Hacker Culture and the New Rules of Innovation

Tim Rayner

• Publisher: Routledge
• Year: 2018
• ISBN:
  9781351595742
• Edition: 1
• Topic: Business
• Subtopic: Business generale
• Index: Business

Fifteen years ago, a company was considered innovative if the CEO and board mandated a steady flow of new product ideas through the company's innovation pipeline. Innovation was a carefully planned process, driven from above and tied to key strategic goals.

Nowadays, innovation means entrepreneurship, self-organizing teams, fast ideas and cheap, customer experiments. Innovation is driven by hacking, and the world's most innovative companies proudly display their hacker credentials.

Hacker culture grew up on the margins of the computer industry. It entered the business world in the twenty-first century through agile software development, design thinking and lean startup method, the pillars of the contemporary startup industry. Startup incubators today are filled with hacker entrepreneurs, running fast, cheap experiments to push against the limits of the unknown. As corporations, not-for-profits and government departments pick up on these practices, seeking to replicate the creative energy of the startup industry, hacker culture is changing how we think about leadership, work and innovation.

This book is for business leaders, entrepreneurs and academics interested in how digital culture is reformatting our economies and societies. Shifting between a big picture view on how hacker culture is changing the digital economy and a detailed discussion of how to create and lead in-house teams of hacker entrepreneurs, it offers an essential introduction to the new rules of innovation and a practical guide to building the organizations of the future.

Part 1

Hacker culture

1 The hacker generation

James McNerney became CEO of the US manufacturing company 3M on January 1, 2001. He was hired to rejuvenate the company. 3M was (and is) famous for inventing Scotch Tape, Post-it notes and a host of other products. It held leading positions in electronics, telecommunications, health care, safety and other fields. But lately, 3M had been drifting. Profits were down and its research portfolio was in the doldrums. Investors were worried the company was losing its lustre. McNerney’s mission was to turn the company around.

McNerney’s solution was to implement Six Sigma across the entire company. Six Sigma, a process improvement methodology invented at Motorola in the 1980s, functioned brilliantly at General Electric (GE), where McNerney had worked prior to taking up the job at 3M. The Six Sigma method aims to reduce defects and failures in manufacturing and operations through a rigorous process of data analysis, improvement and control. The objective is to eliminate variation and reduce the failure rate of a process to less than 3.4 errors per million attempts. The entire system should operate like a well-oiled machine.

Six Sigma had a positive impact on 3M’s operational efficiency. 3M’s capital expenditures dropped from 6.1 per cent in 2001 to 3.7 per cent in 2003, while its operating margins grew from 17 per cent in 2001 to 23 per cent by 2005 (Hindo, 2007). But Six Sigma had a disastrous impact on 3M’s innovation culture. The attempt to eliminate variation in every activity ran counter to the culture of off-the-wall ideas and odd-ball experiments that had made 3M an innovation leader. It took the crazy out of creativity and left 3M’s researchers gasping for air.

Traditionally, 3M researchers spent months, or even years, tinkering around with ideas. The story of how Dr Spence Silver accidentally discovered the low-adhesive glue in the Post-it note is a founding myth at 3M and shapes the way 3M researchers think about their work. Innovation is messy. If you want to create things no one’s thought of before, you need to make room for mistakes.

Under a Six Sigma regime, there is no time for tinkering and no room for mistakes. 3M researchers had to document their work every step of the way, defining their processes, gathering and submitting data, and worrying about things like time to market and manufacturing concerns even for the most unlikely ideas. All the hacking and tinkering they used to do now featured on project managers’ charts as forms of waste. The researchers found the experience deeply frustrating and humiliating.

Soon, 3M researchers were on the brink of revolt. Six Sigma was killing the innovation culture at the company. One researcher objected, ‘there is no way in the world that anything like a Post-it note would ever emerge from this new system’ (Peppers, 2016).

McNerney left 3M for Boeing in 2005, just as it was becoming clear how damaging Six Sigma had been to 3M’s innovation performance. There had been a dramatic drop-off in the number of innovations produced at 3M during McNerney’s tenure (Peppers, 2016). Most of the innovations produced in this period were tweaks and enhancements on existing products. Innovation involves taking risks. It involves ‘guesstimates’, repeat attempts and many mistakes. Fear of making mistakes led 3M researchers to focus on easy wins. Instead of making big bets on risky ideas they found hard to justify, they made incremental improvements to standing product lines that they knew would please the higher ups.

3M’s new CEO, George Buckley, maintained Six Sigma in the operations and manufacturing divisions of the company but ‘largely exempted R&D from the regime’. Buckley reflects:

Invention is by its very nature a disorderly process … You can’t put a Six Sigma process into that area and say, well, I’m getting behind on invention, so I’m going to schedule myself for three good ideas on Wednesday and two on Friday. That’s not how creativity works.

(Peppers, 2016)

McNerney’s approach to transforming 3M reflects the leadership philosophy of GE CEO Jack Welch, who sought to increase operating margins by squeezing dollars out of processes and systems. By 2006, Fortune magazine was ‘Tearing Up the Jack Welch Playbook’ and articulating a new set of rules. If the old rule was: ‘Be the big dog on the street’, the new rule was: ‘Be agile; being big can bite you.’ Whereas the old rule was to look inwards and to rip out as much operation waste as possible, the new rule was to look outwards, take stock of the changing world and figure out how to get to the future fast (Morris, 2006).

These days, even GE has seen the limits of Six Sigma. GE’s FastWorks program, launched in 2012, specializes in a form of business model innovation known as lean startup method, which originated in the Silicon Valley startup scene. Lean startup method involves a mix of entrepreneurial management and team-based hacking. The approach works to accelerate new business development, minimize costs and risks, and increase customer engagement.

GE’s strategy shift reflects the soaring importance of innovation for companies in the digital era. On a broader level, it reflects changes in the way that business leaders imagine how work and innovation should get done.

These changes began in the years that 3M tussled with Six Sigma. Between 2001 and 2005, a cluster of innovation practices emerged, in and around the startup industry, that would draw together and explode at the end of the aughts. The practices were agile development in software engineering, lean startup method in entrepreneurship, and design thinking in user experience (UX), product and service design. While they differ in many respects, these practices share several common aspects, including an emphasis on speed, agility and collaboration, a rigorous customer orientation, and a focus on learning through iterated experiments. They represent a new form of hacker culture that grew up in the software industry, colonized startup entrepreneurship in the aughts, and is currently spilling out to infiltrate the world of business innovation generally.

Looking back at 3M’s experiment with Six Sigma from a contemporary standpoint, it seems ludicrous to think anyone would try to advance the fortunes of an innovative company by implementing a data-driven, process improvement regime. Leaders today take their cue from the startup industry. Instead of trying to monitor and control employees, future-focused leaders give people their freedom, granting them the right to take creative action, to try things out and make mistakes, and to run experiments to test and validate their assumptions. Employees work in cross-functional teams to solve problems and make decisions. These teams operate like startups, coming up with ideas and calling the shots, ‘moving fast and breaking things’.

Startup culture is being embraced by top tier corporations. Corporations as diverse as GE, Coca-Cola, IBM and WalMart are creating startup accelerators and innovation ecosystems using agile, lean and design thinking principles. Hacker entrepreneurs, meanwhile, are using the same practices and principles to build agile organizations from scratch, businesses designed to be ‘big and fast, complex and focused, large scale and agile’ – words that were once ‘oxymorons in the world of business innovation’ (Brown, 2015).

When we connect the dots between these developments, a profound cultural transition comes into view. In the first decade of the twenty-first century, the tech startup industry pioneered a new set of rules for innovation, a new road map for how innovation should get done. This new set of rules has dramatically changed the way that major companies think about, lead and manage innovation. A practical consensus has emerged across a range of fields – a new way of thinking about innovation that has captured the imagination of business theorists and practitioners alike.

This new set of rules originated in the software industry. Its adoption by the business mainstream reflects the rapid evolution of hacker mindsets, values and practices.

Hackers are not crackers

The story of how hacker culture moved from the margins of the software industry to centre stage in business innovation is a tale of our times. Before turning to this story, we need to clear up a misconception about hacking.

Hackers have a bad reputation. Thanks to the high profile Distributed Denial of Service (DDoS) attacks of hacktivist groups like Anonymous, political hacks like the attempts to interfere with voter registration databases in the 2016 US election, and criminal hacks like the Sony cyber-attack of 2014, in which hackers stole over 100 terabytes of data and planted malware to erase content from the company’s servers, many people have a dim view of the occupation. Hacking is perceived as a subversive, immoral activity. Films like Hackers (1995) and the HBO series Mr Robot portray hackers as lonely outsiders who fight corporations and governments. When hackers appear in the media, the article is typically headed with a shot of a shadowy figure hunched over a keyboard, looking like the Grim Reaper in a hoodie.

This is a misleading depiction of hackers. As Facebook CEO Mark Zuckerberg complains, the media’s depiction of hackers as ‘people who break into computers’ is ‘unfairly negative’, if not frankly untrue (Zuckerberg, 2011). It is true that a minority of hackers spend their time breaking through firewalls and security systems, planting viruses, and stealing money and data. But these activities do not reflect the actions and intentions of the hacker community as a whole. The majority of hackers repudiate the criminal actions of this minority. Hacker elders call these people ‘crackers’ to distinguish them from the norm. Eric Raymond writes:

There is [a] group of people who loudly call themselves hackers, but aren’t. These are people (mainly adolescent males) who get a kick out of breaking into computers … Real hackers call these people ‘crackers’ and want nothing to do with them.

Raymond distinguishes hackers and crackers as follows: ‘Hackers build things, crackers break them’ (Raymond, 2001a: 196). This is a distinction I maintain in this book.¹

Hacker mindsets and practices shape the operation of some the most successful tech companies of the twenty-first century, including Apple, Facebook and Google. Zuckerberg is so enthusiastic about hacking that he added a special section on hacking to Facebook’s initial public offering (IPO) document. ‘Hackers believe that something can always be better, and that nothing is ever complete’, Zuckerberg (2011) claims. They feel compelled to step up and make improvements, without waiting for permission. When a hacker sees a problem, ‘they just have to go fix it – often in the face of people who say it is impossible or who are content with the status quo’. If hackers move fast and break things, it is only to make things better. True hackers are driven by a desire for innovation.

How to become a hacker

Eric Raymond (who edits the online Hacker Jargon File and is responsible for several important publications on hacker culture) wrote the definitive answer to this question for entry-level open source software hackers (Raymond, 2001b). To master the art of software hacking, Raymond explains, you need to devote a few years to skilling up on an open source language like Java, PHP or Ruby on Rails. Once you’ve completed this work, go to GitHub, find a project that inspires you, download the software and play. Get to know the people in the community and share knowledge and ideas. Ultimately, the only way to learn how to become a software hacker is by getting hands-on with code and hacking it.

Raymond concedes hacking is a broader and more general activity than writing code. Hacking is an approach to solving problems. Understood in this light, anyone can be a hacker. Entrepreneurs hack business models, searching for new insights and opportunities. Marketers hack customer channels, experimenting with unconventional ways of growing a company’s customer base. Teachers hack classrooms, engaging students in retooling the educational experience. Musicians hack digital recordings, creating thrilling new mashups and mixes. Artists hack culture, combining creative practices and new technologies to subvert standing cultural frameworks and challenge audiences to think differently. To become a hacker, all it requires is a disruptive attitude, a questioning mindset and the determination to learn by doing.

Hacking is a problem-solving activity. Hackers solve problems by speculating on solutions, forging hypotheses and trying things out. What makes a hacker a hacker is the dogged persistence with which the individual keeps on trying and learns by doing. When you think of hacking, think of the sharp, persistent blows of a hatchet or machete, used to clear a path through a forest or field of grass. Hackers solve problems by running multiple, short, targeted experiments designed to clarify complications and illuminate the way ahead. They keep on hacking until they’ve identified a solution.

Typically, when presented with a problem, we grab at the nearest solution and try to implement it. Hackers will forge a hypothesis and run an experiment. While this adds complications, the process works out faster, as it helps to eliminate mistakes. The process can be reduced to the following steps, which serve as a potted guide to hacking:

1 Identify a problem. The problem might be technical, or it might concern work or personal life. The crucial thing is that it is something you find personally significant. This increases the intrinsic value of solving the problem. Intrinsic rewards are what keep hackers hacking.

2 Develop a hypothesis. Once you have identified a problem, take a moment to reflect on how you might solve it. Develop a hypothesis towards a solution. A hypothesis is a guess that indicates a practical course of action. It should take the form: ‘If I do X, I’ll get Y.’ A rigorous formulation, used by startup entrepreneurs, is: <specific testable action> will drive <expected measurable outcome> (Maurya, 2016: 201).

Prior to testing a hypothesis, there is no way of knowing for certain that it is correct. Forming a hypothesis involves making a bet on a certain outcome. If the hypothesis is wrong, it should be evident that it’s wrong once you try to action it in an experiment (i.e., you do X and you get Z). The best hypotheses involve a precise prediction about what will happen when you test them, so you can tell just how wrong you are.

3 Run experiments. The art of hacking hinges on finding simple, cost-effective ways to test hypotheses. Once you’ve settled on a hypothesis, try to invent a fast, easy way of testing it to see if it produces the outcome you expect. This is your experiment. If the outcome of the experiment supports your hypothesis, keep working in the same direction. If the outcome doesn’t support your hypothesis, reformulate the hypothesis and try again....

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Table of Contents
• List of figures
• Acknowledgements
• Introduction
• Part 1 Hacker culture
• Part 2 Culture hacking
• Index