Simone Cicero

Hello everybody and welcome back to the Boundaryless Conversations Podcast. This podcast explores the future of business models, organizations, markets, and society in our rapidly changing world. I’m joined today by my usual cost, Shruthi Parakash. Hello Shruthi.

 

Shruthi Prakash

Hello everybody.

 

Simone Cicero 

And we are honored today to welcome our guest, a deep thinker and expert on complexity, decision-making, and the behavioral forces that shape organizations. Luca Dellanna. Luca is a management consultant, researcher, and author specialized in human behavior, risk, organizational resilience. His work bridges complexity science, psychology, and business strategy, which I believe is very relevant.

 

And Luca helps individuals and companies essentially make better decisions in uncertain environments. Luca also have a couple of books out, including Ergodicity and the Control Heuristics. And in general, I would say that through his work, have got some very relevant insights into how systems evolve, people make decisions, and organizations build robustness. And Luca, it’s great to have you on the podcast today.

 

Luca Dellanna 

Thank you so much for having me here.

 

Simone Cicero

Thank you. So Luca, your work often focuses on how humans and organizations navigate uncertainty, avoid fragility, and in general build systems that can withstand shocks. Another concept which is very dear to your work, that of ergodicity, which may be not familiar to everybody. At Boundaries, we explore similar dynamics, especially when we think about business model design, product design, and organizational architecture.

 

So I will probably leave it to you to give us first overview of how your work has been covering these topics. Maybe if you can lay down a bit of framework to navigate your understanding so that we can peek into some of the areas moving forward in the episode.

 

Luca Dellanna

Yeah, one of the key distinctions I make is the difference between decision-making and action-taking. And for me, decision-making is basically only as good then as the actions we take. Like usually the bottleneck most often is not just on making the right decisions, but especially on making sure that we take action, either in our personal life or if we work for a company like making sure that they are executed upon and that they are executed upon well in particular. 

 

And so for me, that means a lot of attention on the actual implementation problems, on the actual emotions that we are feeling, that others are feeling, on the sources of friction, and for me, it’s about acknowledging them and addressing them rather than maybe putting them under a rug or pretending that they do not exist. And so for example, one thing that I advocate a lot in the context of organizations is the necessity of digging deep and having direct conversations and direct observations. 

 

So by digging deep, I mean that the manager understands and knows what’s going on inside his company. Not from a quantitative point of view, so not necessarily numbers or reports and so on, but very much from a qualitative point of view, so what are people doing, how are they spending their time, what are their problems, what are their worries, and so on. 

 

And this is very hard to do if one tries to use methods that scale or for example, the reports, excessively long hierarchical lines. For me, it’s a lot about having direct conversations, skip-level conversations, and direct observations, which means spending some time where the work happens, where the key interactions happen, whether it’s within the company or with the customers and so on. All of this is really to bridge this gap between decision-making and action-taking, between theory and practice, and between the false certainty of taking theoretical decisions and the actual uncertainty and imperfections of the real world.

 

Simone Cicero

Great. As a starting point, you, I think, lay down a picture where there is a lot of focus on conversations, qualitative data and information, avoid decisions that are just, you know, situated in theory. 

 

I would like to ask you a reflection because, you know, in my experience, in our experience at Boundaryless, a lot in organization is generated in terms of outcomes, or at least can be generated through what we call enabling constraints. So essentially architectural choices, incentive structures, first principle thinking, reducing, let’s say, the overheads of the unspoken, unsaid.

 

But on the other hand, I perceive that there is a bit of friction between what you’re talking about, so qualitative information, going deep conversations versus just setting the constraints so that the system can evolve. So how do you, which is typically also a heuristic that you use in complex systems, right? So how do you merge these two perspectives? What are your thoughts in terms of this kind of friction that I’m perceiving at the moment?

 

Luca Dellanna

Yeah, I don’t see them in contrast. I think that first principle, setting constraints, are all extremely important. But what I’m saying is that if we only do that without also, every now and then, digging deep to make sure that our assumptions are correct and to see how our people are acting or their behaviour is changed by the constraints we put, then there is the risk that we have a system that makes a lot of sense, but then doesn’t change reality in the way we want. 

 

And so that’s why for me, I’m not saying at all that it should be all qualitative, conversations. Like realistically, it’s something that you do, like conversations or direct observation is something that you do a few times a month. 

 

But if you don’t do them, everything else you do might be detached from reality. That’s what I’m saying.

 

Shruthi Prakash 

So ya Luca, you mentioned, on sources of friction and so on. So for me, I’m curious, how do you design and build, you know, such systems that are anti-fragile? And how do you do that at a time when systems are increasingly sort of either platformized or decentralized and it’s an extremely complex system? So, how do you build such structures?

 

Luca Dellanna 

Yeah, just for the audience, so antifragility refers to adapting after a problem, to use problems as a way to drive adaptation. And so for me, I take this very much to heart. For me, making an organization antifragile means to ensure that when there is a problem, one, it is surfaced proactively rather than hidden under the rug or maybe we only discover once this act on it once it’s too late. 

 

And two, that the presence of the problem triggers an adaptation. And so for me, well, how you realize that it’s extremely dependent on the company at hand, on the structure, on the size, on the management system and everything. 

 

But deep down, it boils down to the question of, are our teams able to spot problems early? and do they adapt to them? For me, this is the driving question on the conversation. 

 

Then, well, how you apply it, it depends a lot, but how I personally do it is, if I’m hired by a company, for example, I will just speak with a team, not necessarily just at the high level, like I will do this at at every level including the warehouse or retail or production depending on the office line or accounting depending on the company. And I would just ask them to understand what was the last problem you discovered. How was it discovered? Was it too late? What happened? Was there an adaptation? Was the problem just addressed in the most superficial way or did we actually solve the structural problem? Was it easy? Did the organization help or did it actually get in the way? These are all excellent questions. Do people have the competence? Do they have the time? Do they feel like they have the authorization? Are people expected to solve problems? What happened the last time that someone raised their hand and they said we have a problem? Like what was the reaction of their manager? Was it a reaction that made them wish not to raise their hand anymore? Or was it actually something positive that makes other people more likely to raise their hand? 

 

These are all questions I would pay attention to.

 

Shruthi Prakash

Yeah, so for me, like, I’m curious, how do you sort of enable this, right, like the human behavioral aspect of an organization in that complexity? How does all of that therein affect like the strategy or decision making in an organization, hierarchy in an organization? I know Simone also asked us a little bit about ergodicity, right? The word is a little complex. So the concept itself, if it can be broken down a little bit further, it would be helpful.

 

Luca Dellanna 

Yeah, so first let me answer about how you enable this in the organizations. And first, let me tell you the way that doesn’t work. So the way that doesn’t work is when the top management says we have a new priority. And for example, let’s say the new priority is increasing safety or it’s making the company anti-fragile. And if that’s the only thing that’s done or the main thing driving the discussion. 

 

The problem is that in the mind of all employees, when they hear someone from top management that talks about a core value, there is always a question in the back of their mind, which is, they want me to really spend time on this, even if it means maybe not working on the current quarter’s results, or maybe even if it means increased costs, even if it means something like that. 

 

And so for example, when the CEO says, we want to increase the safety in the company, everyone thinks, do you want me just to do it when it’s easy, or do you also want me to do it when it’s hard and costly? 

 

And this is a key problem that must be addressed. So how do you address it? The only way you can address it is with costly signalling, which means that the CEO is actually the first person who takes some of its extremely precious time – For example, next time he visits the manufacturing plant to actually wear the protective equipment and to spend time discussing safety. And that’s precisely because it’s extremely valuable. His time is extremely expensive. 

 

That is a costly and thus powerful signal. Or more likely, more actionably, like there needs to be some action that demonstrates unambiguously that yes, management is on board and actually wants people to incur the costs of this new priority. 

 

I make an example that is extremely telling. When I joined one of my previous employers a few years ago, know, the first week there was a lot of training, the onboarding, and the core value that was repeated the most was safety. But in the back of my mind, I was in my early 20s at the time, and I was like, you know, maybe this is just the usual things that company HR says, but maybe people don’t really care about it. 

 

And then as part of the onboarding, a few weeks later, go to some of us, we are sent to a hotel in Geneva near the headquarters. And then the following morning, there is a chartered bus that picks us up from the parking lot of the hotel to go to a manufacturing plant that’s 30 minutes away. 

 

And it wasn’t just new people. There were also a lot of senior people. There was also my boss’s boss. So there were also extremely senior people whose time was very valuable. The bus arrives. My boss’s boss is the first one to climb. He notices that there are no seat belts. And he sends the bus back to the depot and asks for a new bus.

 

The result is 17 people stayed 45 minutes in the parking lot, including very senior people, so a very big cost for the company. But in that moment, everyone understood that yes, management actually wanted us to spend the time and effort and the data that the new priority requires. 

 

And so when you want to drive a new change in the organization, for example, let’s say, making it more anti-fragile, making sure that problems are addressed. There needs to be some of those events that show to people in a very non-cringe way, in a very genuine and organic way, that yes, actually management wants and expects people to do it, even if it’s not easy and even if it takes time. 

 

And then back to the point on ergodicity, which is an extremely bad, terrible word, and complex. wish whoever discovered the concept first chose a better name, but here it is. Don’t get scared because what I do in my books is that the title is this complex word, but I basically don’t use it until halfway and I don’t use definition, I don’t use formulas, I only use stories and examples to explain why it matters. And so I will do the same now. 

 

I will avoid the very tricky conversation of defining the term and instead I will use a story to explain what it is and why it matters for organizations. And the story is the story of my cousin. He was an excellent skier since an extremely young age. He made it even to the world championship for his age bracket. And then sadly, one leg injury after another, he had to quit professional skiing. 

 

And from him, I’ve learned the lesson that performance is subordinate to survival, especially over the long term. And I’m not making the banal point that survival matters to performance, we all know that, but I’m saying that it matters more than performance over the long term. And this is quite counterintuitive. So let’s make an example with numbers. Imagine a championship, a ski championship of 10 races. 

 

And my cousin is in excellent skier he has a 20 % chance of winning each race. However, he also takes a lot of risks, and so he has a 20 % chance of breaking his leg in each race. And the question is, how many races is he expected to win in a championship of 10 races? The naive answer would be two races, because we think 10 races, 20 % chances of winning each, 10 times 20% makes two. 

 

However, if we crunch the numbers, we arrive at the result that’s only 0.71. Why? Because if he breaks his leg in the first race, not only he loses that race, but he also loses all following ones because he cannot participate. And so this fact that consequences are irreversible and they have long-term impacts that you do not see if you only care about the current game that you’re playing, that’s basically the principle of irreversibility, or of ergodicity. That in the presence of irreversible consequences, you cannot extrapolate averages. Now, what it means for companies? Well, one, means that if you’re dealing with investing, for example, you cannot rely on averages because if you have an investment and it loses, I don’t know, 100 euros, not only you use 100 euros, but you also use all the following returns that those euros could have generated. 

 

The same applies to people. If someone burns out, you don’t lose the contribution, only the contribution of the people while they burn out, but also the future contribution they could have produced, the fact that even if they come back, they won’t be the same person, and so on. 

 

And this matters a lot when you take decisions, because if you want to take better decisions, you cannot examine the consequences of decision in a vacuum or in an arbitrarily short time frame, but you really need to consider the world environment and the world time horizon that you expect your company or your career to last.

 

Simone Cicero

I was trying to make this connection between the conversation around ergodicity and how you translated this into qualitative discourse. Because sometimes, you know, especially myself or in general, you know, people like me, maybe that are very much about architectures and structures and first principles.

 

We tend to think that you can achieve antifragility through architecture. But from what you are telling me, basically there is not this element of irreversibility that sits there and it could be very impactful. And therefore, you’re pushing for adding another layer of antifragility, let’s say, which is more care and more focus, more care, more conversations. 

 

And I translate that into some sort of passive and active antifragility. So there is a passive antifragility that can be done through architecture. You can do, for example, a company has a set of micro-enterprises. So you can have more options. You can have more optionality on the products you bring to the market. And so if something fails, maybe the others are less impacted.

 

But on the other hand, I feel like you’re talking about qualitative and active antifragility, for example, in culture. So I love that you mentioned these principles of leading by example, walking the talk. That all sounds like it resonates with the idea of creating a culture of attention, detailed attention, focus, being able to speak out. 

 

So for example, I was thinking to a company I talked yesterday, we were talking about the architecture. And at some point I was doing this interview and the guy said, don’t have a culture of people are not outspoken. If they see issues, they don’t talk about that. Which feels like a major risk that you cannot really mitigate just with architecture.

 

Luca Dellanna 

Yeah, exactly. I think that’s exactly what you said. Architecture is, of course, super important, but in my opinion, in most companies, it cannot be the only thing you can only rely on unless you maybe hired an exceptional group of people that already incorporates the necessary attitudinal, let’s say, elements that ensure that everything will work. In most companies in which, let’s say, hiring is more heterogeneous, or because they are large, they need to hire different levels and so on, then I strongly believe that there needs to be two parts, non-sufficient and both necessary, one which is the part about system design, architecture, incentives, and all these parts and the other one, which is the culture and the idea of…

 

Instead of caring about what are the rules, like we need to also think about why the rules might not be followed or how people would act in the cases that are not covered by the rules or where the rules or the incentives they contrast. 

 

And another thing which I would emphasize is also that there are always two sets of rules and two sets of incentives. One is the one that is written, and usually the sense from top management or from a top-down design. And the other one is the set that’s unwritten and usually the sense from your direct supervisor.

 

And that could be, for example, just the supervisor that cares about different things, that reacts to things in a different way, maybe to some things he reacts with anger or with frustration, or he doesn’t have anything. And so the big question when you have an organization at scale is, are you able to control, or at least to take into account, the unwritten incentives and rules that are given by the direct supervisors of people. And this is extremely hard to do only from an architectural point of view. And that’s why I think that most organization would also benefit by thinking in terms of directly engaging with the supervisors, making direct observation to see how the supervisors supervise, how the managers manage, and make sure that that’s aligned with the architecture, the system and the incentives and the culture that we want the company to

 

Simone Cicero

Quick question, I don’t know if you have one, but I was thinking about how do you create these cultural codes. Because it sounds to me that it needs to really be genuine and it really needs to be felt. So you cannot just say, okay, all the supervisors, please read this cultural code book and they magically become attentive to detail, looking to psychological safety.

 

How do you create incentives or structures that generate such a culture that can generate these active antifragility behaviours?

 

Luca Dellanna

Yeah. let’s be excellent question. Let’s begin with the incentives. So the key thing to understand is that usually in the company, you have two contrasting incentives. One, which is profit or productivity or whatever is the leading business metric. And two, whatever you want the cultural metric to be. I don’t know, safety, ethics, respect for people, customer care, integrity, something like that. And there will be situations in which those two things, the overall, sum of the two forces points in directions that are not aligned, which leads to trade-offs.

 

And the key is that this only happens if the incentives are additive. Which means if, for example, someone’s bonus is made, I don’t know, 50 % revenue and 50 % culture, they will take trade-offs.

 

If the promotion can be given to someone who scores very high on business metric but very low on culture, there will be trade-offs. And the only way to avoid the trade-offs is to make the incentives all necessary and unsufficient. Which means you tell their people you perform well on business but not on core values. You don’t get your bonus, you don’t get your promotion. But you also need to avoid virtue signaling. So you need to do the opposite. You perform great on culture, but you do not perform well on business metrics. That’s also not sufficient. No bonus and no promotion. 

 

And only when you put them both as necessary and non-sufficient, then the magic happens. Like suddenly you freed people from the trade-off and they will start to think about solutions and to live their day in a way that’s compatible both with the business and both with the culture.

 

So this is the key thing related to incentives. And trust me, it’s harder to start because people are not convinced, but I’ve seen it work so much more often than, like when it’s tried, then it actually works, works fantastically. 

 

So this is the first thing. then there’s, and of course, like this is something that you need to be extremely clear before. Because if you are not clear at the beginning of the year and then at the end of the year you tell someone, you won’t get your bonus even if you achieved your sales quota, then they will be pissed and it’s something you want to avoid, of course. So you need to be extremely upfront about it. 

 

Okay, that said, in addition to that, there is the problem of scale. Like it’s extremely hard to drive a counter-intuitive transformation at scale with methods that scale. And the way you drive a counter-intuitive transformation at scale is using methods that do not scale. And methods that do not scale means that in addition to emails, videos, posters, documents, and all the things, you also do things that do not scale, which means direct observations, skip level meetings, actually some member of top management going to address directly the supervisors and so on, these kind of things. 

 

I always make the example, the analogy, the metaphor of our blood system. If you think about our circulatory system, the heart is at the center and pumps the oxygen into our blood. However, then we have arteries and the arteries divide into vessels and the vessels into capillaries. Why? The reason is because blood cells can only exchange oxygen with the cells that are adjacent to them. And the same applies to culture. Culture can only change can only be transmitted with people you are adjacent to. So people that you speak face to face or even over Zoom, but where you have a direct contact, where you know each other, where you know the work of the people you are talking with so that you can make examples that are relevant to them and where they know you and they know that you know their work so they can trust that you’re not an empty suit from the boardroom and so on. 

And so I always say that culture, requires a capillary system. So a system that branches out and doesn’t try to skip levels because you cannot transform people at a distance.

 

Simone Cicero 

Right. mean, Shruti, I know you have some other questions. I wanted to have a last follow up on this because I believe it’s very interesting. yeah, first of all, I I resonate a lot on this idea of aligning and compounding versus optimizing for trade-offs between cultural elements and business related outcomes. 

 

For example, we had Rebecca Parsons recently, right? She was a big advocate of sustainable platforms and diversity and whatever, but she always brought up into why this is significant from a business outcome perspective. So I think it’s really, this conversation struck a chord in this sense. 

 

Secondly, I want to highlight another thing you said, you need to be upfront with these rules. And this is very resonant with the conversation we had last year with João Rosa and Trond Hjorteland when we spoke about avoiding the so-called agile bureaucracy, right? The idea that if somebody can step in and kind of cancel the agreements, that doesn’t work. You you generate less fair dynamics, which are tragic. And this is very related to also our architectural and topology practice with the 3.0 based on random hay, which has a very strong use of contracting. So contracting is one thing, management nodes are different things. So contracts are much more solid. 

 

So that was a quick recap.I wanted to say that there are general, I would say, timeless laws that we can adopt in designing architectures that fit with complexity, like, for example, SGP law, or you can use similar approaches. So for example, if you want to deal with complexity at multiple scales, you need to build complexity in the organization on multiple scales. 

 

So we have this kind of timeless heuristics in terms of how do you architect the system. But are there any timeless, general, overly applicable, always applicable cultural elements, some sort of cultural truths that a modern organization that wants to fit with antifragility has to embrace?

 

Luca Dellanna

Yeah, so one such stuff is that whatever you do, you won’t create change unless the supervisor is aligned with it. So if a supervisor of a certain team does not have actual buy-in, like doesn’t actually walk the talk with the transformation you want to make, it will most probably fail. So.

 

So that means that whatever is your cultural strategy, it needs to make sure that the supervisors have an actual buy-in, which doesn’t mean a passive commitment. Passive commitment means they come to the meetings and they nod and so on, but then they don’t really do it with the actual importance. But commitment means I agree that’s important and we will do it. And I will do it and I will do it with conviction.

 

So this would be one such principle. The other principle is that communication that scale can be useful or even necessary, but it’s never sufficient. And if it looks like it was sufficient, that’s because in addition to that, there was also good communication not at scale that happened even if it wasn’t organized but it happened anyway because you hired the right people or because it was a transformation that people actually already wanted and so on. 

 

The other principle has to do with cultural mass. So that’s a principle which again, I can explain it better with an example. Some time ago, I got engaged by a manufacturing company that had some steps that were quite artisanal, meaning that lot of things were assembled by hand and so on. And so the warehouse was very messy. There were components on the ground, the tools not in their place and so on. 

 

And the operations manager told me that he tried everything. But he couldn’t convince his people, they just didn’t think it was important to keep the warehouse in order. And so what we told him was that for a moment he should forget about the warehouse as a wall and instead only care about one specific corner of the warehouse. And we picked the corner of the warehouse that had a fire extinguisher because we thought it’s the one where you can argue there is a very good reason why that corner of the warehouse cannot have components or tools on the ground because we need to access the fire extinguisher. 

 

And we told him that for one month, he should obsess over that corner, which means that every single time that he walks in the warehouse, first thing he does is to look at the corner and if there are components on the ground, stop whatever he’s doing and pick the closest person to the corner and have them pick whatever component was on the ground and put it in the right place.

 

And what happens is that the first week it was quite, let’s say, a lot of a hassle, like he had to remind his people over and over. Second week, they got the message and the corner was empty. And then the third week the magic happened and the rest of the warehouse started getting cleaner. 

 

And the lesson from this is that once you create a habit in a narrow niche, the habit can spread because people tend to apply it to other places of their life and work. However, you cannot crystallize a habit unless you achieve a certain critical mass where every single time you need to do the right behavior. Because if instead the manager only told the people once a week that they need to keep the corner and what happens is that on Monday, the people, they clean the corner. And then on Tuesday, the corner has already components. And they notice that the manager noticed, but no one is saying anything. Then they basically learn the lesson that it doesn’t really matter. And they don’t build the habit. 

 

And so one core principle is that if you’re having trouble driving change, one of the best thing you can do is to shrink the scope of change so that you can gain the bandwidth that you can obsess over it enough to crystallize the habit. Because ideally, it would be very easy to say to the managers, you just insist, insist, insist until the habit gets done. In reality, managers don’t have the time to do that. And if they don’t have the time to do that and they only do it once a week, they can do it once a week for their whole career and nothing will change.

 

Instead, they need to do it multiple times a day for a few weeks, and the habit will crystallize, and then they can move to the next thing. And so my advice would be resist the idea of changing everything at once and niche down, which could be instead of changing the whole company, now we only change the second floor of the office, of this one office. Or it could be instead of creating, I don’t know a culture of antifragility, which is very vague, we focus on building antifragility in one thing. For example, let’s say, quality defects. And then it’s specific enough so that you can obsess it and create enough events during the day that can crystallize the habit over a few weeks.

 

Simone Cicero 

I love this trait of embodied practice that you have. Also this idea of ergodicity, it’s really much about embodying antifragility, right? Because if you die, you’re done. You cannot go back and say, I suppose I was antifragile. 

 

Shruthi Prakash

Yeah, I had written some points on how a lot of what you said had to do with observation or some level of, let’s say, shadowing and so on. So I have a couple of questions. So first is, at any point, does this become performative in that sense that by especially leadership, does it become performative? 

 

Is there any way to standardize this, considering the fact that especially when so much of qualitative aspects are involved, there’s going to be like high amounts of biases, either cognitive or any other form of biases. How can you or can you standardize this process? And does this also apply, let’s say, across industries, across different types of organizations, which are either, let’s say, hierarchical, non-hierarchical, flat, and within organizations itself, there are breaks, breakdowns on how

 

let’s say each team participates or each team operates and so on. So can this be sort of standardized one across organizations? there like a playbook rule book that, you know, can be followed? And yeah, that’s pretty much it. Yeah. And like the performative part of it.

 

Luca Dellanna 

Yeah, thank you. I love the question on performative because that’s actually the risk. the risk, but this is a risk that happens with any initiative in which you don’t have these direct observations. Because when you’re doing the observation, again, the important is not to focus on the, let’s say, the aesthetics, but to focus that we’re actually doing it. 

 

So for example, if what we want is a culture of antifragility and one of the key best practice that we find out is the idea that we do postmortems. Like every time that there is an incident, we try to think what we can learn out of it and how we can solve it so that it doesn’t happen again. Well, you can do it performatively or you can do it in a way that’s actually effective. How?

 

The only way that you can have to know whether your people are doing it performatively or effectively is by being there while they do it. Of course, it doesn’t mean doing it always. You can do it once every six months and you will get a good idea of how they’re doing. 

 

Simone Cicero

Again, doing the work of showing up and exactly.

 

Luca Dellanna

Showing up, being there during the meeting, during the incident investigation meeting, for example, and so on. And then the way that you can prevent it from degenerating into performance as it trickles down the organization is skip levels. Because if you don’t do this skip level, what happens is that there can be a broken phone. Where I think that the one below me does it correctly, but then the one below me is not able to correct the person below, and then the third level does it incorrectly and so on. 

 

And the only way you do that is if you check with both levels below you, the one immediately and the one two levels down. Because the one that is two level down is important for you to know whether the one that is one level below you is able to transmit the same standards to the levels below. 

 

So this is important. And I know that at this point, usually some people tell me like, look, you’re crazy, we don’t have the time to do that. And actually, I always laugh when I say that. One, because you don’t have the time, like some organization, they say they don’t have to the time to do that, but then they have the time to deal with all the issues that happens because the culture is not there, they rework and so on. And then the second thing, I always make a sports metaphor.

 

Like imagine a sports coach, a soccer coach, a basketball coach that never watches the players play and only manages from the meeting room and only reads about the performance of the players looking at the scoreboard. They will be a terrible coach. There is no way that you can improve the way your people play if you don’t watch them while they play.

 

And so this is why for me it’s so important this element of direct observation.

 

Simone Cicero 

Shruthi, maybe I can add at the bottom. So if you want to just ask yours and I can add a bit of nuance.

 

Shruthi Prakash 

I mean, I understand your point, but for me, it feels like a lot of power is being passed on to leadership. And it’s from a very like hierarchical point of view. And let’s say for leader performs a certain way, right? Does that automatically means it’s going to then trickle down. So is it like that? Am I getting it right? What happens then if it’s a little bit more of a flatter structure? Yeah, Simone, you could also add.

 

Simone Cicero 

Yeah, I mean, that was my question basically, because I hear about management by in leading by example, lot of talking about supervisors, which I don’t, I mean, I’m not a big fan of self-management as an idea ideology, I must say, but I can see the benefits sometimes in terms of distributing decision making to the edges of the organization. 

 

So I have, I would say, feelings about talking a lot about leadership and supervising versus the group dynamics that I believe. And that’s also why maybe my focus is a lot about incentive structures, right? Because I’m not a big fan of understatements, okay? So if you these anti-structures, my idea is that they translate into cooperative behavior. 

 

But I would love to hear from you, for example, if you can see some intrinsic limitations in self-management in dealing with antifragility, which I see, to be honest, because for example, I see a lot of times in my life where decisions have been taken in a wrong way because in a collective decision-making process, some of the people involved for the sake of having a collective decision, did have enough skin in the game in the outcomes. So these are the kind of dynamics I would love you to jump in.

 

Luca Dellanna

Yeah, thank you. So, skin in the game, extremely important of course.

 

You can create skin in the game in two ways. One is through incentives. The other one is just on the personal level. At the personal level. But yeah, there has to be like… The point is that there are some ingredients that have to be there for it to work. And then it doesn’t really matter how you provide them, as long as you provide them. 

 

So for example Simone, you pointed out the importance of skin in the game, extremely important. And there are multiple ways to create it. You can create it through incentives. You can create it through these interactions. I’m relatively agnostic to the way in which you create it as long as you create that. 

 

Like the other thing is, for example, culture. Again, company requires some cultural elements to work correctly. How you provide them, I’m a little agnostic to that. You can provide them by hiring for culture, for example. 

 

You can create them by perhaps, yeah, with some specific structure, with some things. Or you can create them with the kind of more top-down initiated way that I was suggesting. Again, I’m very agnostic as to how you create it as long as you create it and as long as you have something that works. 

 

My suggestion would be to consider like all of three of these things, the incentives, the architecture, and the personal interactions, and if you see that one is not able to drive the change you want, then you should probably start adding one of the other, or at least it’s my thinking. 

 

Then another thing I want to say is that autonomy is also extremely important in distribution. And I want to mention that the things I was mentioning them, not necessarily for, they don’t have to be applied and they’re best if they’re not applied for everything. But the question is to nail down those few things that you think matter. 

 

So for example, if you’re a company and you think that the one thing that you really need to nail down is, I don’t know, cost savings or attention to the customer, then I think that, well, you can try just with a structure and with incentives. And then if it doesn’t work, the next thing that I will do will be to take care of the personal interactions, let’s say.

 

Simone Cicero 

Fascinating because in the background I was thinking about, it looks like from your point of view, and correct me if I’m wrong, you kind of acknowledge certain traits of human psychology and dynamics, group dynamics, where you’re telling us, for example, when you say a timeless principle is you need supervisor buy in, you need to lead by example, right? 

 

This seems to me of acknowledgments that when you have groups, you need somebody to show leadership in a certain way so that the others can follow. And it’s also resonating with this idea of niches and large scale systems. The niche demonstrates the system follows. 

 

So I think it’s fascinating because, for example, when I think about Haier’s Rendanheyi, which is a very much distributed way of managing an organization is what we used to create our trio platform organization structure. You have this idea of micro enterprises and very much embedded in their thinking, which is not even Western thinking, right? They are very much, I mean, Daoist company that recognize the system as essential. 

 

But at the same time, they have this idea of ME ownership. So an ME always has an owner. So there is this role that is recognized in the micro enterprise, the owner. And so I was thinking that, and this also resonates a lot with these ideas that are emerging in the conversation right now, management, like founder mode, the element of source work from Peter Koenig. 

 

So recognizing this kind of leadership element in the psychology of how we work. And for me, I reconnect this idea that ergodicity doesn’t really bode well. If we recognize ergodicity in systems, it doesn’t bode well for self-management. Because in a large group of people that are supposed to self-manage, if you assume that on average they’re all good, that doesn’t work, you know, because if there is one hassle, this is going to ruin everything. 

 

So this is a very fascinating conversation for me. It kind of gives me some psychological and, you know, heuristics that kind of talk to speak to my understanding that self-management is not a good recipe for everything. And at least, you know, you have to recognize this for leaders in systems. 

 

What do you think about that?

 

Luca Dellanna 

Yeah, exactly. think that this idea, for example, what do you do? What if there is a hassle? Completely question that you should ask yourself. Or what if there is someone who lacks the skills to do things effectively? Will we be able to discover it? Will we be able to improve that?

 

Because one thing I’ve noticed with if you try to only manage by incentives, you let a lot of the effectiveness of these depend on the agency and the skills of the people involved. And you see this in real life. 

 

Like in real life, we all have an extremely strong incentive to make money. Results may vary. And while I’m an extremely strong supporter of capitalism, of course, and of like letting the incentives do their work and see that, I also recognize that if you put two societies, one that is only looks into incentives, and the other one that together with incentives also tries to up-level what each individual is able to do by providing the required some training, some know-how, letting them know their blind spots, giving them suggestions and so on, the second society, I think, will definitely outperform. And the same applies to companies. 

 

One thing I see when there are excessively distributed systems is that they can work. The question is whether they will work even better if there were some way in which you can spot what is the lead on each person’s talent, on each team’s talent, and you help it unlock with some perspective from outside, from someone who maybe has been there already or has that missing know-how.

 

Simone Cicero 

Fascinating. Thank you.

 

Shruthi Prakash

Yeah, for me as well, it stood out as sort of incentive system sort of driving more of the extrinsic motivation versus a lot of what you mentioned, I presume will drive the intrinsic motivation of a person. So that’s interesting. And the part of making it niche, I assume will also lessen the risk, make it easier to sort of test hypothesis that we might have to achieve short term versus longer term goals. So that’s really interesting for me to learn as well today. So thank you. 

 

Okay, Luca, so towards the end of our podcast, we have this section called as the breadcrumbs where we ask our guests to share some insights, maybe books or suggestions, podcast, something that inspires you in your journey or what you recommend our listeners can gain from.

 

Luca Dellanna 

Yeah, thank you. So, well, for sure, I suggest all the listeners, if they haven’t already read the Nassim Taleb, to read that. On top of that, specifically for management, a couple of books that I really liked. One is called Scaling People by Claire Hughes, which was the former CEO of Stripe.

 

It’s not an exhaustive book, meaning that it definitely doesn’t tell you everything you need to do to be a good manager, but the things it tells you are very good. And then another book which I really like is How Big Things Get Done, which is about project management, but it’s extremely relevant to everyone, even people who are not managers or project managers, because you will be a manager at least a couple of times.

 

in your life, if it’s for your own wedding or your house renovation, and you want to make sure that you nail that. And there are some mistakes that if you do it, they will end up you cost double the money and so on. And that’s a fantastic book to avoid those mistakes in these few crucial moments of your life. And then another book which I really liked, if you deal with hiring, it’s Who.

 

W-H-O, I cannot remember the name of the author, but it’s excellent.

 

Simone Cicero 

Right, we’re going to add it to the notes.

 

Shruthi Prakash 

Yeah, thank you. So just wanted to ask you if you would like to share how listeners can reach out to you as well, maybe your socials or any other page you’d like them to check out from your profile.

 

Luca Dellanna 

Yeah, so my website is luca-dellanna.com. 

 

Simone Cicero 

Thank you, the book is Who? Geoff Smart and Randy Street, am I right?

 

Luca Dellanna 

Yes, thank you.

 

Simone Cicero

Thank you. Luca, it was amazing, really, for me. Great resonance. Really, thank you. I hope you also enjoyed the conversation as I did. Thank you. Thank you. And Shruthi, always brilliant, as always.

 

Luca Dellanna

I did very much, thank you so much.

 

Shruthi Prakash

Thank you. Thanks, Simone. Thanks, Luca.

 

Simone Cicero 

And for our listeners, of course, you will find everything that we discussed with Luca today. If you head to Boundaryless.io/resources/podcast, that will be this episode in front of you. You will find the notes, all the links, the books that Luca mentioned, the concepts and all the transcripts. Of course, until we speak again, remember to think Boundaryless.