Saturday, September 23, 2017

The Only Country in the World

Software systems that interact with people speak volumes about the people who designed them. In particular, software systems used by travelers often send a clear message: “This is the only country in the world. If you are an outsider, you are not welcome.”

Let’s start with the US. If you want to buy gas at the pump – as almost anyone who travels by car needs to do occasionally – and you don’t have a US zip code, you are out of luck. The gas pumps will require a five digit zip code that matches your home zip code, which, of course, you don’t have. US software systems for purchasing gas are very clear: If you don’t live in the US, you can’t buy gas here.

Not that it’s easy for me to buy gas in Europe, because there I need a chip-and-pin card. But credit card companies in the US have settled on chip-and-signature cards, effectively preventing me from purchasing gas at a pump in Europe. My European friends have no sympathy, since they can’t purchase gas in the US either.

Of course, the problems with my chip-and-signature card do not lie in the gas pump software, but in the choice made by US credit card issuers to use signature as the authentication method. We all know that signature authentication is a joke which leads to a far less secure credit card, but in addition, it prevents me from using the pin authentication systems that are common outside the US. My credit card company has issued me a chip-and-signature card that they claim is a “travel card” – which would be true if the US were the only country in the world. But should I happen to travel to another country, not only are gas pumps off limits to my chip-and-signature card, but I can’t purchase train or bus tickets – or anything sold at a kiosk.

There are other countries where software systems used by travelers are limited to residents. For example, in the Netherlands, train tickets are typically purchased through a bank account which – you guessed it – must be at a Netherlands bank. Earlier this year, I was unable to purchase NS train tickets online with a credit card; I had to get a colleague in the Netherlands to purchase online tickets and email them to me. I didn't want to chance getting tickets once I arrived, since I understand there are very few NS ticket kiosks usable by outsiders.

In the UK, there are very nice train discount schemes; for example, two people traveling together can get serious discounts. The catch is that they must first purchase a discount card with pictures of the two travelers, which can easily be obtained online, but must be mailed to a UK address. True, it is possible to obtain a discount card at a train station, but not at Heathrow – and where do you suppose most travelers arrive? Unlucky travelers without a UK address must pay full price for (expensive) Heathrow Express tickets, and then stand in line at Paddington with the proper paper applications and photographs to get a discount card.

Attention UK software designers: did it occur to you that some people don’t have a UK address? How hard would it be to charge a bit more for shipping to addresses outside the UK?

You would not think that Sweden would belong to the club of countries with software systems designed as if it were the only country in the world. But when we arrived at Arlanda airport on a Friday night and tried to buy the special weekend two-for-one ticket on the Arlanda Express, it was not on the kiosk menu. (Yep, I was using a chip-and-pin card – my debit card!). I searched and searched and finally saw the message stuck to the kiosk below the screen: A recent change had been made: now the special discount ticket could only be purchased through the Arlanda Express app or online, not at the kiosk.

Reading between the lines, this is clearly an attempt to limit the best Arlanda Express ticket pricing to Swedish residents. "Not so!" the software designers probably argued. "Anyone can load the app and buy a ticket." How am I supposed to load an app, validate my payment method, and buy a ticket before the train leaves – all without internet access? I complained to the train conductor, who said he thought the scheme was terrible – he has listened to complaints from countless deeply annoyed visitors to Sweden – would I please complain directly to customer service? As I was composing my complaint email on the train, I had to listen to messages about how hard Arlanda Express was working to make our experience wonderful. Yes, but only if you happen to live in Sweden.

We took a taxi to our Stockholm hotel from the train station and tried to pay the driver in cash, only to learn that our Swedish money was out of date and no longer legal tender. So I asked at the hotel desk how to change the old notes into new ones. The person at reception was very helpful – she told me that I could mail the cash in with an on-line form and the money would be deposited in my bank account, even if it were a “foreign” account. I was skeptical. And sure enough, when we looked at the form (which was in Swedish) we found that only bank accounts with IBAN numbers would work. Those of us from countries without IBAN numbers are apparently too foreign to merit a convenient way to get our money back, even though we are the most likely people to have the old currency.

Clearly there are far too many software systems in the travel industry that are built as if the local country were the only country in the world. This is a plea to all the software teams designing systems that might be used by travelers from another country – or might be used by your customers when they travel to another country – have you built your system as if your country were the only country in the world? Why not try a few use cases for travelers from / and to / other countries? We exist, you know, and we’re getting tired of arrogance embedded in software.

Saturday, January 14, 2017

The End of Enterprise IT

Two years ago, the employees at ING Netherlands headquarters – over 3,000 people from marketing, product management, channel management, and IT development – were told that their jobs had disappeared.  Their old departments would no longer exist; small squads would replace them, each with end-to-end responsibility for making an impact on a focused area of the business. Existing employees would fill the new jobs, but they needed to apply for the positions.[1]

It was a bold move for the Netherlands bank. The leaders were giving up their traditional hierarchy, detailed planning and “input steering” (giving directions). Instead they would trust empowered teams, informal networks, and “output steering” (responding to feedback) to move the bank forward. The bank was not in trouble; it did not really need to go through such a dramatic change. What prompted this bet-your-company experiment?

The change had been years in the making. After initial experiments in 2010, the IT organization put aside waterfall development in favor of agile teams. As successful as this change was, it did not make much difference to the bank, so Continuous Delivery and DevOps teams were added to increase feedback and stability. But still, there was not enough impact on business results. Although there were ample opportunities for business involvement on the agile teams and input into development priorities, the businesses were not organized to take full advantage of the agile IT organization. Eventually, according to CIO Ron van Kemenade (CIO of ING Netherlands from 2010 until he became CIO of ING Bank in 2013):[2]
The business took it upon itself to reorganize in ways that broke down silos and fostered the necessary end-to-end ownership and accountability. Making this transition … proved highly challenging for our business colleagues, especially culturally. But I tip my hat to them. They had the guts to do it.
The leadership team at ING Netherlands had examined its business model and come to an interesting conclusion: their bank was no longer a financial services company, it was a technology company in the financial services business. The days of segmenting customers by channel were over. The days of push marketing were over. Thinking forward, they understood that winning companies would use technology to provide simple, attractive customer journeys across multiple channels. This was true for companies in the media business, the search business, most retail businesses, and it was certainly true for companies in the financial services business. Moreover, expectations for engaging customer interactions were not being set by banks – they were being set by media and search and retail companies. Banks had to meet these expectations just to stay in the online game.

ING Netherlands’ leadership team decided to look to other technology companies, rather than banks, for inspiration. For example, on a trip to the Google IO developers conference Ron van Kemenade was impressed by the amazing number of enthusiastic, engaged engineers at Google. He realized that such enthusiasm could not surface in his company, because the culture did not value good engineering.

Let’s be clear, engineering is about using technology to solve tough problems; problems like how can we process a mortgage with a minimum of hassle for customers? How can we reduce the cost of currency exchange and still make a profit?  How might we leverage Europe’s movement to open API’s for our customers’ advantage? These are the kinds of questions that are best answered by a small team of crack engineers working closely with people who deeply understand the customer journey. But at ING Netherlands, technology improvements were being worked out by people in the commercial business who would then tell the engineers what to develop. Not only is this a poor way to attract top engineers, it is the wrong way to create innovative solutions inspired by the latest technology.

The leaders at ING Netherlands decided to investigate how top technology companies attract talented people and come up with engaging products. Through concentrated visits to some of the most attractive technology companies, they saw a common theme – these companies did not have traditional enterprise IT departments even though they were much bigger than any bank. Nor did they have much of a hierarchical structure. Instead, they were organized in teams – or squads – that had a common purpose, worked closely with customers, and decided for themselves how they would accomplish their purpose.

ING Netherlands decided that if it was going to be a successful technology company and attract talented engineers, it had to be organized like a technology company. Studying the best technology companies convinced them that they needed to change – and the change had to include the whole company, not just IT. The bank had already modularized its architecture, streamlined and automated provisioning and deployment, moved to frequent deployments, and formed agile teams. But this was done within the IT department rather than across the organization, and the results were not exceptional. Now it was time to create a digital company across all functions.

They chose to adopt an organizational structure in which small teams – ING calls them squads – accept end-to-end responsibility for a consumer-focused mission. Squads are expected to make their own decisions based on a shared purpose, the insight of their members, and rapid feedback from their work. Squads are grouped into tribes of perhaps 150 people that share a value stream (e.g. mortgages), and within each tribe, chapter leads provide functional leadership. Along with the new organizational structure, ING’s leadership team worked to create a culture that values technical excellence, experimentation, and customer-centricity.

So how well did this major organizational change work? Certainly, it was not without problems. Some people did not want to work in the new environment, and there was not necessarily a role for everyone. So there were layoffs. But the people who stayed were intrigued by the new way of working and quickly became acclimated to their new jobs.

Another problem involved answering the question “What makes a ‘good’ engineer?” For this the bank adopted the Dreyfus model of skill acquisition (novice, advanced beginner, competent, proficient, and expert). It set up an internal ‘academy’ of classes – usually taught by senior engineers – to help everyone develop the skills needed for a future in a technology company.

Perhaps the biggest issue is one that anyone with a background in organizational development would expect – creating alignment across the many autonomous teams has been a formidable challenge. The bank needs to make major changes and develop breakthrough innovations; but these require coordinated action across multiple, supposedly autonomous, teams. Even the top technology companies ING bank studied have not really solved this problem. Ron van Kemenade summarized the problem this way:[2]
We had assumed that alignment would occur naturally because teams would view things from an enterprise-wide perspective rather than solely through the lens of their own team. But we’ve learned that this only happens in a mature organization, which we’re still in the process of becoming.
Centrally driven program management is now used to arbitrate priority conflicts and create alignment, while standardization of back end systems (e.g. data centers) and support functions helps maintain the operational excellence and regulatory compliance necessary at a large bank.

Despite the challenges, ING Netherlands views its new organizational structure as a significant success with sizable benefits to the company. The strategy adopted by ING Netherlands – an organizational structure composed of small, integrated teams, along with an emphasis on simple customer journeys, automated processes, and highly skilled engineers – is expected to spread to other parts of ING Bank.

The moral of this story is simple: agile transformations are not about transforming IT, they are about transforming organizations. If you are going through an agile transformation in your IT department, you are thinking too narrowly. Digitization must be an organization-wide experience.
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Footnotes:

[1] From: ING’s agile transformation, an interview with Peter Jacobs, CIO of ING Netherlands, and Bart Schlatmann, former COO of ING Netherlands, in McKinsey Quarterly, January 2017. See also: Software Circus Cloudnative Conference keynote by Peter Jacobs. (Peter Jacobs, replaced Ron van Kemenade as CIO of ING Netherlands in 2013.)

[2] From: Building a Cutting-Edge Banking IT Function, An Interview with Ron van Kemenade, CIO ING Bank, by Boston Consulting Group. See also talks by Ron van Kemenade: Nothing Beats Engineering Talent…The AGILE Transformation at ING and The End of Traditional IT.