For a company recently called “the most intriguing startup in Silicon Valley” by Wired magazine, Nicira is involved in what sounds like the dullest field imaginable: software-based networking.

But don’t be fooled.  Nicira is on the verge of reinventing the Internet, and if they succeed they’ll put Cisco, one of the original giants of the web, out of business.

To understand what it means to have a virtual network, you have to understand what kind of hardware runs the Internet today. Servers, routers, switches and other networking devices are hardcoded with the firmware to route signals to their correct destinations.

The result is stable, but notoriously difficult to modify or update. Engineers often have to literally move servers and physically reroute cables in order to make even small changes to the network. This in a world where we have virtual worlds, virtual identities, virtual currency, virtual computers, but no virtual networks.

Nicira is about to change all that.

They are getting all the intelligence and functionality that today lies in the hardware, and putting it into the software. The potential result is an instantly configurable, infinitely flexible, dynamically resilient network that can run on cheap hardware from China just as easily as the most expensive Cisco servers.

They are, in short, commoditizing networks. Today if you want a network you have to build your own billion-dollar datacenter or rent cloud storage and computing power from Amazon or Rackspace.

In the future, you will be able to use the cheapest hardware to create virtual networks limited only by your programming skills and imagination.

The era of the virtual network is about to arrive, and it may change everything. Again.

Seattle-based game company Valve was the topic of much discussion on BoingBoing yesterday.  The 16-year old company has no corporate hierarchy whatsoever, and yet - according to its employee manual - their profitability per employee is "higher than that of Google or Amazon or Microsoft".  The company's team page proclaims at the top "We've been boss-free since 1996", and then proceeds to list every single employee (a bit over 100) in alphabetical order.  About the founder, Gabe Newell, the manual says, "Of all the people at this company who aren't your boss, Gabe is the MOST not your boss, if you get what we're saying."

How does this madness work?  Leaving alone the claim of incredible profitability, how do they manage to get anything done at all?  Is this not a recipe for corporate disaster? 

Maybe.  But what the employee manual [PDF] describes is actually an incredibly well-designed corporate machine for maximizing productivity, allowing good ideas to flourish, and minimizing corporate waste.   Valve's basic approach to "managing without managers" is:

• hire only incredibly self-motivated people
• give them full autonomy to decide what project to work on
• teach them to spot valuable projects, and to understand what value they can add to those projects
• allow team structure to happen organically - teams self-select, leaders are chosen by their peers
• encourage people to acknowledge and learn from mistakes quickly to move forward
• make everyone responsible together for the success or failure of projects

and finally (and most critically):

• determine the value and compensation of each employee by peer review

When you organize an company like that, several things happen:

- You leave no room for unproductive people to hide.  Nobody can pass the buck on to the next person, as that person is going to be determining their salary at the next review.  Everyone maximizes their own productivity.

- You allow the best ideas in the organization to bubble to the top.  When people are free to suggest ideas and other people are free to join them (or not to join them) in executing those ideas, people rally around the more promising ideas while leaving the unpromising ones to die a quiet death. 

- You allow the natural leaders to lead.  For any project there are team members who will be the natural leaders.  In a more structured environment, those natural leaders are often not the ones appointed to lead the project.  When team structure happens organically, leaders emerge organically as well.

- You reward people for finding the position in the company where they can make the biggest difference.  If everyone is free to go and do what they want, and everyone's salary is determined by peer review, everyone naturally seeks the place where they can make the biggest difference to their teammates, to maximize their income.  The net effect is a system where employees want to make the biggest difference they can, always.

The results of this sort of structure can apparently be impressive - as Valve shows us.

So the big question of course is: does this only work for companies that make video games, or can it work for everyone? 

Well there are two things here to note: 

1.  Valve is unlike many other companies in a couple of ways.  Most notably, it is entirely self-owned with no outside investment, and it owns all of its own IP.

2. Valve didn't design and impose this structure on itself from the top - it evolved organically toward it from the beginning (see a good blog post about this here).

So the short, easy answer to the above question may be no, this only works for Valve.  But the bigger answer is that all companies should be exploring how they can introduce these kinds of ideas into their own corporate structure in ways that makes sense to them.  The more you create the right incentives and opportunities for employees to add value as best they can, and the more you create openings for the best ideas to bubble up naturally, the better, leaner, and more competitive your company will become.  And the happier your employees will likely be, too. 

80% of everything your organization does is a waste of time.

Don’t believe it? Most don’t, even when confronted with the following statistics:

• 1.3% of movies earn 80% of revenues
• the wealthiest 20% people globally own 82.7% of the world’s wealth
• about 20% of U.S. patients consume 80% of hospital resources
• 91.1% of plays on Last.fm are made up of 8.9% of bands
• 30.4% of websites receive 69.9% of hyperlinks
• 26.9% of email users send 73.1% of all emails
• 25% of Facebook users cover 75% of all friendship links
• 22.9% of users make up 77.1% of all “@” mentions on Twitter
  
  

It follows, and research has repeatedly shown, that in most complex systems about 20% of the inputs are responsible for about 80% of the outputs. In other words, 20% of the work done in your organization is responsible for 80% of the results, however they are defined.


In 1951, Joseph Moses Juran used the rule to start the Quality Revolution that swept the Japanese manufacturing machine into power, observing that over 80% of defects are caused by much fewer than 20% of causes.

In 1963, IBM discovered that 80% of a computer’s time is spent executing 20% of the code, using this insight to completely redesign its software and paving the way for its dominance of the industry.

The numbers may indicate something more like a 70/30 or 90/10 split, but the idea is the same: the most effective portion of the resources at our disposal is approximately 16 times more productive than the least effective, exerting a powerful influence that few people and companies take advantage of.

The difficult part, of course, is figuring out which assets are which. If you had a simple table ranking the productivity of your assets from least to greatest, it would be a simple task to focus your energy on the productive few and spend less time on the unproductive many.

Luckily, there are methods for extracting this information dynamically, without wasting time on compiling numerous data sets and correlating variables (effort which would, paradoxically, fall in the least productive 80%).

Let’s look at four specific ways to use these principles in the area of project management.

1. Simplify mercilessly

Simplicity is not just a design or user-experience imperative. It is fundamentally about productivity, since projects obey the Law of Organizational Complexity: as the number of project aims increases, the effort to accomplish them increases not in proportion, but geometrically.

There is no hard-and-fast rule for how many objectives to include, but for each one ask yourself: does adding this new objective add value in proportion to the time spent on it? If not, you’re probably already in the Land of Diminishing Returns. Stop and reconsider.

2. Impose constraints

As Eric Ries affirms in his book The Lean Startup, “having too much money is just as big of a problem as having too little.” This is not hyperbole. In a world of technology that seeks to remove as many constraints as possible, these limitations enable us to focus on the most super-productive tasks.

Whether you use tight deadlines, short product lifecycles, or stretch targets, the important thing to remember is that constraints shouldn’t be used to squeeze one more drop of work out of your employees, or impose unsustainable work schedules. Think of it as the “gamification of project management”: you are working together to dynamically discover the highest value gems in the vast landscape of priorities.

3. Plan for optimization

Although the current trend is to spend less time planning and more time iterating, planning plays a big role in harnessing the 80/20 Rule. And if you think about it in the terms we have discussed, it makes sense. As long as you are confident that you are optimizing your work at the 20% inputs level, you can spend up to 80% of the total project time in planning while maintaining most of the result. Of course, in practice you won’t need nearly 80% of the time for planning, and any amount less than this is time saved or quality improved.

4. Design, design, design

It has become almost a cliché, but Design Thinking is one of the clearest examples of 80/20 logic. It is well-recognized that mistakes in design result in the largest number of defects, contribute the most to cost overruns, and perhaps most seriously, are most detrimental to customer satisfaction.

It helps in the design process to think of each small improvement not as an inconsequential detail, but as a super-productive, factor-of-16 optimization. Ask yourself: how many such super-optimizations are worth looking for in the design phase? The answer is probably “quite a few.”

It’s important to understand, however, and perhaps this will give you new impetus to reboot the search for productivity in your organization, that these recommendations are not based on fuzzy notions of employee empowerment or me-too stories of past successes.

The most advanced research on chaos theory and complex systems affirms the essential truth of the 80/20 Rule, and challenges us to discover the hidden dynamics behind the projects we put so much work into.

Before our annual analysis of the strategy of a tech giant, we wanted to share with you the reason why we're so enthusiastic about the Russian technology market.

Looking at the main sources of global news, you won't find many positive article on Russia: just check out Wall Street Journal or New York Times and you will get an idea.

But that didn't prevent us from looking behind the curtain... and what we found was surprising. Not only surprising in a positive manner, but also in a very promising way: there is a very fast expanding digital market in Russia, that not only is catching up on western level, but is also extremely innovative.

When we found out, we decided that we had to be part of it and we opened an office in Moscow. Our Russian office is now helping companies bridge the gap between them and the Russian market.

Today, we are releasing an extensive market study that will show why we are committed to Russia, and why you should have a different look on the Russian market.

Read the Study




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Key ideas

Why should you read this presentation?

- You still think that the Russian market is underdeveloped and that Russian startups are only copycats
- You are hesitating on expanding your business to Russia
- You have heard interesting stories about the Russian digital market, and you want to learn more
- You are Russian and you think that no Westerner understands what is going on there

At the end of the presentation, we give you 3 reasons why you should expand to Russia.

Did you know?

- Russia accounts for the largest pool of internet users in Europe, before Germany.
- Russians use more mobile payment solutions than UK citizens.
- Online advertising has already overtaken print advertising in Russia, a year before the US.

Debunking prejudices

You will dive into the dynamism of the Russian digital market and will discover that

- This dynamism is not superficial: it is based on a deeply-rooted culture of technology and science.
- Even if the overall market is still emerging, it has strong pillars to stand on: role-models such as Yandex or Mail.ru, and a diversified network of investors.
- The ecosystem is boiling, with many successful adaptations of western best-practices and a lot of local innovations.

And finally we will share with you our vision of the Russian technology specialties.