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November 28, 2005

ITIL, Optimization, and the Performance Management Approach

Business derives value from the utilization of IT in the same way that it derives value from the use of money or people: the business applies the asset to enabling those events that have a designed ability to impact business conditions.

Assets may be applied directly or indirectly to the target event.
- Directly, the asset is deliberately "consumed" by the event itself. This involves using the asset as a material element of the event. The event may employ, transform or exchange the asset, in order to produce another output.
- Indirectly, the asset may be used to deliberately affect circumstances surrounding the target event. By "circumstances", we mean conditions surrounding the moment or location of an event.

Consumption and circumstances often develop independently, and they often coincide without much resistance on the way. But management's intent is to replace coincidence with planning, and move consumption and circumstances to co-operation .

If cooperation didn't need to be planned, we wouldn't need management. For this concern, the proper focal point is not the assets, but the events in which they are involved.

I.

In producing cooperation, one of management's primary responsibilities is to establish compatibility between the circumstances and the consumption. With assets at stake on both sides, competition for the supply and deployment of assets is an issue. Since no event goes unfollowed by others of equal importance, organizations need to know what will happen to their capacity as an aftereffect of the cooperation.

In effect, whatever requires the cooperation -- namely, the target event -- is seen as something that must either conserve or replenish assets, so that business will be continuous and ongoing instead of episodic or temporary.

Yet placing that restraint on the target event must not prevent the event from bringing the needed impact on business conditions.

This reflects a broader principle: environmental conditions are part of the "infrastructure" for business functions, and meanwhile, consumption (business function) has prerequisites (specifications). Circumstances (environmental conditions) have effects (states) that must productively correspond to those prerequisites.

This "productive correspondence" of current specifications and current states is exactly the compatibility being sought from management.

Consequently, it is evident that the key issue is not asset management; rather, it is event management driven by business requirements -- which is the ordinary description of business capability.

II.

The history of the business capability is largely recorded in the history of events that occurred under the pressure of demand. As pictured above, an "event" is the overall result of interacting capacities and requirements. Thus, we easily expect an event to vary widely as the number and strength of influences on its separate elements varies. The primary threat to manageability of events is the inability to control that variation and maintain a useful synchronization of the elements.

In periods where management efforts are successful, events are the normal focal point of attention to whether the business is getting what it desires from IT. The benefits of events are the most ordinary measure of success. When event benefits fall short of desires, then the typical approach is to look for what disabled the event from being beneficial. This disability will usually be found in either of two areas: one, the context of the event (as in time and place); and two, the makeup (causes) of the event.

In accordance with the "event model" discussed so far, we can especially appreciate thatprocesses are used to place controls on the makeup of an event, so that the event's final character is appropriate to desires.

Ideally, a process predictably selects and coordinates the event's elements, with as much aggressiveness and detail as necessary to assure the needed character of the event. By increasing the process's ability to reliably find and control necessary event elements, management can mature the process to a point where the timing and location of a certain type of event also becomes more and more predictable -- which is hugely valuable to selecting and organizing responses to demand.

Process-modeling (now evident as a form of "event-planning") usually seems highly convenient to management. Mmanagement readily adopts a "process" approach to designing and cultivating desirable events. And more maturity in the approach promises the business greater opportunity to create (or find) and leverage advantageous business conditions, strengthening the approach's justification.

But acquiring strength and quality of maturity cannot be taken for granted. This means, in turn, that the assumed benefits of processes are always to some degree uncertain to occur.

“Complexity is intrinsically predictable,” Wharton management professor Saikat Chaudhuri notes, with a very major caveat. “If one places sufficient resources and project management strategies in the right places, it’s possible to manage the complexity. You can learn how to do it. But uncertainty, by its very nature, requires constant adjustment. This type of flexibility is tough to achieve, especially in the middle of integration activity.”

Challenges to process maturity are a part of the uncertainty, affecting the makeup of anticipated events. Another big part is shifts in demand, which reflect changes in the context of events. This indicates a need for an alternative to process management to serve as the lynchpin of business value.

III.

In the discussion that is most interesting to business people, the working definitions of "performance" pertain to the generation of value versus demand. Business runs on competitively satisfying external party demands -- and it is constantly translating those external demands into demand on its internal constituent organization. In that light, maturing the management processes for events-- which links an organization and its environment -- is a critical aspect of managing improvement in performance.

Yet with management process maturity in place, the unpredictability of demand remains a highly significant type of uncertainty threatening management results. Because uncertainty is a fact of life; organizations must simply take a useful position against it.

Thus, complementing event management, the most critical aspect of deliberate performance improvement will be demand management.

Consider "benefit" in a general sense, as a constructive impact of an event. The effectiveness of management is measured by the benefits delivered, and events deliver the benefits; so we continuously scrutinize how we manage the enablement of the necessary events.

But without at least hypothesizing alignment of events to demand, it is difficult to foresee what "benefits" (if any) will likely be obtained -- thus leaving operations without a significant justification. Demand management represents the "business dimension" of overall operational alignment -- events are planned specifically against the known or expected range and scope of variability in demand.

This makes it clear that "performance" always presumes a capability with a justification -- and that is the most important slant that ITIL has on IT management.

IV.

Being able to foresee benefits is essential to executive responsibilities for planning. With planning, we chart the overall path from capacity to events to benefits to demand. The path must be accurately envisioned as management efforts.

The IT Infrastructure Library (ITIL) documents key principles and practices that organize the IT management path from capacity to demand. In describing how organizational resources are used to conduct the practices, time-tested examples of management processes are offered that show the coordination of distributed assets, utilization controls, and business requirements. Because processes are so important to implementing the management of these factors, process integrity and maturity are enormously important objectives of ITIL's information. Yet often the approach to understanding ITIL is too easily distorted by a competing perspective -- not the necessary one of "implementing management" but instead the habitual one of managing implementations.

The misfortune of this latter perspective is that it significantly discourages understanding and appreciation of ITIL at the organization's executive business level. The key to repairing or avoiding this situation is to understand how ITIL information helps to describe the management of events that characterize the business capability.

Performance Management is an evolving discipline that uses forms of communication and visualization that are strongly suited to mapping the origins of and connections between an organization's assets, functions, events and demand.

To maximize the positive influence of ITIL in the organization, performance management instrumentation can bring two things to executive attention:
- relevant business issues expressed in terms of the ability to impact events; and,
- the improvement of that ability as a consequence of pursuing compatibility with ITIL.

The target effect of the ability is to drive benefits that improve the infrastructure for business functions.

The key is to communicate this ability to drive benefits as more a cultural effect than a merely mechanical one.

With the more conventional "mechanical" view, the active drivers of business benefits (from events) are usually more about linear procedures, assignments, and accounting -- concepts that gain their meaning at deep levels of granularity and organizational segmentation. Their main objective is to establish compliance in the organizational activity, which fosters predictability (a lower risk) and scale (a benefit).

In contrast, by "cultural" we mean that the active drivers of business benefits (from events) are goals, priorities, and agreements -- concepts that need to be collectively meaningful across the organization. The main objective is to establish compatibility within organizational diversity, which fosters agility (a lower risk) and resourcefulness (a benefit) in the focus on demand and progress.

One thing we want to know is whether the two approaches shape different kinds of events in order to deliver benefits in their different ways.

V.

Rather than assume that a given business problem can be solved by differing benefits, we normally assume that the problem calls for a certain benefit and that we can get it, if necessary, from more than one kind of event.

But generally, events are cultivated not only to deliver certain benefits but also to do that with certain characteristics.
.
In driving the benefit, any advantage of the cultural approach over the mechanical would first be researched in how it addresses management's responsibilities for producing three critical delivery characteristics:
- functional excellence,
- quality, and
- economy.

Typically, each one of those characteristics can be framed as a measurable effect of premeditated standards, expertise and efficiency -- factors that go into shaping the events that are the source of benefits. So, what we can consider is how a cultural version of these factors differs from a mechanical version.

Standards, expertise and efficiency are all intended to maximize the stability and continuity of the health of the business by "optimizing" organizational responses (events) that generate benefits. Stability and continuity presume that the way the event occurs should leave the organization in the best shape to both use the benefits immediately and make additional future efforts. However, "management" brings intentional design to the way the event occurs. So, we look for the "optimal" outcome in the effect of the design.

- From a cultural standpoint, "optimal" means that risk and opportunity are in balance.
- From a mechanical standpoint, the "optimal" concern is the balance of cost versus output.

Within either case, the challenge to stability and continuity is fundamentally the same: despite the uncertainty of demand, which increases complexity, achieve an intended balance.

VI.

Optimization is the name of the effort to resolve the complexity. Optimization is not just opportunistic, but instead it follows a model, to logically pursue the highest priority outcomes. Here we have two models from which to choose -- a cultural approach and a mechanical one.

A cultural perspective on standards, expertise and efficiency does not exclude or contradict a mechanical one. Both perspectives emphasizes the idea that managing uncertainty in business is a critical success factor, and they both aim for stability and continuity of the business.

Instead, the cultural perspective argues that both stability and continuity are predicated on goals, priorities and agreements -- and that goals, priorities and agreement require dynamic and collaborative maintenance.

To associate either approach with the needed business benefits, we start by identifying and cataloging the functional expectations and targets that we attribute to them regarding:

Standards -- how they contribute to functional excellence,
Expertise -- how it contributes to quality
Efficiency -- how it contributes to economy

That is, we look at each of those as evaluated from the perspective of:
- business opportunity and risk (cultural)
- execution output and cost (mechanical)

The group of findings generated about the two approaches represent our expectations of them. Those are then immediately set against the logic for creating business benefit. That delivery logic will necessarily include these two components:
- The organization's availability of resources must be sufficient to realize the expectations.
- The combination of resources must amount to the "means" for generating the events that deliver the target business benefit.
Initially, the question is whether the necessary means are evidently "more likely" to be generated and sustained for the cultural or mechanical approach. But shifting demand changes the focus.

Understanding how to deal with demand means acknowledging the challenges of complexity. Complexity features a multitude of moving parts trying to come together to hit moving targets. Generating value from the complexity is tough:
- the organization must be resourceful enough in its diversity...
- to engineer appropriate events in real-time...
- from circumstances that have variability frequently exceeding "best case" or ideal formulas.

Dynamic, collaborative access and utilization of resources may be the only path to meeting a business need -- the path facilitated by the cultural approach.

The difficulty of the cultural approach is that it is more complex and thus is harder to organize and measure in a singular, objective way. Addressing that problem, the evolving discipline of performance management provides a solution that can consolidate these influences in a centrally manageable view.

Given that, the general importance and advantage of the cultural one is that it proves to explicitly relate to a wider range of demand on the business.

VII.

Demand management is staged as a shared responsibility of business and IT.

In planning, monitoring and measuring the coordination of resource diversity and demand variability, executives find that performance management can track and illuminate IT's contribution, position and progress.

In turn, leveraging ITIL should be done in ways that aim to maximize consistency and persistence in coordinating diversity with variability.

ITIL's guidance offers IT and business stakeholders a single way for both parties to see requirements and operations. The alignment cultivated through that common view reinforces expectations that consistency will increase in the Business-IT relationship.

The business intends for that consistency to translate into business capability, but the range of needed capabilities introduces more complexity against the intended operational effectiveness.

ITIL describes ways to resolve the complexity, towards consistency in the IT enablement of business capability.

With IT organizations expected to implement management that cultivates beneficial events, bringing ITIL to performance management helps the IT organization to describe the logic and importance of the difference that it makes -- i.e., "IT's value" against demand.

Posted by Malcolm Ryder at November 28, 2005 12:11 PM

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