
Hunter Powers: And of course you can also use this for yourself. There's something in your personal life or a situation that's primarily you and you can't figure it out. What's going on here? Again, stop thinking about what you think about the situation, what you say about the situation, what other people say about the situation, and go back to just the actions. If you were an alien observing this, what would you think was going on? What strategy would you think is in place? Then optimize the strategy. Then compare that strategy with what you think is actually going on. And the difference between these two models, that's where your problem is. All right?
Hunter Powers: Hopefully you found that interesting. It's a technique that I have found useful and that is your one idea for today, the Alien Observer Model. I am Hunter Powers broadcasting live from our nation's capital, as we say in the city, DC proper, Washington, DC. And until next time.