“Have you recently heard the CEO or other senior executive of a company say something like, we’re a technology company now?” asked Andrew McAfee ealier this year in his keynote at the 2024 MIT IDE Annual Conference. McAfee is a Principal Research Scientist at the MIT Sloan School of Management, and co-founder and co-director of MIT’s Initiative on the Digital Economy. “And in particular, when you heard that person say that, did you think to yourself that’s really not a technology company at all?”
He explained that what CEOs are trying to convey when they say that they run a technology company is that their company needs to be managed very differently now. The pressure to innovate, remain agile and execute at the very high level that technology companies have felt for the past two decades has actually been getting more intense and now applies to their own companies, regardless of the industry they are in.
McAfee’s keynote is based on his November, 2023 best seller The Geek Way: The Radical Mindset That Drives Extraordinary Results. The book’s thesis is succinctly articulated in its introduction: “A bunch of geeks have figured out a better way to run a company. As a result, they’re taking over the economy. And they’re just getting started.”
The term geek is commonly used to mean “an expert in a technical field, particularly one having to do with computers.” But McAfee explains that his book is not about “what a bunch of computer geeks have created. It’s instead about the creations and achievements of a bunch of business geeks: people who got properly obsessed with the hard problem of running a modern company, came up with unconventional solutions, and implemented them.”
One way to test the thesis that business geeks have figured out a better way to manage a company is to look at the economic performance of companies in the regions with the highest concentrations of geek-managed companies. In the US, most such companies are in the West coast, especially in Silicon Valley and the Seattle area. So, McAfee compared the market capitalization of the 100 most valuable US companies in 2002 to their market capitalization in 2022, grouped by the location of their headquarters. One group included those companies headquartered in the 3 West coast states, — California, Oregon, and Washington, — and the second group included companies headquartered in all other 47 states.
By the end of 2002, “the West Coast was home to a cluster of large tech companies that were comparatively young. However, most big companies were elsewhere. Eighty-four of the 100 largest companies were outside the West Coast, as was more than 80% of the total stock market value of this group. America’s large-company landscape was dominated by names that had been around for a while: Citigroup, J.P. Morgan, and the American International Group (AIG) in financial services; Merck, Pfizer, and Johnson & Johnson in life sciences; IBM in information technology; and the General Electric conglomerate.”
But, things were quite different twenty years later. “By the end of 2022, the West Coast bunch contained almost as much large-company stock market value (47%) as did the entire rest of the country (53%).” While Northern California and Seattle were the hottest spot in the country for highly valuable companies, “the rest of the country hadn’t demonstrated much of an ability to grow large tech companies, or large young companies.”
So, what is the geek way?, asked McAfee in his MIT keynote. While the companies that have embraced the geek way are far from identical, they do share a similar organizational culture, — a different set of practices and philosophies for running an organization in an extremely technology rich, fast changing environment. Their cultures are more freewheeling, fast‐moving, evidence‐driven, egalitarian, argumentative, and autonomous than those of the typical industrial‐era corporation over the course of the 20th century.
In particular, the geek way is a product of four basic values or norms, which he went on to describe.
- Ownership: giving employees higher levels of personal autonomy, empowerment and responsibility while reducing the amount of communications, coordination, and bureaucracy that prevailed in large 20th century industrial organizations.
- Openness: a willingness to hear what other people have to say, and being receptive to arguments, reevaluations, and changes in direction, — that is, the opposite of defensiveness.
- Science: conducting experiments, generating data, and arguing about how to interpret the evidence rather than your own opinions.
- Speed: a preference for achieving results by iterating rapidly instead of planning extensively.
McAfee further explained that the geek way was developed because the mainstream ways of getting things done weren’t working so well, so it was time to try something different. He showed a 1970 slide of the waterfall development model, which was the classic way to manage a big, complicated project in the industrial era. In the waterfall model, a project was broken down into a set of linear sequential phases, — each phase beginning when it got the deliverables from the previous phase.
The first phase involved understanding the various project requirements, which were then passed on to the analysis phase to make sure the requirements were correct. Then came the design phase, followed by the development phase where the product was actually built. Then came testing, and finally operations to get the product announced and delivered to customers. This was a very systematic, rational approach. “The problem is it doesn’t work,” said McAfee. “The results of the waterfall model are a constant series of disappointments and delays.”
An audit conducted by the US Department of Defense of the use of the waterfall method for large software development projects “found that in 75% of the cases the project either failed or was never even put into use.” There were two main reasons for these poor results. First, unlike a physical project whose progress you can actually see, software typically has low observability, that is, it’s hard to tell how much progress is being made and whether the software is doing what it’s supposed to do. As a result, software developers don’t get feedback on how well they’re doing until late in the project’s life cycle, the so-called called 90% syndrome, a situation in which developers mistakenly believe that they've already completed 90% of the project when in reality the actual effort still required is significantly higher than 10%.
In 2001, a group of computer geeks got together, came up with the agile software development model, and released a Manifesto for Agile Software Development. The Manifesto is based on Twelve Principles for Agile Software, including “Our highest priority is to satisfy the customer through early and continuous delivery of valuable software”; “Business people and developers must work together daily throughout the project”; and “Continuous attention to technical excellence and good design enhances agility.”
“The reason this approach deals with the 90% syndrome so effectively is that when you’re doing agile right, you iterate very rapidly,” said McAfee. “Everybody knows if you satisfied the customer on the most recent interaction or not; … you’ve inherently got much higher observability and you’ve got constant valid feedback about whether the project is on track or not.”
The agile model, the essence of the geek norm of speed, doesn’t just apply to software anymore. “The geeks are taking this fast iteration approach and they’re applying it to all kinds of projects.”
“None of the business geeks I spoke to for this book think they’ve discovered the corporate fountain of youth,” wrote McAfee in the concluding section of his book. “They don’t think that their companies — or anyone else’s — have figured out how to be permanently successful. … Its advocates stressed to me how much work it takes to maintain strong norms of science, ownership, speed, and openness, and how, even when they’re in place, the classic dysfunctions can still creep in.”
“I don’t know where the next cohort of large, innovative, fast‐growing, customer‐ and investor‐delighting companies is going to come from. But I do know that they’re not going to be following the industrial‐era business playbook, because that playbook just doesn’t work as well as the geek way.”
“Companies that grew up during the industrial era have to throw away that era’s playbook if they want to stand a chance when the geeks come to town.”
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