This documents the only (in my terms) successful organizational structure I have ever been a part of. And, it was only a partial success. The story goes back to a seven year period, 1964 to 1971, where I was able to work with a single industry and set of companies through the entire process cycle of R&D, product development, design, sales, production, service and maintenance. This scope was more than what today would be called a supply chain and less than what I would call a full, mature ValueWeb architecture. In going on 46 years of work, it shocks me to write “the only successful organizational structure...” I thought a great deal about the word “only.” I decided to use it because it at least establishes a marker - a minimum standard. There were several organizations I worked with that were very well run and fun to be with. Tishman principle among them. I will argue, of course, that this was accomplished despite their structure and for a limited period of time also. The swimming pool era lasted only a short period before it lapsed back into convention - but then, it was not a true ValueWeb and that also is part of what is to be learned.

I sometimes think that I was born with a hypersensitivity to organizational structure. This comes, I suppose, from being an innovator who has never been satisfied with all the explanation why doing things better “is impossible.” As I dug into these explanations, I discovered that virtually all of them had to do with organization and with the claim that “profit” would be sacrificed by the new idea. I found this not to be true. In many cases just the opposite. Innovation can be made to pay for itself and if it is done right nearly always will. No, organizations take on a life of their own. They are not neutral environments. This is good news - and bad depending on the character of what is made. My insight was to realize that organizations are DESIGNED like everything else. They are human artifacts. It seems to me that most think of them as “facts of nature” - immutable. I discovered that virtually ALL organizational concepts are variations on the same theme. There are not competing models of organization out there - there are competing versions of the same model. I was “happy” to “discover” in 1961 and “again” in the mid 70s that the traditional organizational structure was not able to deal with the growing complexities of modern life. The old way was going to die. Since then, I have devoted a great deal of my effort to discovering and designing alternatives. I have also spent the greater amount of my time helping traditional organizations stay alive. It will not do to have them die before there is a tested alternative. This would be bad engineering and very bad business. All this lead to the MG Taylor Corporation and a 25 year effort to get to what I now consider the beginning phase of a genuine alternative to traditional organizational architecture. In the mean time, I discovered many other fellow traveler:. Weiner, Ashby, Beer, Channon, Arbib, Boulding, Brand, Miller, Minski, Bateson, Kauffman, Kelly...Their work in cybernetic, systems theory and chaos theory has established a powerful base. My work has been to put these kinds of ideas to work. Unfortunately, this work is just beginning to be part of the business mainstream and is still approached in a mostly metaphorical (non structural) way. “How is you business like a rain forest?” Insightful, useful - but not enough. I have worked to learn how to engineer organizational structures as one would any other technical system. This act is to INSTALL an OS. We in the MG Taylor (proto) ValueWeb have had some success in doing this. Enough to have many unique stories to tell - like the one that follows. Enough to know that there is definitely something to this and enough to have a health respect for the persistence of the old way and its power to compromise and reabsorb attempts to transform it. Our present step is to build a true ValueWeb at significant scale. This will be assembled, “bottoms up” from a number of project-focused ValueWebs that will find their own natural path to creating a greater system. In period 2002 to mid 2004, there emerged several projects as candidates for doing this. Success with these will constitute a great breakthrough. In the mean time, we have our own (MG Taylor) experiment and our past project experiences from which we can extract the knowledge necessary for building every more powerful and useful models.

In the mid 80’s, I created the “Business of Enterprise” model to codify this experience. I first called this model the “Business of Business” because of the question I asked: what is the business of business?” This may seem like a simple question. At the time, the answer usually would be “to make money.” This is confusing cause with effect. My answer was that the business of a business was to function like the commissioner of Baseball that builds a network of individuals and enterprises focused around a certain set of objectives - a defined “game.” Later, I realized that this pertained to enterprises of all kinds including governments.

This model is also closely related to the NASA story which describes how NASA functioned as a (partial) ValueWeb enterprise when going to the moon.

In the last 30 years, I have re-tested and applied pieces of this organizational schema, the F-15 and AEDC projects being the most notable examples in terms of economic results. However, I have not yet been able to get the whole system in place, other than for these isolated projects for a period of time, as an OS for the day-to-day operations of an entire enterprise or culture of significant scale. The swimming pool experience was itself incomplete, in this regard, and functioned in isolation and only for a period of several year. Withinn its own model of enterprise as defined at the time, however, its scope was across an entire system and it functioned at sufficient depth and integrity to show that a remarkable organizational transformation is possible that that this results in both human and economic brilliance. It is possible, now, to implement the The method and ValueWeb concept at a sufficient scale to make a critical mass that it will not be locally reclaimed by the existing organizational mode that makes up our social default. This is possible because the tools of practical networking (Internet, blog, wiki, KM method, financial sophistication) are now sufficiently developed so that isolated renegade (in the eyes of the establishment) nodes can be connected in such a way - and across the boundaries of any discrete single organization - so as to form this critical mass. The projects now underway (as of April of 2004) and the over 30 Taylor-like Centers that exist globally make up the bare minimum nucleolus of this nascent ValueWeb.

For the first time (post 9/11, actually), I feel these evolutionary forces pushing the MG Taylor Enterprise in the direction we have always wanted to go. This is “an idea whose time has come” to quote Mr. Nixon in a somewhat different context. The same can be said for several of our clients. The default model of organization, so long the ruling paradigm, is finally coming under direct fire. It is, in fact, rapidly crumbling under the pressure of today’s markets. I long said (from 1975 and onward) that “no one gets out of the 20th Century alive doing what they are doing now” - This includes MG Taylor. The destruction of the old organizational model - and economic model - is a factor of the environment (Rate of Change and Complexity Model [link]) not our wishes. The paradox is that MG Taylor has had to live in the old organizational world while building a bridge to the new one. An uncomfortable and often dangerous place to be. We have fallen victim to these circumstances more than once.

The answer is simple. It can be answered by asking another question: “why don’t our environments function with the technology as illustrated on the cover of our 1982 Business Plan?” It is the difference between THERE and HERE. You can never get too far ahead of your own culture while remaining a fully integrated member of it. MG Taylor is not some kind of Utopian dream. It is not organized to function in semi-protection as can be provided in a research organization or university. MGTaylor is a business. This was a deliberate choice. A “where the tire hits the road” decision. The mission of MGTaylor is ubiquity of a new way of working. The measure of success is to do this as a for-profit company (in a ValueWeb) that delivers the GOODS, makes money and creates shareholder VALUE. This completes the entire “Stages of an Enterprise Model.” As such, MGTaylor and the core Business Units have been limited by market as they have pushed the market. Of Course, as a true ValueWeb process emerges, market and ENTERPRISE become the same thing. This is a true answer but only a partial one. There is another. The other answer is that we did not know how to build MG Taylor as a ValueWeb from the beginning. We have tried several times to make it have more value-web-ness and each attemp has been met with limited success. We were fairly successful with the “Producer Network” part of our Web, have had now and then success with our “Client/Customer Network” members and almost total failure with the (would be) “Investor Network” members. 2002, saw the beginning resolution of the conflicting models of what makes a traditional investment and a ValueWeb investment. This has proven to be one of our most difficult tasks - philosophically, legally, operationally.

It should be understood that a ValueWeb has several levels of recursion in it’s structure. Conventional organizations (on one level of recursion) can be successful members of a ValueWeb structure. VISA is an example of this. The company VISA was structured and managed in a conventional way. The network of alliances VISA was a ValueWeb-like Enterprise and thus an example of a chortic organization (on THAT level of recursion).

It is also true that a conventional organization can (and will often) have ValueWeb structure-processes at levels of recursion within it. Startup and joint ventures within a large mature enterprise can be done this way. A (protected) NavCenter is another example. This is a way to start the “conversion” process.

These “partial” ValueWeb structures can be effective (but perhapts not permenant). The Model suggests that a full ValueWeb architecture operating (at minimum) on three levels of recursion - made up of a critical mass of nodes that run the ValueWeb OS - will out perform conventional structures by orders of magnitude. They will require PatchWorks-like processes to stay in tune and to optimise their output.

This piece is organized into four sections: (1) the STORY itself which captures the experience. (2) Comments on the Model, itself, which has never before been put down in sufficient detail. (3) Application to the MG Taylor enterprise Business Units which are going through what I believe to be the first real step to a true ValueWeb architecture. (4) Application to other environments and projects.

Just as DesignShop events have been our LAB for developing the process and understanding the algorithms for the Patent, our own business (and becoming ValueWeb network) is a LAB for understanding and demonstrating a new organizational theory. Our own organizational experience is what we know the most about - through direct experience. We also have the knowledge gained by working with hundreds of organizations and thousands of people over the last quarter of a Century. Not all these partner and client organizations were explicitly building ValueWebs. They all DID, however, employ some facet of our philosophy, methods and tools. This work, plus our own developing theory and the theory developed by others (usually, in unrelated fields) has been integrated and forms the basis for our system and method.

When I encountered the swimming pool industry in Arizona in the mid 60’s it was already groping it’s way to a primitive value web model. Over a six year period we were able to develop this impulse into an explicit system of work that today would be called a “value-added, mass-customized-product, just-in-time, lean-construction (production), extensively out-sourced, supply chain system.”

Every step from the customer meeting and sale through financing, design, construction, clean-up, first customer us and maintenance was developed into a single system that cut more than 20% off of the product cost and guaranteed delivery of the pool (from sale to swimming) in 10 days at the height of the season.

It also resulted in a significant increase in quality - aesthetic and mechanical. This completely refuted the often stated principle that between reducing time, better quality and lower cost you can have, at best, two of the the three.

In this system, as many as a thousand pool projects could be tracked at once and the entire network of construction crews coordinated minute-to-minute over a twenty mile radius to accomplish multiple work sequences on each pool in a single day. A fully equipped swimming pool construction requires 23 crew (size of 1 to 6) hours over 9 tasks. When we “practiced” by building a new display pool we would typically start early Saturday morning and be swimming Sunday evening.

Any calendar time beyond 10 days and crew hours beyond 23, and work phases beyond 9 - in a typical swimming pool - is waste. Waste that drives cost upward, quality downward and the customer experience crazy. Even a highly customized pool with many amenities should add only small increments of time. In fact, once I had this system in place with consumer pools, I was able to build elaborate custom designs with decks, trellises, extensive landscaping and often screened porch additions at the same per-unit cost structure and in the same basic time frames as a production pool design. This was the objective of the experiment. To demonstrate that - once good practices are in place - custom design does not, itself, in impose significant cost/time penalties.

Why swimming pools? Partly it was opportunity. I had designed some custom pools that the builders were having trouble building. When I showed them how easy it was, I was pulled into their industry. Why I stayed with it was threefold. First, the swimming pool as a piece of construction technology is interesting. It involves most of the trades in discreet combinations. It is “heavy” enough to require significant equipment and organization. There is a high variety of finishes and and many, many different conditions that generate different design requirements. By nature, the units are spread out, geographically, generating significant logistical problems. Second, they are “production” items in that, despite a great variety of designs, the underlying structure allows for the leveraging of volume components and techniques. Third, the customer is intimately involved but not dogmatic about the design and techniques of building as is, traditionally, the circumstance of house or office building.

These are ideal conditions for testing new construction and organizational methods. It should also be noted that by the time I started this work, I had ten years experience in designing, building and developing housing, apartments and high rise structures in 4 states. I had personally performed every task involved: R&D, sales, design, construction layout and management, enterprise management and every trade involved in the production of a pool.

I knew every step and sequence. I had already discovered that merely changing the sequencing of a project could yield significant decrease in construction time (motel for Royal construction, 6 months to six weeks, as example). Also, I had a passion. When I entered architecture, I was told that any change in design drove unacceptable construction costs. It was clear to me that the conventional way of building was intrinsically more complex than many of the suggested alternatives. Over the ten year period, I both learned the trade and accomplished significant cost/time reductions in conventional building. I did this in ways that allowed for better design to be accomplished. I was not satisfied as were many architects of my generation to regale builders, throw their hands up in the air and accept high costs, poor construction and long delays to completion as normal. I wanted to know why and I wanted to know HOW to build better. Imagine an artist who knows nothing about paint and “directs” the creation of a work via sketches and descriptions from a distance - that is the condition of an architect in a traditional practice model.

This is important to would-be system integrators. DETAILS are significant. Knowledge of the entire process is a requirement. On very large complex challenges - the F-15, as example - this means a sophisticated System Integration Team and appropriate participation of the entire ValueWeb membership. The F-15, involved over 900 units distributed worldwide, operated by several air forces. Each plane has 500,000 parts, 50,000 of which are unique. The system has been maintained and evolved (upgraded) over a 35 year period with the expectation of remaining viable for another 10 to 15 years. Up to an many as 40,000 people, are involved in designing, engineering, building, fielding, maintaining and using the system. These circumstances result in a huge configuration management problem. Complexity of this sort requires GROUP GENIUS.

The swimming pool system we put in place was simpler. However, at it’s full expression, about 40 people were involved in the design and maintenance of the process at any given time. Most of these were the workers who built the pools.

Because the swimming pool is complex enough to be nontrivial and small enough to support what today we would call rapid-prototying - and because there is clear competition between contractors - this is an ideal environment to demonstrate the efficacy of alternative technical and process techniques. Feedback and innovation was accomplished on a weekly basis.

Another advantage is that, in the 60’s, this industry was not made up of sophisticated players. Generally, most builders had learned by doing and were repeating mistakes learned from those who taught them. This was an “industry” ripe for learning. I found out that it is easier to teach uneducated people how to do it well than sophisticated folks who are “educated” with every reason why it cannot be done. In the end, we established a system that had a true economic measure: at the end of the week, everyone’s check told them how well we had done. This was the only time in 44 years of work experience that I have seen a compensation system put in place that actually worked, was fair and encouraged both individual and group performance.

The system grew organically. We worked with four competitor pool companies over a 7 year period. One of the companies we worked with, over a two year period, through their entire startup process. We supplied, at various times and in various combinations, the following services: system integration, schedule management, research in components, product design, field supervision, subcontracting. At the peak of the process we employed, ourselves, the entire ValueWeb in the production of our own custom pools. We also manufactured some low volume custom components. Typically, we negotiated a new contract each year and then provided our services exclusively to one company for that period. This was also the pattern for all of the subcontractors in the system. What happened, then, was competition moved from between companies to competition between networks. Networks that resorted themselves every year. Thus, techniques and methods migrated to all of the competing pool companies. Competitive advantage was seen as a yearly thing. Each subcontractor was very aware that they negotiated, annually, for both revenues per unit and for volume. The pool builders and the subs were very conscious, each negotiating season, of trying to attract the BEST TEAM with with to play the season. They also worked, together, with intensive collaboration to reduce, time, waste and cost for everyone in the system - not just for themselves. Competitive advantage meant how many pools could be delivered, in a short season, at what price point to the customer, with what features and for what level of quality. Competition was fierce in season. Sharing was ubiquitous between seasons.

The customer truly gained in the process (which is a rare thing despite all the rhetoric). Construction workers achieved incomes as high as 30 and 40 thousand dollars (in the 1960s) and the pool builders maintained a gross profit of 25% unheard of in this industry. The price of the pool dropped every year, the feature set increased, time to swim declined radically and quality (horrible when we started) soured.

At the end, a 20 ft. by 40 ft. pool with automatic cleaning, heating, copious amounts of decking, trimmed out in a first class way sold for $4,000, was delivered in 10 days (sale to swim) and was seamlessly coordinated with other work such as landscaping, outdoor furnishings, building additions and other objects: walls, planters, gates, etc. The technique by which this was accomplished is decribed below (The Model).

At the end, I was able to build totally custom pools at the same per-unit cost, using the same contractors in the same time frame. Imagine a back yard with a pool made up of four intersecting circles, of different levels, a fountain rising up from the intersection of three of them, raised, cantilevered circular decks of concrete and laminated (4x6) redwood, circular trellises offering shade, extensive landscaping and lighting, custom enclosure walls (of complex shape) and ornamental steel inserts and gates - all build in 10 DAYS, in season for a complete price of $7,500 (1970 money). This was the peak of my capability as a designer builder). I have never matched it since - the closest being the Cambridge facility nearly 30 years later.

They way that I accomplished this was by levering the relationships and methods that I had created in collaboration with the pool companies and subcontractors. I produced a drawing (plan) of the back yard. On it was the entire design. The price of each phase of work was stated along with the schedule (date and time of day) and a list of materials required and crew and equipment necessary. The client (technically acting as owner-builder) wrote me a set of checks (in advance) for each phase of work. Each was in an envelope. The contractors had learned that when I said “be here, at this time with these materials, equipment and people” that they could rely on a clean site, proper layout and supervision and INSTANT payment. They had no sales cost, engineering time, bidding costs, scheduling complexity, supervision requirements, and collection complexities. All they had to do was divert a crew for an hour (or a few) as specified and immediate contribution to their bottom line was accomplished. Added benefit: training for their crew by Matt Taylor. I was on site each day, for all crew hours, managed my other crews by wireless and then went on to other work when that days sequences were complete.

On the way to other projects, I did a couple of pool layouts myself. This kept me in good physical shape, connected to the business and paid for my salary and truck. The money made from the rare custom and fully featured back yard environments “dropped” to the bottom line of our business. In this 7 year process, work that typically was time consuming, frustrating, expensive and risky because simple, rewarding and profitable.

It should be noted, that when I started this process - 7 years before the example given - I executed a custom pool and landscape of the same scope and complexity (triangles instead of circles) and it cost $21,000 and took three months - all considered a financial bargain by the owner and a construction miracle by the contractors at the time. This project totally consumed me for four months. This last project employed about 50 hours of my time (about half of which I was able to do other tasks in my portable office on site).

THIS IS WHY I SAY THAT 75% OF THE TIME AND HALF THE COST OF ANY CONSTRUCTION PROJECT IS TYPICALLY WASTED - victim of the burden imposed by the organizational structures, the contracts, the build process, design ignorance and owner interference. This is a statement of huge significance. It is also something that virtually no one has wanted to hear in over 30 years.

The cost and impact of building can be radically reduced. This makes room for better design, higher quality, more sustainable materials and energy solutions. When we are told that these values cannot be “afforded” this is within a game that imposes upon itself a huge inefficiency tax. This requires, however, that several circumstances be brought together over a period of time: A steady volume of work. Total understanding and rationalization of the building possesses. Trust built up over a long period. Elimination of all possible overhead redundancies. A knowledgeable systems integrator on the site. Strict Rules-of-Engagement totally enforced. Also, appropriate use of technology. In this case, as will be elaborated below, the first “NavCenter” and Motorola wireless in every crew truck in the system. The complete system has to be engineered - not just the build part; this means, the engineering of the pool as a basic product, the sales process, the financing process, the drawing and contract documentation process, the scheduling process, the field supervision process, the field layout process, the build process of each specific trade, the feedback process between pool builder and trades AND individual workers, the pool startup and turnover to owner process, the relationship with the owner process. Over a 7 year period, each of these processes were refined through multiple iterations of work until risk, mistakes and sloppiness of every kind was eliminated.

This was an eloquent system of building.

A system that can be applied to many different business and production circumstances.

The swimming pool industry, in the 60s, in Phoenix, was characterized by frequent bankruptcies of financially unstable small contractors, sloppy work, a bland product, time delays, high costs and a myth-based selling process.

Any attempt at customization from the standard rectangle or kidney drove the costs through the roof. Coordination with the many other suppliers and contractors necessary to complete a back yard environment was almost totally nonexistent. Cooperation was almost totally nonexistent - and, were there was cooperation it was mostly corrupt with back door payments, finders fees and locked in deals all to the buyer’s detriment. Owners were lied to, manipulated and ignored once a contract was signed. Quality was unbelievably bad. Often the pool was built in an easement leading to law suites and expensive fixes. There was little discipline in the system and the actual structural integrity of the units were often compromised by improper placement of materials. No one was making much money. Typically, owners who signed their contacts at the beginning of the warm season got to swim in the fall. From end to end it was a sleazy process dominated by suede shoe salesman - charisma and high pressure substituted for engineering performance and quality.

It was not that people did not want to do better -they did not know HOW. It was a circumstance driven by ignorance. The BELIEF was that this was intrinsic and things could not be approved unless unbelievable amounts of money were spent.

As example, when my first custom pool design - which had 16 corners, three levels and masses of custom tile was bid for ten thousand dollars, I questioned the builder. He said that it would take days to lay it out and form it, that the lines could never be maintained after excavation therefore the design would look terrible and the no one could do the tile work the way I had it designed (coming out of the pool and over the bond beam). I pointed out the the actual materials of the pool were the same as a typical 20 x 40 and he agreed but sighted outrageous labor costs. I asked him what would be the costs if I did the layout, formed the pool, established both grades and lines with offsets so the various trade could re-string the lines at will when building, and, if I took care of the time myself - what would be the cost? He gave me a cost 10% over a standard pool (the 10%, he admitted, was for “security.” “Done” I said. He asked me when I was going to lay it out and set batten boards. I told me the date. He said he would drop by “sometime” to see the process. I told him he had better be there between 8 and 10 am because I would be long gone afterward. He refused to believe it but said he would be there at 8 to watch my crew do the “impossible.” Needless to say owner, pool builder with his entire supervisory staff showed up at 8 and were surprised to see the “crew” called Matt Taylor. In one and a half hours the the job was done and I had the layout contract for 2,000 pools. My sojurn had begun.

They simply did not know how to layout a swimming pool accurately. Two to three inches deviation was considered normal - straight lines impossible (see Layout). Similarly, when it was time to do the decking (which did not follow the pool but “wove” in and out of it and the landscape), I started an hour ahead of the crew pouring and finished by the time they got the first section in (see: pouring concrete). Easy. It is a METHOD or it is a disaster - no middle ground in things like this.

They wanted to know how all of this was achieved with no dimensions on the drawing and I had to explain what a module was.

As for the tile, I went to the tile store, bought the tile (about three times as much as for a normal pool and custom (a total of 300 extra dollars). The pool builder sent his time contractor over, he looked at the pool, saw what I wanted and started to leave the job. Fortunately, his truck was blocked by mine. An more fortunately, I had a couple of six packs of beer in my truck. And, lucky for me, I knew how to lay tile (see: American Pool Building). We had a great time, got really drunk and produced a tile effect never seen before. The tile man became my best advocate, worked out a fair price and became the tile king of the NEW fabulous way to add accent and color to your pool. Mass customization had begun! He made a fortune of it and within 3 years refused to do “those puny bathtub” installations that once were the standard.

The shape of this pool was not the way it was for only esthetic reasons - although the result was spectacular. The yard was narrow. Even a small kidney-shaped pool could not fit in. That is why I was hired in the first place. The conventional would not work. I designed a “zoned” pool where the basic functions of diving, swimming laps, playing and sitting could all be done simultaneously without interfering with one another (each has flat bottoms at the best debth required for the function.. This intent drove the shaping (which provided great variety for design play and problem solving) and also allow me to fit the pool into the narrow yard with out removing all the trees (only one had to go) - another owner requirement.

In one stroke a new pool type was born. It became the “Tri-Level” Pool, dozens, maybe several hundred, were built and one pool salesman made a career of doing only this kind of pool by copying my custom pools and adding his own versions. He got quite good at it. He also leaned when it was important to bring the work to me (about one out of ten as it turned out).

There are several discreet lessens from this part of the story:

This one pool started a process that changed an industry. There were several innovations for the time and place: Cantilevered decking over the pool edge (no coping - a new way of forming). Flat multilevel pool bottoms (structural consequences, steel tying changes, impacts on the automatic cleaning systems and water circulation). Multi-sided shape of the pool and “syncopated” decking (layout and forming “complexities”). Tile instead of decking over part of the pool (bond beam) perimeter (requiring exact bond beam geometry and workmanship; replacing large tile pieces with mosaic tile - not a standard at the time). Integration of the pool with the house and landscape (issues of grading, water run off, leaves in the pool, access from the house, safety concerns).

Each of these potentail impacts had to be addressed.

It turned out that there were only a (real) few blocks between a mundane design and an exciting and far more functional one. Those blocks could be removed, by removing them from the traditional process, demonstrating how easy it was to do the work and then transferring the process back into the common protocol. An architect that never gets out of the drafting room cannot do this. When THINK work is separated from DO work all kinds of unnecessary barriers result and cannot be resolved. I was able to do this because we were a design office AND a contracting firm. We were also willing, when necessary, to do R&D by absorbing these R&D costs and guaranteeing to the owner we would replace any thing he did not like (or did not work) after he had USED it awhile.

The organizational transformation process is accomplished on the level of the organization’s products - not management. Extract, do, demonstrate, transfer, explain the principles at work - in that order.

From 1979 to 1982, Taylor Associates (now MG Taylor) created the basis for the work it is doing today. The Weak Signal Research and philosophical base had been laid down 1974 to 1979. In the first three years of it’s existence, MG Taylor built it’s first environment, developed the basis of the Modeling Language, created and refined the DesignShop process, fielded an RDS experiment and operated the first client NavCenter (Mentor Corporation). We formed a corporation, created a Board of Directors, received investment and sold the company. The beginnings of a ValueWeb was established. We serviced a small, national client base of medium sized organizations.

From 1982 to 1985, the Acacia years, the information factory concept was refined. We concentrated on one client and it’s customer base enjoying, for the first time, steady revenues and a budget sufficient to staff beyond what was just required to produce client work. What is now AI stayed in Boulder as a network member organization and was not reintegrated until the early 1990s. It was in this period that we gained the operational excellence required to deliver our service products at volume and profitably. On an event basis, we have been profitable ever since. In terms of an organization, overhead to operating profit, we have been profitable, break-even and at a loss, annually, in approximately equal shares. In total, we have accumulated a loss of about three million (out of 42 million revenues). With a total capital contribution of about 500 thousand dollars this means the entire cost of creating our products, service and the four business units that deliver them has been less that four million dollars. In 1999, we had a valuation of 10 million.

The sale of the business to Acacia involved some breaking up of the organization but most of it stayed intact. The piece that “spun out” later came back in. When the enterprise as a whole left Acacia this was the first time it was somewhat shattered. Most KnowledgeWorkers, the archives and physical facilities stayed inside Acacia. The principle gain of the Acacia years, besides financial stability and the refinement of operations, was the opportunity to work with a moderately large organization though a protracted change process.

1985 to 1990 were the ad-hoc years. The enterprise functioned as a network, had no fixed assets, did not market and worked predominately inside large organizations such as Capital Holding and GM. We used the Acacia Center (that we had designed for them) as a place to do infrequent events. We later took over this Center and operated it for a couple of years. The Capital Holding relationship exemplified our pattern of work that lasted until 1995: we did a DesignShop process focused on some specific problem (in this case, a merger), build them an environment (in this case two, one in 1997 and a larger facility in 1992) and facilitated their process through a multi-year transformation process (1987-1994). there were usually three of us as overhead and a network of about 15 to 20 KnowledgeWorker that performed work on a contract basis.

1991 to 1995 continued this same operating model with the exception of the OMC environment which operated 1991 - 1992. The OMC had a staff of about six. It operated at a profit the first year and a loss the second. The market was not strong enough to sustain long term growth a pattern we experienced again with the Hilton Head knOwhere Store. However, like Hilton Head (1996-2001), the OMC was key in launching several relationships and parts of our evolving enterprise and therefor was profitable on the scale of Enterprise (as every environment we have built for ourselves has been). In the case of the OMC, it facilitated our relationships with the Car Rental Industry and the US Air Force. It was in this period that several pieces of our enterprise started to coalesce. The RDS was reintroduced and became the principle delivery system of our work in 1995 (and only this one year, to date, which is a significant point). The relationship with the Air Force followed the Capital Holding pattern only on a much larger scale - we built them an 8,000 square foot environment and did over 40 DesignShop events in the first year. The core overhead of GMT stayed between three and six, usually three hundred thousand a year. The “Home Office” of MG Taylor, 1993 to 1996 was our 800 square foot Sea Loft. We generally established apartments at client locations with a principal on site - a pattern that remained in place through 2000 (and is very like to reoccur). The Air Force work was as sustained engagement that afforded MG Taylor steady revenues and the opportunity to work on large-scale, complex systemic issues that effected global systems. It directly lead to our NASA work. Between 1987 and 1999, I spent over 80% of my time “on the road.” Annual revenues in this perion ranged from 600 thousand dollars to 1.7 million. The full life cycle of first serving a client in one of our environments through transfer of the system and method to them, involves four distinct phases of work each requiring very different kinds of and levels of effort on our part and each phase has radically different profit margins. The profit margins do not necessarily directly relate to the work loads or even the theoretical value of the work. They are provided my the client’s perception of value and this changes from client to client and time to time - even, from region to region.

It was 1996 to 2001 that MG Taylor laid the foundations of a “standing” business. In this brief period, MG Taylor (and now, knOwhere, Yolke, AI, iterations) has gone through several “classical” phases of development, de-evolution and recreation. This was highlighted by the establishment of the knOwhere Stores (Hilton Head 1996, Cambridge 1997, Palo Alto 1997), the relationship with EY (1995 - 1998 and the sale of the Cambridge facility to them), the integration of AI (1996) and the establishment of our own production facility (1998), the peak of our employee base (over 30 in 1998, 20 in 2001 across all Business Units), the creation of separate Business Units (1999) and revenues fluctuating between 5.5 and 9.9 million per year. Through out this period our structure was a hybrid of traditional corporate structure, extreme outsourcing to the network, extensive partnering with a larger company and extended virtuality. This has been a high performance organization in product/service delivery and unstable in traditional management.

It will be 2002 and beyond that the true ValueWeb structure will emerge and grow. This will follow the ValueWeb Model, employ the “Swimming Pool” engine with MG Taylor developing a portfolio of enterprises employing the “NASA Method.” If MG Taylor will remain the Systems Integrator of this web or a larger played within it is a question that remains unanswered. What is clear is that both roles are often in conflict. This has interesting implications for the application of ValueWebs to traditionally owned corporations. Our present (February to March 2002) default condition, is that we are still involved in both roles and looking at our many options for moving forward.

It should be noted, however, that we have been profitable - and not - in each of the eras (other than 1979 to 1982) and that there are simple correlations to be found, among the many variables, that drove these results.

Chief among them, of course is the ratio of fixed overhead to net revenues. This is determine by volume and our ability to scale up and down quickly enough to keep our ratios in line. This issue is made complex because our product/service delivery shifts rapidly in both location and in what our customer/clients buy. This last factor is caused partially our lack of critical mass but more from the nature of our market. For example in 1995, our revenue was mostly generated by DesignShop events delivered by RDS deployments to several clients all over the US. In 1996, the majority came from one client (EY) delivered primarily in the Hilton Head knOwhere Store. In 1997 and 98 mostly DesignShop events from one client (EY and their clients) delivered in our three knOwhere Stores, two EY environments and one client NavCenter. In 1999 and 2000, a number of different services including three NavCenter transfers to a diverse client base delivered through the Palo Alto knOwhere store and from within the client NavCenters in several states. During this period, direct AI WorkFurniture sales became one third of the business involving large environment sales one year to a few clients and many small environment sales the next to many clients all over the world.

In this same period, we entertained three serious merger/purchase options and two large joint ventures. While some of this is the consequence of being a small business in start up most of it is the consequence of a highly volatile market. A true ValueWeb architecture will mitigate some of the impacts caused by this volatility. This will move the impacts away from the operating business level to the web-enterprise level were traditional market volatility is better dealt with.

The Swimming Pool Model evolved to deal with certain circumstances: seasonal fluctuations, economic cycles, wide geographic distribution, time-demanding buyers, a design-focused product (mass customization), a new product (low cost consumer pools), fast growth, untrained workers, quality issues, brand competition and the integration of multiple products/services from multiple organizations. These circumstances match up nicely with the circumstances of the MG Taylor Corporation and affiliate corporations. These circumstances are widely shared among industries and organizations of all kinds all over the world.

SolutionBox voice of this document:
INSIGHT • POLICY • PROGRAM