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Join Derek Hudson as he explores Essential Dynamics, a framework for approaching the challenges facing people and organizations. Consider your Quest!
Hey everybody, I'm Bryn Griffiths and welcome to Essential Dynamics. And Derek Hudson is, why am I doing this? I guess I'm here to help you a little bit, but this is your show.
Derek:Bryn, thanks very much for helping me with my show. It's great to have somebody to talk to you, great to have someone ask good questions, calls me out when I say dumb things. And so let's run.
Bryn:Well, let's continue on with our conversation. On our last episode, we talked about AI and the confusion and people are still trying to figure out how is this gonna be applicable to me in my business or in my home life or whatever. But, you know, we've been taught that there's only one way to use AI, but more and more now as I read more and more, I started to recognize that there's different ways of using AI, but is there a new way to use it?
Derek:I think there's a new way to think about it. The challenge that we talked about in the last episode is that it's this shiny tool and it can do really cool things. And so we're trying to take the tool and apply it to the work that we do. And we tend to think about our work as the stuff that's like that comes across our desk. We have our own kind of point of view of the systems that we work in.
Derek:And my focus here with Essential Dynamics is always to step back and see the system and to see how an organization has a purpose or should have a purpose. There's something that's trying to accomplish and there's a whether they design it or not, there's a system that develops to create that value to accomplish that purpose. And I want to talk about AI in that context. Then, you know, in all of the stuff I've read, whether it's try to help leaders or executives or help in individual productivity. It all kind of comes down to, I have a new tool.
Derek:I'm gonna work at my workbench and I'm talking about like the whole factory.
Bryn:Well, on the last episode, we were talking about the fact that maybe some leaders of some companies were not using AI appropriately because they can't quite figure out how two plus two equals four, right? What about this episode today?
Derek:Well, what I wanna do is take essential dynamics, which we've been talking about for 125 episodes and set it up as a format by which you could use AI to help understand your business. Ah, okay. It's kind of like if we go back, I talked about spreadsheets a lot. The first way to learn how to use spreadsheets is to have a problem that you're trying to calculate an answer to and you know how you would do it, but it's just that there's a lot of number crunching involved. And so you lay it out and then instead of having to add up all the columns on an adding machine, which I had to early in my career.
Derek:Right. This spreadsheet takes care of that and you can focus on the logic and make sure your variables are good, your calculation's good and that the output makes sense. And so here we have the opportunity to have another thinking tool help us in our responsibilities to look at the systems that we operate in and make sure that they actually flow, they actually accomplish things. And so I guess I'm probably going to bounce back and forth and it'll be interesting to see where this goes. I see AI as a tool to help us think about the problem and sometimes as a tool that will actually help us be part of the solution to a problem.
Derek:Okay. There's so much that AI can do to help us think about a problem, but not if we're thinking at the wrong level. So what I'm trying to do in this one is new way to think about AI is let's step back, try and see the whole system and then you use AI to help us see the whole system.
Bryn:Okay, we always talk about purpose X and purpose Y, but AI, I don't think it can reveal purpose, can it?
Derek:It can't.
Bryn:Clearly can't.
Derek:And I have had an ongoing battle for over a year with Chad GPT and purpose X, purpose Y. And I thought I had it fixed and it popped up yesterday when I was getting ready for this podcast. So I'll up and share it. So in my mind, the most important thing that you have to start with is that this organization or this project or this family or whatever has a purpose. But it's not that simple.
Derek:There's actually a conflict on the purpose side and we refer to that as purpose X and purpose Y. And what I'm trying to do is to find the juiciest artist conflict that kind of paralyzes us. Sometimes one of those sides we don't speak about, we don't acknowledge, but that's why we're paralyzed, but there's a purpose x and a purpose y. And Chad GPT consistently tries to categorize what a purpose X kind of purpose is and what a purpose Y kind of purpose is. And I've given it my Essential Dynamics handbook, full text explaining that we do not pre generalize or categorize purpose X and purpose Y.
Derek:And then it just creeps in because that's what ChatGPT is designed to do. It's to see patterns and to share patterns. And I just keep fighting back. And so the latest one is purpose X is what you're trying to accomplish, where you're trying to go and purpose Y is what you're trying to protect. Oh, boy.
Derek:And that could be true. That could be the thing. Yeah. But it's not in every case. And so I won't go into all the details, but when I was having this conversation yesterday trying to correct it one more time and it got it and it recited back that purpose X and purpose Y were each in their own instance opposing and that's all we needed, I said, okay, find three examples in literature of a purpose x, purpose y that's not this standard classification you've been using.
Derek:And I won't share the x and y, but the three characters and and works, literary works were Frodo in Lord of the Rings Okay. Javel Jean in Les Miserables
Bryn:Yep.
Derek:And Hamlet in Hamlet.
Bryn:Very conflicted characters.
Derek:Yep. Conflicted characters. They have lots of stuff going on and I'll leave it to listeners to Do their own stuff. Ask Chad GPT or do their own homework on that. Okay.
Derek:But the point the point is that the AI agent isn't helpful in that regard. However, once I say, this is my purpose x, this is my purpose y, I can say, what does that mean to this system? I can I can throw something in and say, I wanna do this and and Chad GPT can say, well, aligns up very well with purpose x, but it takes purpose y the wrong direction? And so guess what I'm what I'm trying to illustrate here is that the essential dynamics, very simple way of looking at systems is essentially a logic model. Everything has to make sense.
Derek:There's a causal relationship. This comes before that, that causes that. That's a subset of that. Here's a flow, value flow. Here's another flow, cash flow.
Derek:They're not the same, but they're related and their relationship can be understood. And if your AI knows that, then your AI can help you understand your system.
Bryn:How many times you have to tell it though? Well, like I guess frequently.
Derek:They don't call them large language models because they can work off haiku.
Bryn:Yeah. Wow. Okay. So so
Derek:So this is this is a this is a an intellectual and a leadership exercise. This is not we're plugging numbers in a spreadsheet. Yeah. Right? Yeah.
Derek:Yeah. But we're to think. And so using chat GPT or some other large language model, you can poke at logic. It's good at that. It's really good at that.
Derek:And so like it tends to jump to conclusions and over summarize, but you can ask it, does this make sense and what follows next from this? And so that's on the purpose side, but it can't
Bryn:tell you what your purpose is. But at the end of the day, we're controlling the flow.
Derek:Well, for sure, And for so I have Eddie, we talked about Eddie a few months ago. Yeah. That's eddie. Guide. You can find the Eddie tools online and Eddie will analyze a system based on essential dynamics and tell you about purpose, path and people.
Derek:But it can't create a system. It shouldn't create a system. We shouldn't let it create a system. I just want to talk about path for a second.
Bryn:Sure,
Derek:yeah. So path is how we accomplish the purpose, how we achieve value. Things that move us towards that we call drivers and things that hold us back we call constraints. I have really trained my model heavily in the idea of constraints using the theory of constraints. And it's really good at looking at text and numbers now too, and then calling out and saying, I think that's where the constraint is.
Derek:Okay. Or understanding when I say this is the constraint, what that means and what it would mean, for example, for other parts of the process to support that constraint. And so that's, I find that quite helpful. So you could ask it, now that we've identified this constraint, how can we increase flow in the system? And it can kind of simulate or model that for you.
Derek:Right. And then on the people side, one of the things that I found that AI is particularly good at is kind of taking the position or the voice of another person. And we tend to see things our way and so the challenge that we talk about on the people side is that there's always tension between the individual and then what the group needs. And AI is pretty good at interacting with humans. So I haven't explored that very much.
Derek:But how could you personalize something so that one person could see it one way and another person could get the help they need work from the same system. The other thing that we talked about in central dynamics, which is really ties in really well with AI is we talked about four flows.
Bryn:Right.
Derek:Yeah. So there's like the creation of value, value flow, that's the work moving through the system and you know, on the loading dock and out to the customer. Cash flow is connected but it's not the same because you have to invest before you start getting revenue and there might be some timing differences in when you pay for things and when you receive cash, you can borrow money. And so cash flow is different. I did fantastic, Brynn, I did awesome financial models that that forecast value and cash flow.
Derek:Income statement, cash flow statement, the balance sheet. They're all integrated. They're beautiful. I had to use Excel. They were awesome.
Bryn:But? Is there is there a but coming here?
Derek:What no. Well, the the but is that they're only good as the numbers that you put in. Right. The other two flows we talk about, one is information flow and that's one that I'm using AI to to work on. What information do the leaders get about value and cash so they can make better decisions?
Derek:And then the other one is energy flow, which is the furthest one from AI because it's the experience that people have, what motivates them, what frustrates them. And but you can use the AI to recognize those things. Like for example, if you had a employee survey and ask people what frustrated them and you got a bunch of text back, then you could use AI to find common themes. And, know, are the things that create energy on the team and what are the things that reduce energy on the team? So all of that is just a way of saying that we've thought through the key flows and factors that you need to see in an organization if you want to understand the system and get to system flow.
Derek:And those are all things that are really easy to converse with an AI about because it's logic based and it makes sense and they build on each other and there's a defined vocabulary. And so then the question is, so how would you use AI to help actually improve the flow in your system?
Bryn:K. I guess that's my next question. How?
Derek:Well, I I think I'm gonna I'm gonna just go in one direction for now. We'll see how this lands. That is we've talked about this before. The key resource to every organization is the capacity of the organization's leadership to pay attention to something. We just call it leadership attention.
Derek:And you can't expand that capacity very much. You have a CEO, everything comes to the CEO. Maybe the CEO is the founder and they invented the whole work process to begin with. And so they get all the questions. And so there's your limitation right there.
Derek:If that leader pays attention to something, it gets better. If they don't pay attention to it, it doesn't get better. But also you can't just go get another leader. You can't run a night shift for the, you know, the night CEO, can't step in and put out another, you know, eight or ten hours of the day. So your leadership attention doesn't easily expand.
Derek:So using it well is critical to an organization. And so that leadership focus is the key thing because anything leadership focuses on will get better. Okay, so now we introduce AI. And there's kind of like three levels, I think. I'm making this up as I go here, but this is really interesting.
Derek:One is AI becomes a huge distraction because you play with it. Yep. Oh, yeah. Or or I mean, I saw some very credible people and they were pitching their leader AI thing that they wanted to sell as a product. And it was basically like Google alerts.
Derek:It was, we will crawl the web and then we will send you stuff that you're interested in. As we need another feed, right? Yeah. Okay, so that's crowding out our attention. That's not focusing our attention.
Derek:So if I just get in and I do this random chat with GPT on a topic, I used to do it with Wikipedia. I used to do it with the World Book Encyclopedia when I was a kid. I read something that makes me interested in something else. I go down a rabbit hole. An Yeah.
Derek:Hour later I come back, I don't remember my first question. You know, that's a distraction. We all do that. Okay. Yeah.
Derek:So there's that. And it's what we've done in a world where we were bombarded with outside contact, emails, texts, scrolling, all that kind of stuff. And then we get a new one that's super powered and knows everything there is to know in the world. So that's a big risk to a lot of people is that we're going to suck leadership attention. The other thing that's related to that is now we're going to try and use AI.
Derek:So now in the midst of all the other things we're trying to do in an organization, need an AI strategy, Right? So that could be a big distraction. Okay. So the second one is that we use AI as a personal assistant optimizer. We get our own workflows down because AI is scanning our email for the critical things.
Derek:AI is reminding us that we have to allow for travel time to go to our next appointment, stuff like that. And I see a lot of stuff. I talked about this last episode. I see a lot of stuff where that's AI's solution to leadership. And I think it's shooting way too low.
Derek:You know, I mean, like, we have digital calendars. Someone can make an appointment with you in your calendar. You can send a text message by dictating. You know, those are all things that kind of improve your flow. But that's not what leadership attention that's just creating leadership, more capacity for leadership attention.
Derek:It's like, what do we so the third level is how do we actually use our leadership attention to make an organization better? And one of the ways I think about that is if it can reveal to us the way your system works. So what we're working on, I think I referred to this in a past episode as the holo map, which in Star Wars was that three d thing where they can see sort of any part of the galaxy from any perspective. Your business system is a set of logical steps. It may not be designed, it may not be that optimized, but like product moves through and comes out the door and that can be described.
Derek:So typically, if you think about investors, there's one way to look at a business. They would ask, you know, someone who wants to get money from them and they say, what's your business plan?
Bryn:Hear it all the time.
Derek:They would have a document. So the document would be, depending on the model, it would be like a one pager or a seven pager, you know, 57 page business plan with appendices. And that's a collection of words and numbers in a document. And then then they decide, this isn't working out so we have to change. We're gonna pivot.
Derek:So now you gotta Wait
Bryn:a minute. Hold it. You did the 40 fingers when you said pivot. Pivot.
Derek:Pivot. That's the thing. Yeah. Pivot, which means that we're gonna try something else. But pivot sounds like more, you know, legit.
Derek:Yeah. We made a mistake. We're gonna try something else. That's not as cool, but we're gonna pivot. So we're gonna pivot.
Derek:Yeah. So now you got to rewrite your business plan. Okay. So what I'm trying to get at is the business plan incorporates a bunch of logic. If you take your business plan and a framework like Essential Dynamics, which has logic built in about what the flows are and the drivers or constraints, and you put those together, the HoloMap is a constructed view of an organization.
Derek:That's the logic. And I guess in a sense, it's like having a vector diagram as opposed to a raster image. If I get this right, I'm probably wrong. Wow. The thing about a vector diagram is you could say, show me from another angle or zoom in or change that dimension and all logic's there and you can do that.
Derek:Whereas a raster is just like the pixels. It's just the dots and you you're stuck with the one view. So the business plan document is the one view and the logic model is all kinds of views. You could take that and say, give me the business plan for the investor and out it comes. You could also say, what's the agenda for our quarterly business review meeting?
Derek:And it knows the key variables in your organization and puts those on the top of the agenda. So so what that allows you to do is take something very complex, apply our framework, which makes it easier to understand and then makes it dynamic so that you can view it from different angles. And so that is a way then to optimize leadership attention because you don't have to keep track of all the details. You can see exactly what you want when you want to see it. And so that is I think of put it this way, a worthwhile quest for AI, which is better than doing being a newspaper clipping service or an accountability partner or a meme generator and limerick writer.
Bryn:I ask you can I ask you this? Is AI there to create more noise or to eliminate more noise? Well, I keep hearing this one comes up all the time with people that I talk to. They say, the noise, oh, the noise. And other people go, well, me, it's actually quiets things down a little bit.
Bryn:I gotta think that's the user.
Derek:So I think we're talking about if I talk about three levels, the first one I talked about, which let's say level three at the bottom is creates more noise. It's like, maybe that's minus one, that's negative, right? Yep. I was overwhelmed with 57 channels and nothing on and then I got the internet And now I have an AI crawling the rest of the world and feeding that to me. Right?
Derek:So that's distraction land. Then the other one is like personal optimization, which is what, you know, what you're talking about is like, help me remind remind me what my list is. Don't show me spam. So that's better. But what I'm saying is the highest and best use of AI is to use its logic capabilities to help you do what we like to say in the central dynamics is see the simplicity on the other side of complexity.
Derek:Yep. So don't summarize it out of existence like we've both had Chad GPT do to us, but find the levers, the key variables that are most important and keep those in front of us. That's I think the potential of AI. It's well suited for that. It's like all of the technologies are moving in that direction.
Derek:But if we're over here in distraction land, right in limericks, it's not going to help us. And if we're in personal optimization mode, then we're going to be a really efficient executive, really efficient manager working on the wrong stuff. Or we can operate our system for flow.
Bryn:It's gotta be a delicate tightrope to walk for leaders. Right? Because you can go this way, you can go that way. One may work beautifully. The other may be a total disaster.
Bryn:It's got a I good say
Derek:they stack. I say they stack.
Bryn:So Okay.
Derek:Forget the like, don't get distracted, you know. And that's that's a challenge for all of us all the time. Yeah. There's so much is coming at us. So you ought to avoid that.
Derek:And one of the ways I think I've found that I can get on top of that is that I have different activities in my life that are very different from work. Like my my community service, my family, my outdoor activities. Yeah. I'm not scrolling when I'm doing any of those and they're different from work. There's a there's a they're a brick.
Derek:So eliminate the distractions, become effective for sure, and use the tools to become effective. But don't think that's the pinnacle. For a while I was in a personal knowledge management learning phase, which they go through from time to time. And I noted that there were a number of people, YouTubers and stuff that had these great workflows and apps and hacks and stuff like that that they did to be more personally productive. And you're like, I'm not worthy.
Derek:I'm not worthy like these people are and then you realize that that's their job. Yes. Like they don't they don't actually do anything other than look productive.
Bryn:Hang on. I can walk around the office with a piece of paper. That's how I used to do it.
Derek:Yeah. Hey, Brandon, back at my Pricewaterhouse days, we only had one printer for my spreadsheets. You know what I was talking about? Yeah. Last time?
Derek:Yeah. And so I used to joke that if I wanna look busy, just walk around the office with a floppy disk and say, I'm looking for a printer. And then if I wanted to look real busy, I'd carry around two floppy disks.
Bryn:Yeah. You can fool some of the people some of the time.
Derek:That's right. So anyway, the hierarchy at the highest level is use this thing that can sort out logic to sort out the most important logic that an organization has, which is how does it create value? And don't stay at your desk and be an optimized manager, work on the whole system. And of course that depends on your job and your scope, but I think we can always step back and at least look at it at the system from our boss's level and our boss's boss's level. That's when you become useful.
Bryn:Okay. So to kind of put a bow on this and the other thing too about AI is what we're talking about today as we're into the holiday season here is that by the time we get to March, so much could change. It's incredible how fast things are changing on the AI front. Right? And you got us you gotta have at least one person in your building that is right up on top of all this stuff that can pass stuff along to you.
Bryn:But if we had to put a bow on what we've talked about here, not only in this episode, but the previous one, when it comes to essential dynamics in AI, what would you say?
Derek:I think that we're just barely seeing the potential and we think too small if we think about sort of automating our little tasks. I think we got to think big and say, how do we collectively working together in organizations optimize the flow of value in organizations? And then beyond that, wouldn't it be great if we could optimize the flow of value in society because clearly we need to do better for more people. So with that, maybe I will branch over to my Christmas greeting and message.
Bryn:I was just gonna get to that before we wrap things up here.
Derek:Yeah. We had we've had twice we've played the Essential Dynamics Christmas special this time of year. And I refer people to that. That gives some thoughts about how I think Essential Dynamics fits the Christmas story. But what I would say is that we are, as people on this earth, we are here to create a society where we take care of each other.
Derek:We're brothers and sisters. If that's one of the Christmas messages is that, you know, God sent a child to earth to teach us how to love each other. And I'm grateful for the chances that I have to work with people in my professional career and in other ways to really get to know people and to love them for who they are and to also see the potential for who they can be. So with that, Christmas.
Bryn:And Merry Christmas and a happy holidays to you and everybody. Lot there's a lot of friends. And and the other thing too, respect other people's opinions. That's something I think is kinda getting lost. If I was gonna send one message out for me, I can have an opinion.
Bryn:You can have an opinion. I need to respect other opinions, not just my own. Also, you might be able to convince me with your opinion to change my opinion. Some people just dig in and I think that that's why the world is a bit of a mess right now is because people don't wanna listen to other people and don't wanna change their opinion.
Derek:Well, I think that we should all be come together in a collective pursuit of truth and sometimes truth is hard. Yeah. But ultimately, it's it's only truth that makes things better.
Bryn:I think it's a good way to wrap things up as we head into the holiday season and coming back in January 2026. I can't believe it. It's also hard to believe we've now done a 126 episodes.
Derek:Ben, awesome. And thanks for for you, Brent, for being on the ride every step of the way.
Bryn:Let you wrap it. I'll let you wrap it.
Derek:And to everyone else, thanks for thanks for a fun year of working listening to Essential Dynamics and working on it. Looking forward to awesome stuff in '26. Until then, consider your quest.