Archestra: April 2005 Archives

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April 29, 2005

Performance, Success, and Strategy

Much of what will appear in this site's content pertains to an accepted or conventional use of the term "performance".

But in order to reinforce consistency in examining what "management" manages, it helps to distinguish between "performance" and "success". Here's a great definition of success ripped from Dictionary.com: The achievement of something desired, planned, or attempted. This definition makes it pretty easy to focus on the idea that a business has an ultimate measure (success) while it acknowledges variance in the effort to get there (performance). It also makes it easier to understand strategy as something that logically relates performance and success.

An immediate extension of this is the notion that "success management" and "performance management" are separated but related.

Success, represented by desired achievements, stages a level of further consideration that is mainly about determining whether goals should be reprioritized, retained, replaced, revised, etc. This has an obvious bearing on the idea that some success can pave the way for more success -- the ambition both of the business and of its stakeholders -- whether "more" means longevity or volume. Most importantly, it stresses attention on whether there is agreement or not between the business and its stakeholders on what goals are important at what time.

Performance, represented by the quality of the effort to succeed, becomes more obviously about improvement and about cause-and-effect. Here, emphasis on competency is the point. The notion of competency has a great precedent and use in legal and medical fields, where the meaning references the ability of a person to both spontaneously and consistently call upon relevant functions("faculties") in the face of demand for responsiveness. The most interesting observation about competency is that if the spontaneity and consistency are verified, the competency is validated even if it does not result in an advantage for the competent party. Parties that can stand trial or withstand surgery will not necessarily prevail, but incompetents will not be subjected to the stress of trial or surgery in the first place. Performance management understands that it can help the party "come through with flying colors" but acknowledge that the jury is still out and may finally come in with an undesirable outcome.

Strategy has the very interesting challenge of synchronizing available performance levels with currently prioritized goals. This responsibility makes it more obvious why risk management and change management are fundamental to strategy, along with scenario modeling and forecasting. Strategy can be prescriptively influential on both success and performance, but it cannot "cause" either of them. Instead, it gives a plausible argument for being able to establish, maintain and leverage the synchronization within certain ranges of certainty that include variation in both success management and performance management.

A final note on these distinctions is two-fold:
- first, the generic distinctions between success, performance and strategy apply whether the level of attention is enterprise-wide or task-wide; if on a given level all three things are not well-related, there may be little reason to believe that a higher level can depend on the lower one...
- And, in each of the three cases, the "management" discipline not only attends to a focal point (e.g., "competency") but also to the means for addressing that focal point.

As will be seen in lots of other content in this site, the above illustrates that the conventional concern about the gap between strategy and execution is really much easier to understand in terms of a gap between success and performance. To put a bighter light on the reality of this more precise difference, we only have to remember that in fact the "best" team does not always "win"...

Posted by Malcolm Ryder at 11:59 PM | Comments (0) | TrackBack

April 27, 2005

Productivity and Performance Management

Over at CIO.com, Christopher Koch, CIO's Executive Editor, blogged in his Koch's IT Strategy channel (Apr 14, 2005 "Productivity and Plain Vanilla") that productivity and competitiveness are showing loose correlations with IT spending. This issue of whether IT matters evidently continues to be a debate, yet I wonder if the problem is that the not-new, almost 10-years old answer (see Paul Strassmann on management) is simply unpopular and is still getting ignored. Occasionally, this answer gets to poke its head into the room, opening the door all by itself.

As Koch reports: "Economists and IT pundits are divided as to whether IT has any real productivity impact at all... Eric Brynjolfsson is outspoken in his belief that there is an improvement in productivity and competitiveness among companies that spend heavily on IT... But Brynjolfsson, who is management professor and director of the Center for eBusiness at the Massachusetts Institute of Technology's Sloan School of Management, emphasizes process change, rather than software. In a recent interview with Gartner, he identified seven characteristics of the 'digital organization' from his study."

Interestingly, nearly the entire set of characteristics discussed in reference to Brynjolfsson's study have to do with *performance management* and not with productivity. Here's what I mean: productivity is about the level of output that is achieved through the consumption (i.e. processing) of resources. That's why process design is always at the heart of the productivity issue: does the process effectively connect the kinds of resources used with the kind of output produced? Why or why not?

That working definition makes it more apparent why a "debate" on IT's value to business productivity is somewhat strange. A business uses the output of its processes as its resources, in order to achieve other outputs on a different level of impact. IT's role (point A) typically is to improve and sustain the ability of processes to generate the desired process outputs (point B); thereafter, the business must make use of the process outputs (point B) to generate business outputs (point C). So we're simply looking at "productivity" on two different levels.

Regardless of the company studied, we will not find point A driving point C. We will find point B being managed differently from company to company, just as we find point A being managed variously. Dealing with point B is where Performance Management comes in, to begin to translate the second (upper) level of productivity into competitiveness. Performance management will bring a model of why productivity makes a difference in establishing a company's necessary relative advantages in competing for position, revenue, mindshare, and other elements of success.

This doesn't mean that performance management isn't active at the "point A" level. But at that level, the most important observation is that level A productivity's potential roles in business productivity be clearly distinguished and understood: -- a pre-requisite is not the same thing as a cause.

Managing pre-requisites is different from managing causes, in that causes are tightly bound to forecasted effects, while prerequisites are bound only to opportunities. That is, causes generate effects, but prerequisites only allow them.

Draw your own conclusions, but visit Gartner for the interview, and many thanks to Mr. Koch at CIO.com.

Posted by Malcolm Ryder at 11:25 AM | Comments (0) | TrackBack

ITIL - avoiding ITIL implementation mythologies

A consensus exists that ITIL - the defacto standard reference for IT service management - is a library of descriptions of "best practices". But it is crucial to note that in those descriptions, there is content pertaining to several different issues, three of them for example being objectives, practices, and processes. Just saying "best practices" does not logically mean that all three issues are best, nor understood, nor self-fulfilling for an organization. Saying "best recommendations" is more likely to the point.

It's an understandable urge to acquire the best "solutions" that makes some organizations try to force-fit ITIL -- acquiring by forcing themselves to fit ITIL's apparent prescriptions of behavior. Unfortunately, that doesn't work unless everyone wants it to. Meanwhile, organizations can't just simply run an "ITIL.EXE" installation wizard.

This calls for revisiting the idea of "implementation" on a fundamental level. Strictly speaking, implementation means *applying* something (an implement!), as a practical function within an existing operation. Our corporate experience with most large "applications" is that they must be customized to the targeted operational environment before they can "go live" and survive to deliver ROI. But the whole trick to that is to first understand whether the application must be customized to the current environment or to a future environment, or somehow to both. The IT organization, as run by its managers, *is* the environment. The dynamics of that environment are all about people and the reasons why people will do things.

Therefore, the typical prerequisite elements of "implementation" are always "target, commit, adapt", respectively meaning (1) the goal to adopt the implement; (2) the commitment to the necessary level of operational performance; and (3) the ability to adapt to using the implement.

Put differently, the necessary trio of implementation success factors is strategy, maturity models, and change management. Without this trio there is no rational roadmap available to guide the evolution of the organization from its pre-ITIL orientation to its ITIL-orientation. To create this roadmap, organizations may or may not need outside help, but the point is for organizations to embrace the concept of ITIL-orientation as opposed to ITIL-installation.

Posted by Malcolm Ryder at 10:26 AM | Comments (0) | TrackBack

April 25, 2005

The ROI of Management

The essential function of a business is to process resources to generate value in a targeted market. Generally, the profit results from exchanging the delivery of specific benefits of that processing for something else more valuable.

To sustain this ability over time, the business must be able to regenerate and refocus resources in accordance with the changing requirements of competitive demand in the market.

This means that the capability to execute is the result of an ongoing investment, and the capability itself is a return on that investment. Let's call this the capability return on investment, or CROI.

Because market demand forms competitively, the business must anticipate the conditions in which the exchange of benefits for reward is probable. Organizing around the probability is the concern of strategy.

For the purpose of instituting practice of this organizational effort, Strategy is formulated in Plans.

The business goal is then to have execution of the plans generate a profit return on the investment -- or PROI.

Shifting markets mean that PROI relies on CROI. But the likelihood that execution will drive profits rests on the likelihood that the underlying resource-processing will have the characteristics needed to establish -- on demand -- appropriate delivery of benefits for the current opportunity presented by the market.

This makes capacity and coordination the key characteristics of execution, while strategy directs the execution.
- Capacity provides immediate breathing and maneuvering room in the set of options for resource allocation and application. Growth is the increase in capacity that is effectively applied to opportunity.
- Coordination provides constructive throughput of the impacts of resource deployment, from the initial decision through runtime activity. Alignment is the increase in coordination that ensures operations meet requirements.

Those key characteristics of execution mean that PROI from execution mandates a use of resources that both results in and leverages growth and alignment.

In turn, the criticality of appropriate usage mandates direct management of utilization to comply with strategic direction. The degree of compliance realized is called "performance."

Thus, in order for CROI to drive PROI on a long-term basis, performance must support strategy by establishing compliance through growth and alignment.

This understanding is the basis of the Archestra Management Framework.

Posted by Malcolm Ryder at 6:50 AM | Comments (0) | TrackBack

April 22, 2005

Managing Strategy versus managing Performance

For the most part, recent consensus on the state of business health includes two interesting headlines. One is that business competitiveness now requires "growth", which in turn requires moves that go beyond cost-cutting. Another is that effectiveness requires "alignment", which in turn requires moves that go beyond efficiency.

In the new era of growth and alignment, the old business platform of economy and efficiency is now mainly a staging area in which processes are designed, or repaired, or re-designed. There can be no doubt that every business must design there, but as we also see in the current consensus, the new criterion thrown into the mix is change. This ingredient pushes all resource management (whether of processes, people or technology) up against the challenges of agility and renewal -- both challenges pressed upon the business by operating environments that are increasingly independent of any given business.

In fact, to secure the business's ability to be responsive to the right things at the right times and thereby consistently exchange value offered for more value gained, the business now must concentrate more than ever on relationship management. Through collaborations and partnerships (both internal and external to the company), relationships bring the business earlier alerts, economies of scope, and a broader range of available resources -- on demand. Thus the business has greater means to assure itself the right positions, on time.

However, exploiting the positions is what causes a payoff -- and another current general consensus is that companies do not so much fail to have viable positions as they do fail to execute from them.

This notion, which argues that most companies have a strategy but fail to execute it well, points us at the idea that performance should be seen mainly as successful execution of strategy.

Ironically, the other big story that managers are hearing is about how companies that successfully execute poor strategies would actually "outperform" companies that have great strategies poorly executed. This story clearly equates performance with results. But it does not usually drill down into whether the sustainability of that output is likely or is even relevant to the foreseable future. In effect, it is a disposal definition of performance.

As a kind of advice, the story is appealing in a comforting, common sense way, as if to say "perfect is the enemy of good enough!" This advice is just great, as long as whatever strategy is being used really will likely tap into significant levels of opportunity even if it is poorly conceived. Executives who are betting your careers on that, please raise your hands.

So how does the idea of "successful execution" of strategy actually net out? Is the point of strategy simply to get organizations on a productive path but then step aside? Or does strategy just "pan filter" the range of execution's results for the results that it wants? Or is it that the competitors that really matter are just not different enough to require a strategy above and beyond superior execution?

Our problem is to understand what strategy really has to do with results, and how that connection works. The underwhelming answers just described above can be reached by at least three paths of confusion, each of which should be avoided...

#1 - "Execution" is thought of as just a synonym for operation (i.e., thought of as procedure, instead of as actions continuously negotiated between options and risks).
#2 - No distinction is understood between tactics (securing opportunity)and strategy (creating opportunity).
#3 - Short term results are not examined in the context of long-term value, so they are not asked to contribute to it.

The Management Framework
To dispel this confusion, a couple of "management" definitions of strategy and performance allow a better perspective on the issue and provide consistent connections of strategy and performance to growth and alignment.

- Strategy is about the value of the direction chosen. Essentially, strategy selects positions oriented towards a selected goal.
- Performance is about the quality of the effort made to go that direction. Essentially, performance selects ways to get and use the positions established by strategy.

The key to this vocabulary and point of view is recognition that both strategy and performance start out in management's mind as projections, as models of possible futures, not as assessments of the past. From the models, plans are developed to link the models to the specific organization. Then the plans are used to both steer and evaluate the ongoing "actuals" versus the models.

Again, strategy and performance are both aspects on a planning axis; typically, given the usual level of internal and external business complexities, most organizations will not approach projected strategy or performance targets except by working to realize the plan.

On another axis, growth and alignment are both aspects of execution.
- How is growth pertinent? Primarily, growth is meaningful when it is increased capacity that is effectively applied to opportunity.
- How is alignment pertinent? Alignment is meaningful when it is increased coordination that raises the certainty of operations meeting requirements.

Given that, it's fair to assume that all companies want to enhance growth and alignment -- in other words, they want to accomplish both growth and alignment in a way that makes the two things valuable. But even if they don't immediately accompish those things, they want valuable results from their ongoing efforts, which means organizing activity for meaningful, incremental deliveries of value.

This brings us to a clarified distinction of what it means to manage strategy and to manage performance.

By understanding that execution must be concerned with supporting growth and alignment as success factors and not just with outputs, we see that the manager's primary responsibility is not simple procedural adherence to plans, but rather that "realizing" the plan should be continuously pursued in terms of whether intermittent activity and outcomes are consistent with the goal of growth and alignment.

In both the cases of strategy and performance, managers need to bring execution capabilities to the plans. Synchronizing those capabilities with the needs of the current plan is a manager's highest priority. By making change more manageable and therefore increasing the organization's accommodation of new plans, capacity and coordination (respectively, elements of growth and alignment) characterize the key approach to optimizing the potential of strategies and performance. Because capacity and coordination are literally provided through the makeup of the organization, this point of view explains the connection between organizational development and results.

Consistent with the working definitions established so far, we can now use typical management terms to map out the synchronization described above...

STRATEGY:
- growth intersects strategy in objectives.
- Similarly, alignment intersects strategy in priorities.

Strategy management primarily attends to objectives and priorities -- conceiving, communicating, tracking, supporting, evaluating and adjusting them -- such that they nurture and leverage growth and alignment, respectively.

Applying that same cycle of attention (i.e.,conception through adjustment), performance management addresses performance's intersection points with growth and alignment.

PERFORMANCE:
- initiatives nurture and leverage growth; while
- tactics nurture and leverage alignment.

Thereafter, with initiatives and tactics supporting objectives and priorities, management negotiates results. This understanding replaces the ambiguous notion of "executing strategy" with something that all managers can directly and rationally engage.

Posted by Malcolm Ryder at 1:45 PM | Comments (0) | TrackBack

April 20, 2005

When is governance Governance?

Any cursory cruise around the 'net shows a typical, even classic, debate about what is included in "governance". On the one side, people are afraid to leave anything out, because a governance failure is felt to be too dangerous. On the other side, people are afraid to put too much in, because otherwise the resulting complexity makes it seem less attainable.

This raises the question: if governance is something that everyone must subscribe to, is there a common-sense definition that points at a generally portable and evolutionary approach?

Let's try this: you know you're doing governance when you routinely exercise
(a.) proactive management of...
(b.) execution compliance to...
(c.) standardized quality requirements for...
(d.) risk accountability

The italics indicate the points where other available definitions can either grab on or argue. We can imagine a few kinds of arguments, testing whether this definition links the right ingredients together in the right scope. But common sense just might prevail: if this is not an appropriate and portable definition of governance, then let's imagine scenarios that do not have these exact characteristics; why then would we say that those scenarios are "governed"?

Meanwhile, the four parts of the proposed definition intentionally contrast with a number of other vital organizational responsibilities, while not excluding them:
- proactivity versus remediation
- execution versus planning or strategy
- quality versus efficiency
- accountability versus management

In trying to make the definition a reality of operations, many big questions pop up:
- how do we get to a sustainable proactive state?
- what is needed to establish sufficient execution controls?
- how do we embed requirements into systemic operational rules and policies?
- can we eliminate the gap between the objectives and the methods, of auditing and of forecasts?

This diversity of concerns poses challenges to any organization, ones that may be tackled by solution providers on several levels including:
- cultural,
- methodological, or
- technological.

For most companies, developing and applying a governance discipline within the organization will be driven by the usual two suspects: low-hanging fruit (the quick wins), and raging fires. So we'll see governance over here, and governance over there, and in time it can make sense to have the various efforts support each other.

Realizing that, we know that coordination of effort across the issues and levels will be the real reason why governance will evolve in any given company and in that way earn a capital "G".

Posted by Malcolm Ryder at 12:42 PM | Comments (0) | TrackBack

The Performance Analysis Framework Pt. 2

"Performance Drivers" are the conditions that usually obtain for value to emerge from the interactions of the organization's operations, locations and relations with other parties. Drivers may be causes or they may be prerequisites. Typically, when managers translate a leader's mandate into actions, the step initially considered is to decide how to configure resources and methods to leverage environmental conditions that "drive" progress.

Management's job is not just to orchestrate the interactions but also to cultivate those conditions and, through designing the co-operation of conditions and interactions, to prescribe when the emergence of value is most likely supported or inhibited.

For performance management, an organization needs to comprehensively manage information that is used to:
- develop a performance logic model (a theory of progress)
- develop the supporting plan for organizationally implementing the model
- initialize and prioritize action
- monitor status
- confirm underlying or correlated events, and
- reconcile significant differences.

Those actions will primarily involve information that describes operational conditions in terms of value, including:
goals,
assumptions,
relevance, and
priority as well as
variance and
status.

In emphasizing the value-perspective on the operating conditions, performance analysis has two needs: one, for the first four of the six types of information to be logically interrelated; and second, for that logic to be continually applied as a major influencer on business operations.

The real-time decisions for directing activity then matter because, as evidenced in variance and status, they emphasize how follow-up activity is succeeding in turning "plans" into "actuals".

This follow-up activity constantly confronts opportunities, restrictions and expectations that surround the ability to use procedures, tools and people for getting things done.

The practical intelligence about those constraints is distributed throughout the organization. To allow discovery of how to optimize resource utilization for the plan, that intelligence must be coordinated and integrated. Then, refined activity can realize the plan, and drivers can be supported, to produce desired outcomes, which will be observed as good performance.

With the Archestra framework for performance analysis, the identification of goals, assumptions, relevance and priorities is subjected to a reality-check. Opportunities, restrictions and expectations that mitigate them are excavated and grouped in two dimensions:

- reasons (typically dynamic)pertain to the "why, what, and when" decisions that drive resource deployment, while...
- requirements (typically structural) pertain to the "who, where, and how" decisions that establish the organization's position regarding its relations with other parties, locations and operations.

The most important influence of the framework is to illustrate that progress cannot occur unless business reasons are articulated as organizational requirements-- and that if reasons change, then requirements must adapt through change or realignment with the reasons.

As shown in the following example, the framework elicits and accounts for another set of defined progress drivers to be managed, beyond the typical basic level of operational "components" such as designated procedures and resources. The overall value articulated in this example is "sustained superior fulfillment".

-------------------------REASONS versus REQUIREMENTS:-------------------------
WHY versus:
- Who: A director must ensure that an on-time deliverable occurs
- Where: Responsibility for fulfillment will be with the department that directly supports the customer
- How: A process for controlling the production schedule must be used

WHAT versus:
- Who: A workgroup must be authorized to manage an activity or condition that ensures an on-time deliverable
- Where: Production must take place in both a primary and secondary (backup) location
- How: New facilities, instead of prior ones, will pilot the production

WHEN versus:
-Who: The deliverable is on-time when it meets with the recipient's agreed expectation
- Where: Adequate lead time for fulfillment should be built into the delivery, including contingencies
- How: Start-up of production should be supported by a contractual arrangement

-------------------------------------------------------------------------------------------
Staged by the framework, this "plane" of requirements specification is the arena of the direct performance analysis, addressing the underpinnings of progress above the component level and instead on the policy level.

Posted by Malcolm Ryder at 6:07 AM | Comments (0) | TrackBack

April 19, 2005

The Performance Analysis Framework Pt. 1

All businesses operate on the presumption that progress is viewed through purpose. But in assessing progress, too often the business is distracted by the pressure for efficient activity, to the detriment of managing for effective achievement.

Typically, when managers translate a leader's mandate into actions, the step initially considered is to decide how to configure resources and methods to leverage environmental conditions that "drive" progress.

"Drivers" are the conditions that usually obtain for value to emerge from the interactions of the organization's operations, locations and relations with other parties.

Attending to the drivers, managers first need information that identifies how the key condition in question is helping or hurting progress, and this means identifying what underpinning aspect of the plan's cause-and-effect prescription is being influenced.

Management typically puts a lot of attention on monitoring the "components" of a plan, in the sense that there are mechanical parts such as the steps in a procedure or the quality of a particular resource being used, and the plan assumes that their use is necessary.

But those specified components are just one aspect of the plan's underpinnings. An equally critical aspect involves the actual reasons why their usage is necessary, and the requirements that are success factors for their usage in the planned way.

Those reasons and requirements are what make the components "appropriate" for the organization's attempts to execute its strategy. Managing this appropriateness is generally a matter of establishing policy.

Cross-referencing the reasons and requirements forms a framework for understanding how the organization can actually organize for performance, because it looks directly at organizational characteristics that will tend to inhibit or protect opportunities for progress.

This follow-up activity constantly confronts opportunities, restrictions and expectations that surround the ability to use procedures, tools and people for getting things done.

The utilization of that intelligence is the focal point of performance analysis.

Posted by Malcolm Ryder at 8:50 AM | Comments (0) | TrackBack

April 18, 2005

Performance Analysis versus Business Intelligence

What Performance Managers Manage

Because managers are responsible for production and execution, they are accountable for achievement.

That achievement comes in various flavors. When not looking for "quality", we usually express accountabilty in terms of "performance".

Good managers always work to make the achievement valuable in one way or another. Used strictly, performance names the observed effect of making progress towards some value that is targeted to be generated, captured and delivered.

In that sense, performance is obviously aimed at ultimate outcomes, and the beneficiaries of performance are naturally focused on the expression of "results"...

But analyzed as something one can manage, performance per se is also about how you get to the results. So it is about the direction of ongoing execution, and about states that have been asserted to represent progress. In fact, we might say that the essential job of a manager is to "make progress".

Progress might be constructed or it might be cultivated. Either way, to understand current progress, managers must determine whether current and foreseeable conditions are complying with ones that typically generate states presumed to advance operations towards the target.

To represent progress, compliance measures ensue -- comparing actual conditions versus prescribed ones. This prescription is, in effect, a theory of progress.

Keep in mind that the "prescription" is really a kind of forecast of the future that was made in the past. When the "prescription" was made, it was influenced by the mindset of its author at that time, and its bases could range -- on the one hand from assumptions to histories (i.e., hypothesis to proof?), and on the other hand from preferences to rules (i.e., options to requirements). As suggested here, this leaves us with prescribed conditions that come in various flavors... from wishes to plans.

The problem this illuminates is that in evaluations -- a comparison of prescribed versus current conditions -- the current bases might similarly range. The evaluation doesn't just bring facts, but instead it brings a current mindset that proposes what facts are interesting, and then compares those interesting ones to the prescription from the previous mindset! This may not be helpful. For example, comparing actual (current) myths to prescribed (prior) plans tells us ... what?

So "compliance" might be technically true yet still be conceptually undisciplined and therefore have seriously debatable worth.

The point is that it's one thing to determine that you got what you asked for, but it's another thing to determine that you asked for the right thing. The former identifies a "correct" achievement, while the latter identifies a "relevant" one. Arguably, the former case should only be called a "progress assessment", while the later warrants the heftier label "performance evaluation".

Meanwhile, an even greater point is that achievement takes its meaning from the context in which it is recognized. Just as activity is not necessarily achievement, achievement is not necessarily progress -- and progress is not necessarily good performance. Sometimes, progress reports reflect somebody doing a great job at something that no longer matters... Although managers must make progress, it is not sufficient.

II.

Scientific management increasingly relies on analytics that will classify and test the recurrence and correlation of actual and prescribed conditions.

To reliably feed that analysis on a business-wide scope and scale, business intelligence systems are deployed -- really, for automated surveillance of business conditions.

The essential purpose of business intelligence (BI) is to gather enough evidence of activity patterns, in operations and in transactions, for identifying the most probable patterns associated with "valuable" outcomes.

However, business intelligence starts without an idea of why things work, and it builds a picture of what is "working" or not, regardless of the plan.

Effectively, BI generates new information to consider in the context of performance, but it does not describe performance.

This is not a problem, however, because BI is just one application of analysis, not the total analytic opportunity for determining performance.

III.

More importantly, analyzing performance takes additional different steps -- ones both contiguous to BI and at a higher level than BI, yet supportable with BI.

A strategy can be safely thought of as a "theory of advantage". Leaders promote the strategy as the mandate for the organization's execution.

"Drivers" are the conditions that usually obtain for value to emerge from the interactions of the organization's operations, locations and relations with other parties.

This design amounts to a "theory of progress" that the decisions follow.

That theory of progress consists of selected drivers logically arranged to interact in the organization and its operating environment. As a version of the theory is tailored to the characteristics of the specific organization, the tailoring produces a "strategic plan". Since both the environment and the organization are constantly changing, the strategic plan must be continuously adjustable yet stable.

Operational effectiveness is perceived mainly in the degree to which the plan is faithfully realized. In other words, effectiveness is a result of the succesful aligning of the drivers and the organization's capacity.

The main purpose of performance analysis is to discover and prioritize the factors having the most significant current impact on alignment -- i.e., on the "effective" realization of the plan.

Performance analysis information starts with the existing idea of why things should work (i.e., generate value), and acquires more information to test that idea against reality. (Here, BI's work provides support to both forecasting and validation, complementing performance analyses.)

The necessary alignment requires that performance-related information be continuously processed to determine when and how another adjustment (iteration) of the alignment is needed. This processing is a closed-loop of management awareness disciplines that promote the sequence of:
- studies leading to decisions;
- interactions leading to effects; and,
- confirmations leading to validated perspectives

Importantly, because performance presumes value-oriented adjustments, attempted changes promoted around the cycle must include transmitting the value proposition and perspective, not just status data and task assignments. Therefore, the acquisition and circulation of the performance analysis information is more likely to depend on successful knowledge management practices than on automated event monitoring.

IV.

For performance analysis, the organization needs to comprehensively manage information that is used to accomplish six key tasks:
1 - develop a performance logic model (theory of progress)
2 - develop the supporting plan
3 - initialize and prioritize action
4 - monitor status
5 - confirm underlying or correlated events, and
6 - reconcile significant differences.

This will primarily involve information that describes circumstances through a different set of terms than does BI. The performance analysis vocabulary includes:
goals,
assumptions,
relevance,
priority,
variance, and
status.

By articulating the value-oriented aspects of the performance logic model, those six types of information as a group characterize performance analysis in contrast to BI.

Although performance analysis and BI share attention to the last two types, performance analysis has two needs to be met:
- one, for the first four types of info to be logically interrelated as directives; and
- two, for that logic to be continually applied as a major real-time influencer on business operations.

Closing the loop on analysis, the directives are considered against feedback evidenced in variance and status. This final consideration provides the picture of how follow-up activity succeeds in turning "plans" into "actuals".

Posted by Malcolm Ryder at 7:12 PM | Comments (0) | TrackBack

About Performance Management

Management always includes responsibility for the full lifecycle of what is being managed, including these basic phases:
- conception
- development
- implementation
- support
- evaluation
- change
Given that, what does it meant to "manage performance"?

Performance can be understood only as a degree of achievement towards a recognized goal. The most typical source of confusion about performance is confusion regarding how to define the goal so that it can be unambiguously agreed to have been reached. Often this agreement only matters within a specific community, and so the tendency is to pursue goals that the community defines. This is practical, but it does not prevent the community from establishing goals that are actually lacking value or missing the point of their ultimate concern. The most infamous examples of this now are the mythologies of the dot-com era, in which "eyeballs" and "stickiness" were treated more seriously than revenue. But that very example gets right to the heart of the matter, because for the short-term eyeball-counters, their stake did not depend on revenue, whilst for longer-term investors, the stake did depend on revenue.

So goal-setting must first be scrutinized for its ability to represent the diversity of stakeholders. Assuming that there is not a built-in defect in the goal-definition, performance might then be rationally managed against a goal.

The next step is to grab the prospect of performance by its lifecycle, close the end-to-end lifecycle into a loop, and plan to sustain attention to it through multiple revolutions. That will require capabilities suitable to each management phase, including:
- conception needs a theory of successful pursuit and milestones
- development needs a model and infrastructure for pursuit
- implementation needs a change management process
- support needs a response level policy
- evaluation needs cause-effect tracking
- change needs forecasting and risk assessment

Those "needs" share the key concerns of providing each phase of performance management with three critical characteristics: accountability, repeatability, and a methodology for integating each phase with the prior and following phase. Put another way, they make management rational, with all phases dedicated to the same ultimate goal.

With that background, it is possible to assess the relative maturity of current efforts to manage performance. A maturity model for performance management should examine the degree of planned continuity that is sustained in supporting the needs of each lifecycle phase through multiple revolutions of the lifecycle. A management profile emerges from grouping together the levels of achievement found in each phase. The most important issue is to characterise the value of each level of achievement in terms of assuring the mastery of the full lifecycle.

The remaining problem will be a big one: how to organizationally distribute the functions and authorities that enable each phase to be properly attended? This is where management systems must put the rubber to the road, solving the issues of complexity and coordination versus the need for punctual and accurate communication. The performance manager must try to identify the opportunities for the production systems that drive progressive action towards goals to cough up evidence that can be used to support performance management decisions for each phase. The likelihood is that while production systems can provide evidence, integrating the evidence in a goal-oriented context will not naturally occur, and so a performance management system will need to be implemented to integrate, contextualize and supplement the production evidence. Thus, organizations that are looking into technologies that monitor, document, and analyze business environments and business processing should work on coordinating their deployments to support management maturity.

Posted by Malcolm Ryder at 4:38 PM | Comments (0) | TrackBack

April 15, 2005

Archestra: The Architecture of Enterprise Strategy

Archestra treats strategy as a managed "product" for
developing, maintaining and communicating the risk/benefit dimensions of
competitive position, in operations, organizations and markets. Through
collaborative research and contributions, individuals and organizations
are building Archestra's evolving knowledgebase of related concepts and
techniques in producing and pursuing strategy. This knowledgebase is structured
into the interconnected Archestra Frameworks -- the entry levels for
which are the Topical
Framework and the related, evolving Conference Framework
(see the Archive categories).

Posted by Malcolm Ryder at 4:47 PM | Comments (0) | TrackBack

April 13, 2005

Strategy, Architecture, and Performance

A business is an organization that exists to convert resources into assets at a pace faster than the assets lose superior value to the resources.

Meanwhile, markets define the value of the asset. Move the asset to a different market, and its value gets regenerated from scratch by the new market, with a likely (but not necessarily) different result.

If that is true, then against that backdrop all businesses have the same deep questions about driving business performance.
- Market model: how do I get a position to capture the value that a market can generate?
- Business model: how do I optimize the resource-conversion potential, for delivering assets into that value-making market?
- Process model: how do I build and maximize the resource-conversion capability?

Let's step towards some answers.

Position: Most business strategists initially address the problem of decoding the way a market can generate value around an asset. This results in a market model of various dynamics to be leveraged. Then, the business looks for (i.e., conceives) a "fulcrum" (one or more of them) that enables the leverage.

Optimization: Actually making and sustaining that fulcrum is the next issue. Specifically, the organization must engineer certain conditions that create the leverage. This engineering becomes the primary purpose of the business's operations (yet is often unrecognized as such because people are accustomed to thinking of operational outputs as goals instead of as causes.) To engineer the conditions necessary for market leverage, the organization must implement and exercise a business model for the market, respecting the ongoing changes occurring within the market. For that, the essential elements that make up the business's structure -- resources, services and relationships -- must be continually re-aligned to ensure that the business's effects stay within accepted tolerances for the target market. Naturally, this ongoing reconstruction is constrained by the known characteristics of those basic business elements. To ensure that strategic reconstruction is successful with the constraints, management relies on an architecture (a pragmatic systems design framework) to provide principles for alignment, and relies on change management (a governance framework) to defend the architecture.(For some reason, people tend to not take credit as the "architect" of the setup unless it acquires some celebrity as a success. Regardless...)

Development: As said above, the business organization that is derived from the business alignment must generate the events needed to exploit the market position.

This occurs as "production", through organizing activities in a sustainable balance with supplies and skills. That balance point within production usually tries to simultaneously maximize economies of scale and economies of scope (a blending that is again an "architect's" natural domain).

In that effort, the actual provision and consumption of supplies and skills are quite variable and therefore take up a lot of management attention. This variability is often assumed to be covered by ERP systems. But increasingly, establishing real cross-functional manageability requires process modeling.

The process model orchestrates events around strategic objectives. Those events are what mostly occupy the awareness of the parties who "use" the business through their own roles within the conversion chain and/or as market-makers. The orchestration predictively arranges or promises these events, and the participants execute to make them occur. Keeping those promises is what operational performance is about.

So the hierarchy of interdependencies, from market model to business model to process model, respectively links strategy, architecture and performance.

Posted by Malcolm Ryder at 12:38 AM | Comments (0) | TrackBack

The Architecture of Enterprise Strategy: an open studio of research on the link between how and why