Creating options

An important measure of the success of an IT strategy and architecture is its ability to adapt to changing circumstances.
• CIOs are faced with long investment cycles, while technology lifecycles are only getting shorter. IT needs to be ready for trends and requirements that are completely unknown when the investments are made.
• A good part of IT innovation that drives new business opportunities comes from consumer IT, and CIOs need to be ready to link in. Today this comprises the 2.0 world: Trends on the horizon include augmented reality and sensor technology, for example. Analyst company IDC predicts unstructured data will grow at twice the rate of conventional data. Already by 2010, unstructured data will make up the majority of all enterprise data.
• Many businesses are investing in value chain integration, requiring processes and systems to link to a wide variety of processes and systems owned by customers, partners, suppliers, and other stakeholders.
IT offers an infinite range of alternatives and unlimited choice in how to tackle these challenges. Winnowing down a wide range of technology choices requires discipline. CIOs can demonstrate the required leadership by turning unlimited choice into a set of directed options. 

Choices are not the same as options. Choices, or alternatives, represent all possibilities. We use the term options in the sense of financial options, acquired with the express purpose of being exercised at will. Creating options means taking matters into your own hands. In a skillful hand, a portfolio of options helps decide what initiatives to expand, which ones to delay, where to change direction, and what to expedite. If you have specific options - as opposed to unlimited choices - you are better prepared for change.

Business and IT alignment

I recently received a promotional email for a "masterclass" on business and IT alignment. The training promised answers on the following questions: "how do you know your IT strategy is aligned with your business strategy?", "how can you put together a governance model that ensures IT follows the business?" and "Pitfalls and success factors".

I checked, the email wasn't from 1983, but seriously from 2009. How can we still have that discussion? Has nothing improved in the last 20 years? And moreover, how can business/IT alignment be so misconceived?

First of all, let's define alignment, this is usually skipped already. From a social-psychological, a person is aligned when the self, self-perception and external perception closely match. The self-perception is how you look at yourself, and the self is who you really are. If there is a mismatch you could become delusional, frustrated, and generally uncontrolled. You don't understand yourself. If there is a big gap between the self and self-perception, and the external perception, people expect you to be someone that you are really not. This leads to role distance, and unauthentic behavior too. The same can be said of organizations. If there is a big gap between true organizational behavior and who we think we are, we are kidding ourselves. Did you check out your mission statement and values lately? And if there is a big gap between external perception and the organization's true motives, you spend more time figuring out how to spin your strategy externally than actually executing on it. Quite dysfunctional. 

Same with business/IT alignment. Like any relationship, it needs to come from both sides. Business perception about value needs to match the IT perspective. But... functional relationships should be based on equality. If both parties agree that IT should follow the business, you're in a dependent, submissive relationship. Not mature.

Business needs to align to IT, as much as IT needs to align with the business. It's a two way street. The nature of technology dictates so, for starters. If you are a carpenter, and you buy one of those circular saw tables (new technology), you'd better organize your process and work around that table, instead of lifting the table to go to the wood. If IT were to follow the business, deleting text on a screen would have to be done with Tipp-ex. The whole point of technology is to not align with the business, but to bring innovation. New, different, better ways of working. If anything, business should align to technology in order to be more successful. In fact, secretly we do so already. It has become a best practice to adapt the business to the processes built into the ERP system and CRM application, and rightly so.

Then, let's discuss Business/Business alignment. How many times is IT struggling with suboptimal business cases, based on budget held by the business, by having to put in a departmental solutions, because each department is "unique"? IT is often found to be "nerdy" and having "no sense of urgency" for talking about architecture and infrastructure. True, IT driven projects are usually not very successful (the business will see to that), but the only thing worse is a business driven project. Short-term successful, but ill-architected, nothing repeatable, and lots of them combined form one big negative ROI in two years down the road. It is the role of IT to see commonality between functional requirements, and take an integrated approach. It would be a lot easier if the business departments would align with, well, the other business departments, instead of IT having that struggle all the time themselves. 

And, while I am on the subject, it's a pity if organizations are still discussing business/IT alignment. The real battlefront has moved on already. The name of the game is value chain integration. Aligning all stakeholders around a successful and sustainable business model. Making sure partners, suppliers and channels all benefit from integrated logistical and administrative flows, while taking into account the requirements of investors, regulators, and society at large. This is how alignment contributes to the business strategy.

But perhaps we should start with something else. Remember the definition of alignment. The self, self-perception and external perception need to closely match. Perhaps the real problem is the gap between self and self-perception. IT people sometimes think too little of themselves, and desperately want to be seen as a 'business partner' and considered of strategic importance. Don't worry. You are. Because of the nature of technology. And IT people sometimes think too much of themselves, claiming they understand the business better than the marketing, operations or sales executives. Don't kid yourself. When was the last time you talked to a customer, and constructed a multi-year deal? Think of yourself as who you really are: at the core of business innovation, while at the same time making sure the business runs smoothly.

Thanks for reading. Rant over.

frank

BBQ = BPM + CRM + EPM + ERM

This summer I bought one of those fancy outdoor kitchens, and it runs on gas bottles. I got one bottle as part of the BBQ, and off we went. After a while the bottle was empty, and I wanted to exchange it, getting my 55 euro deposit back. I found a garden center in the neighborhood that sells that brand. My wife was surprised to see me come back to the car with two bottles: a full one and an empty one. I had not been successful in trading it in. The garden center explained to me I needed a special deposit form, and the original receipt. The special deposit form could be obtained by sending in yet another form to the supplier's headquarters, and they would send the deposit form back. Within. Three. Weeks. Excuse me? 21st century?

A short call to the call center proved them right. Indeed, a complete circus of administration that would make most 'red tape' look pale. And I didn't have the original receipt anymore. I sent an angry email to the contact center, with the request to pass it to management. I pointed out that we both our interests were aligned, I have their bottle that they want back, they have my deposit, that I want back. I further explained, I couldn't help myself as a former management consultant, that processes like this can lead to serious consequences. People might give up and simply dump the bottle in the trash, which would not be in line with the "green image" the gas company wants to portray. I also pointed out the reputation risk. That it would take only one person to set fire to the bottle, and make a funny movie out of it that is posted on Youtube. Frankly, I didn't even expect a response, just got it from my chest, and went on finding out how on earth I could get a new receipt from the internet-shop where I ordered the BBQ.

To my surprise, the next day I got an email from the company's marketing director. I had caused a dilemma, she said (quoting my own research!). Either help an angry customer, but run the risk of fraud (no paper trail), or keep a tight process and lose a customer once in a while. Then she asked "what would you do in this case, Mr. Buytendijk?". That was the most fantastic response you can think of. Showing strength by opening up, turning a complaint in an opportunity, using my negative energy in a positive way. "Service recovery", as CRM specialists call this. It means that complaints that are dealt with will often lead to higher customer satisfaction, even compared to before the incident. Well done.

Over the next days we had an interesting email conversation, for instance about lean and six sigma. The starting point is that processes need to add to customer value. If they don't they should be abolished or changed. This process clearly didn't add value, in fact, it destroys customer value. Although I didn't see the need for such a process (in fact, all you need is to track the serial number on the gas bottle), if the company would insist, first move it to the Internet, second, make it a worthwhile process by supplying BBQ tips generated by the community of users, while registering your bottle. However, what I found out was that these bottles do not have a serial number. That is odd, it is a basic principle in auditing that wherever there is a change for fraud, the flow of goods needs to be monitored. Without identification, there is no monitoring. The lesson we can learn from that is that if the basics fail, no process, or no technology is capable of adding customer value anymore. Unless you get the basics right, all you can do is damage control. And, reasoned the other way around, if you get the basics right, the problems the company has between balancing the needs of the back office (fraud prevention) and the front office (smooth customer interactions) would completely disappear!

Oh, one more thing. I did a little bit of "market research" and found more people who use gas bottles from the same company. In their case it was solved differently. The outlet where they got the product told them to never mind the whole bureaucracy-nonsense, they would exchange it for them anyway. The dysfunctional processes was replaced by a shadow-process, figured out in practice. A solution, yes, but wouldn't it be better to be in control of your own processes?

Process, performance, risk and customer relations cannot be seen as separate disciplines. An optimization from one point of view then leads to problems looking at it from another angle. However, when you take a more integral approach, often a simple solution means a world of difference. Will the gas company take the advice? That's the question, sometimes the simplest advice is the hardest to follow.

That time of the year again

(*) Warning. Contains Irony.

It's that time of the year again. Running season. Every year I write in my blog on my jogging efforts. Yesterday I ran the "Singel loop" in the City of Utrecht ("Singel loop" does not translate as "single loop"! Loop = Run, Singel = a canal surrounding a city), a 10km run.

Last year in my blog I used this run as an example of how measurement can tell you anything you want. Last year:
• I improved my personal record for the 10K (great!)
• ... as no. 570 I came in last anyway (hmmm... not so great)
• ... but the system didn't register the people who gave up and never finished (at least I did!)
• I started front row, and came in last, so I must have seen every single runner (social indicator?)

While running yesterday, I found some other examples in running that help understand the subjectiveness of measurement. (Yes, measurement is far from objective!)

Everything is relative
KPIs are used to express one measure of success against a certain base, like revenue per employee. A great way to fluff up your performance. In my case, if I correct my time of 1 hour 16 minutes (1:16) with my overweight, it compares to running 10k in about 1 hour, which is really not bad! Also, it was hot. Does that count for something, comparing performance to other occassions in better circumstances?

Measurement system
I use the Nike+ system that counts every step and sends the data to my iPod. Distance, speed, etc. is based on the average step-size. I reckon the system has about a 7.5% margin of error. So when my measurement system said I did run 10km, I still had 750 meters to go. According my definition of 10 kilometer, I did that in about 1:11, which is nicely on target of what I usually run. And as long as that is the only system of measurement, it is fine as long as the margin of error is consistent. One measures improvement (or not), even if the basis is wrong. So in a sense I did make my target of 1:11, as it was based on a different system of measurement.

Measurement tells you about the person measuring
Measuring a subject itself already causes a change in behavior of the subject. Also, any measurement system shows the hand of the person measuring. Choice of metrics (objectives), or relative position (from where was something measured). For instance, I measured that in the beginning of the run I was mostly overtaken by men. Later on, I measured I was mostly overtaken by women. What does that tell? That on average men run faster than women. But it also tells you something about me. I don't run terribly fast (in fact, I was amongst the last to finish).

Rhythm helps driving performance
I have been writing many times about how quarterly closings are a completely artificial event, that should not impact discounts, etc. The shoemaker charges the same price for fixing your shoes, whether it is March 31st, or April 1st. However, I have noticed there is something to be said for a periodic pace of business. A rhythm helps. I noticed that one song particularly (Eminem - Lose Yourself) kept me going. The rhythm was perfect, it gave me energy and the beat really drove me forward. 

Synergy
My time this year was worse than last year, when I ran the race in 1:14. Then again, I didn't train that much, as I have spent most evening and weekend hours on writing on my new book. Ironically enough, the book is on dilemmas. So is this a dilemma? Spending time on writing versus time on training? The book actually argues it is important to find the and/and situation. How can you do both at the same time? Being so energized working on the book that I automatically run more as well? Alas, practice turned out to be different. Time truly has proven to be a constraint. Then again, synergy was achieved, I did come up with the content for this blog while running...

Lastly, measurement is about learning, closing the loop. That means this blog is about learning how to learn, which in terms of Argyris and Schoen is called 'double loop' learning. Another reason why "singelloop" doesn't translate as "single loop"...

frank

Can a process be ethical?

Ethics is the philosophical discipline that studies morality. Morality is about what is fundamentally right and wrong, towards yourself as well as to others. I wonder how often 'what is right and what is wrong' is being asked in organizations. It should play an important role in strategic decision-making, particularly in these days, as making ethical mistakes can lead to serious consequences. Most organizations have a code of conduct all employees need to sign. 'Doing the right thing' has become more important than risk management alone.

Many have discussed the idea of what constitutes an ethical organization, or ethical targets and performance indicators. If aggressive cost saving targets leave a procurement officer no choice but to work with suppliers that use environmentally unfriendly materials or even use child labor, that is clearly unethical.

But I have never heard of ethical considerations when designing a process. On the philosophical level, for me, a process is a promise. A process promises that if you use it, the outcome will be timely, predictable, and correct. Processes are often obligatory. You have to use it. If the process itself cannot live up to the promise (because it is for instance too slow), it creates frustration, anger, and in the end lethargy. And it drives people to think of ways to circumvent it. Unethical behavior, yes, but driven by an unethical process.

Considering what is right and what is wrong, ethics in other words, shouldn't only be a strategic discussion, they should be part of every business case, or systems implementation.

Academy of Management 2009

More than 8,000 attendees (mostly academics), 35,000 papers submitted, and 1,600 papers accepted. Amongst which a paper on 'scenario-based strategy maps' written by Pietro Micheli of Cranfield U, Toby Hatch of Oracle and myself.

The start of the conference couldn't have been better. I check into the hotel, get into the elevator and am standing next to... Henry Mintzberg. He is one of my heroes, his work "Strategy Safari" was one of the best strategy books I've ever read. I was so perplexed I didn't say "hi" or anything. Then again, can the gentleman please have 30 seconds of peace and quiet in the elevator, people are bothering him all the time.

The number of presentations was overwhelming, covering every conceivable management topic. I was happy to see that the conference guide has contact details of all presenters, so we can ask for their papers.

So Pietro, Toby and I showed our work on scenario-based strategy maps in a bit of a different style. Not a formal presentation, but almost a market. We had an 8"-4" board where we attached a number of slides to, and people were wondering around, stopping at stands they thought were interesting. We got good traction, have been busy all the time.

The bookstore was unbelievably big, with a full range of books from most large publishers. Shopped till I dropped! 

Oh, and lastly, Henry Mintzberg did a book signing, so I got my autographed copy of his latest book and was even able to give him a signed copy of my book. Silly, but I had to...

Connecting the dots

Recently I attended a presentation by a member of the board of a large insurance company. He discussed the "lean" implementation the company has gone through. Lean is a methodology aimed at continuous improvement, and it originally comes from the manufacturing world. Obviously it can also be used for administrative processes.

One of the key elements of Lean is to define the customer value that the organization needs to deliver, and then to eliminate everything that doesn't contribute to that goal. The problem with that could be that you stop innovating. Customers usually don't ask for innovation, they just want to do business hassle-free. The insurance company took a great approach. They company didn't simply ask customers, it didn't just analyze data, the company observed customers closely.

One example that was given was the process around customers moving house. Simply optimizing that process is simple: once you know the customer's old and new address, you can immediately change that in the system, and send out a confirmation letter or email. Process optimized, costs saved, unnecessary steps eliminated, on to the next process. But hang on, what if you think this through? How to add customer value? Moving house from an health care insurance point of view is much more impactful. If you move to another city, you may need a new dentist, a new general practioner, new specialists, etc. Why not offer the customer to register them at a new doctor, and point them to the web site where other customers rate their doctor, dentist etc. Customers become a community. Another innovative thing, was that in its scorecard the insurer doesn't only measure the improvements in time, cost and quality for the company itself, but it actually has performance indicators on what it has achieved from a customer perspective. As logical as this sounds, this is a rare thing.

Lean and Six Sigma do not always have to be 'in the box', and simply about cost savings and operational excellence. Really thinking through what adds customer value is the key to innovation, and this presentation I attended showed that clearly.