April 2, 2006
Business-IT Alignment: Revisiting ActiveROI
By the time the Y2K threat got serious in the corporate mindset, IT innovation had already reached a point of viability where replacing old stuff had to be taken as a serious alternative to patching it.
But it wasn't just the technology that needed to be reconsidered. As it is almost automatically remarked in the business conversation about IT, related people and processes also were in the mix -- and here came the dot-com wave.
Among various other things that "e-business" did to reposition IT in the enterprise, it gave an old teaching instrument a new meaning.
You may remember the elementray school spelling aid "I before E except after C"... For it's new web-era use, I translated it to mean "infrastructure before engagement, except after customer." The problem new to the day was that the web was now allowing customers unprecedented aggressiveness in dis-intermediating the corporate mechanics that ordinarily actually provided services. Customers emerged who wanted "do it yourself" relationships, while others emerged who simply had no patience any more for companies that mired them in internal production technicalities.
Effectively, in both cases the customer's punchline was: "if your I.T. doesn't make me happy, change it or I'm gone."
The hugely superior economies of keeping existing customers versus gaining new ones made the most sense of my new translation. But the implications for IT organizations were not really so new. The point-of-view on IT's operational performance just shifted from I.T.'s "internal" customers (business units) to the company's "external" customers. Internal customers had already had this attitude for a while, and everybody knew it.
Still, despite external customers suddenly getting their hands directly on company infrastructure, it seemed brutally obvious that IT organizations should not be held responsible for managing external customers. (Otherwise, what were business units for?) So the message really needing to be drummed was that internal customers needed to be better empowered by IT.
By abstracting the basic management steps to that empowerment -- resources to operations to relationships -- the model I first proposed set a floor under a wide region of research, from which several key further items grew. Among those, a major one well-rehearsed by 2002 forecast the IT Organization agenda as in the article CIOs: Managing the business's IT Agency.
Then, what brought that agenda to the level of the full CxO group was the problem of linking IT performance to enterprise performance. This problem enjoyed a huge rise in importance due to the maturing acceptance of having enterprise applications automate essential operations cross-functionally, despite hair-raising complexity in integrations and change management. While I liked referring to the celebrity of the problem as "Enterprise Chance Management", it wasn't much of a joke since it was also becoming more obvious that business opportunity was relying more and more on IT-enabled responsiveness.
Given the huge level of investment recommended by Y2K, enterprise applications, and the internet, the business need to understand the value of its IT capacity hit a high point that called for a way to put the IT agenda into a model of being managed by the business. In reply, I created (and own) the ActiveROI model -- a construct signifying the generation of business value from IT resource optimization, achieved in a continuous and proactively matured discipline. Translating the model into practice methodology, the consulting firm Renovance, LLP went to market. Renovance's elaboration of methods for applying the ActiveROI model was indicated early on in the whitepaper, "ActiveROI: Achieving Business Processes and IT Infrastructure Alignment through Real-TIme Management". (As a consulting firm, Renovance developed and offered trademarked practice methodologies of my copyrighted model, in its lines of business.)
From a CIO's perspective, the ActiveROI model describes that the enterprise's engagement with the marketplace runs on an organizational platform created by architectural and portfolio management disciplines that can coordinate IT.
But overall, ActiveROI understands performance in terms of relationships and the services that maintain them, while it understands resources in terms of events and the investments that address them. The critical thing to note is that services and investments are the two most highly discretionary offerings of the executive management of the business -- effectively defining the identity of the business that will predispose its opportunity in the market. As explained by ActiveROI, this "drills down" to the IT agenda and its business alignment.
By way of ongoing explanations and by hosting comparisons and debate, Archestra will continue to elaborate the ActiveROI model and several of its already-in-progress successors or offshoots -- including Archestra Runtime by myself, and works that certain colleagues may finalize for presentation via Archestra in the future.
- Malcolm E. Ryder, April 2, 2006
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March 13, 2006
Aligning Strategy and Production
In management conversations, the vocabulary uses ideas like value, performance, and success in urgent and motivational ways. But their usage is too often so flexible that it is nearly impossible to be sure whether the means of achieving them are being sorted out for better manipulation, or instead just all lumped together (where measurements start to lose their meaning as well). In general, less definition brings less likelihood of predictably gaining necessary effects.
To begin the more detailed look into definitions, the following line of thought offers a point of view about how -- in a context of marketed deliverables -- execution turns intentions into realities that matter.
The home base of this point of view is a significant simplification in identifying the key objectives associated with execution. That is, what does "execution" mean in the value systems of its stakeholders? It's not just about going through the motions. What is needed from execution?
As shown in the first picture below, there is a demand perspective and a supply perspective -- which are important to compare because they are basically independent of each other and yet, in order to create the value sought by stakeholders, must come to correspond and agree with each other.
- Demand asks for something, and the provider gives it through two main features: implementation that creates the factual difference between "requested" and "realized"; and, specification that ensures the right thing was realized.
- Supply offers something. Correspondingly, it promotes availability as the difference between requested and realized; and it offers quality as the assurance of the rightness of the realization.
By describing supply and demand in terms of effects, this viewpoint also allows us to include an initial mapping of the execution-related ideas called "support" and "delivery" as values. With this mapping's cross-reference, it is more evident what it is about demand and supply that stakeholders feel execution needs to accomplish. In this view, Support represents the activity in demand and supply, while Delivery represents the item in demand and supply. We understand that the intended support or delivery has measurable practical significance that from one instance to the next may differ in level while not in type.
The next key idea is that all stakeholders, despite their different roles or positions, actually have the same goal -- which is that the execution linking supply and demand will be successful in negotiating a viable relationship of offers to requests. At any given time, a particular stakeholder may have more or less interest in detailed visibility on the mechanism; but everyone wants the same overall success and can appreciate that overall execution may be a highly collaborative multi-party effort.
All the more reason to stress that everyone should be able to see themselves from a common point of view. That, in turn, is what allows a shared appreciation of the three basic elements defining the execution's success: the design, the plan, and the ultimate output or product.
Each of those elements represents a set of definitions and decisions that are made within the execution, promoting the realization of the request. Each represents an area that contains many options, making the particular decisions as important for what was not chosen as for what was. The decisions represent the actual propagation of potential value throughout the effort to realize the request.
Typically, we expect the translation of intent to reality to be captured in a plan. The following picture generically identifies and arranges the major points of reference within the plan definition that characterizes the before-to-after execution.
From the bottom up through "Workflow", we see the buildup of activity that will ultimately transform the current conditions or state (need) into the targeted later state (satisfaction). What happens above Workflow establishes the mechanism by which we can assume the right thing is actually achieved from that base of activity.
But in actual practice, the definitions of design and product, not just plan, must all be attended to in detail. Like the plan, the design and product aspects each have a hierarchy of key decision-levels that are execution components. The following picture identifies the components of the design and product definitions, along with how the key details of the plan components pertain to them.
This full articulation of the execution effort shows a series of decision interdependencies that, followed from the bottom up, chart the generation of an eventual "Production" as an accurate, reliable and safe instrument for fulfillment. The point of having and using this big picture is to create, before execution, the logical alignment of an end-to-end system for fulfillment.
Going from the bottom up, what we see about the "Plan" group of execution components (middle column) is that each of them allows a "Design" execution component to generate a "Product" execution component, or vice-versa. For example, Strategy uses Modeling to generate an appropriate Architecture; and through Resourcing, a related Organization (i.e., functional unit) is generated from Architecture; and so forth. Furthermore, the details of those Plan components reveal issues in which decisions drive the design component towards the product component. For example, the Organization will use Development to generate an Infrastructure; and in that Development there are issues about standards, methods and schedules that get decided and shape the actual path to Infrastructure. Higher up, decisions about Change issues including authority, scope and risk likewise channel requirements into Production.
In that sense, the zig-zagging between design definition and product definition is controlled by Plan items. Control is, of course, a basic management concern. Everyone wants to get all the way to the finish line. But as the saying goes, if it doesn't matter where you're going, then it doesn't much matter how you get there. Tthe most important aspect of this control is the value problem -- that is, how the control links the values in Supply and Demand.
Looking at the big picture, the intuitive expectation is usually that, Supply is "pushing" from the bottom of the arrangement, tempered by management controls -- while Demand is "pulling" from the top. But in terms of validating stakeholder value, the dynamic is different than that. We spot it in terms of support and delivery.
Given the big picture, the expectation should be that Design will build up the offer of availability that is eventually substantiated in the facilities underlying (i.e., supporting) the Product. Meanwhile, those Product facilities, through prioritization, will promote the request for implementation that is represented by the intentions defined throughout the Design.
In other words, it is not Supply that pushes upward, but instead Support.
Meanwhile, "Delivery" -- featuring an assured ability to provide the correct thing -- should be able to "poll" an auditable trail, down through all levels of decision-making. Because recipients hunt for a provider of what they specifically want and will consider more than one provider, real-time polling would be the ideal, verifying the character of current options. In other words, Design will drill-down into how the provision of the Product specification will be logically assured, and the Product must be able to track down its characteristic quality to Design origins.
That is, Delivery, not demand, is pulling from the top.
The summary of all the above is that in execution there are generally three different arenas -- the sets of definitions driving decisions in Design, Plans and Products -- within which one might track critical success factors and/or points of critical failure. By parsing those numerous issues according to a value orientation on achievement, opportunities that are relevant to stakeholders for linking supply and demand can be anticipated or detected more consistently and thus better managed. This aids fulfillment by way of enhancing problem resolution, optimization and agility -- respectively reducing risk, securing effectiveness, and cultivating advantage.
Posted by Malcolm Ryder at 1:20 PM | Comments (0) | TrackBack
February 20, 2006
A Comprehensive Governance Framework
Why Governance?
Institutional control is a matter not only of doing things "correctly" but doing the proper things correctly. And, we want to control the institution in a way that is itself institutionalized -- just as a mature person would normally control themselves in accordance with appropriate principles of behavior that should be habits of character.
But what is it about an organization that particularly needs governing?
If the organization is a "business", then the motives of a business will drive organizational activity and the point is to steer those activities in principled ways that actually help the business.
The framework below sets the high-level business motives (across the top) as the outlook on key focal-points of the organization's management.
One set of points -- competency, policy, and strategy -- together describe the organization's makeup stretching from what it knows how to do on over to what it should do and finally what it has decided to do. In effect, this describes the current predisposition that the organization brings to its work every day.
The other set of points -- strategic development, operational availability, and transactional consistency -- summarize the organization's major proactive mechanisms for generating "delivery of value" to stakeholders. This is more like the organization's position (not to be confused with positioning).
The balancing act between the organization's predisposition and its position can be seen as a basic behavioral phenomenon demonstrating what the organization knows about how to translate its potential into reality. (Of course, this should include some consideration of whether the current potential is desirable and/or needs changing.)
Given those two axes, the framework looks at the internal structure of the organization for the key contributors that govern relevant business activities -- that is, what it actually winds up doing.
A key observationof the framework is that the organization's capacity to respond to opportunity and demand is hugely shaped by the coherence of its governance. While a lack of governance does not preclude notable capacity, the exact lesson learned in business between 2001 and 2006 is that risk factors in responsiveness can make existing capacity more of a liability (dot.bombs, Enron, etc.) than a benefit. This makes the influence of governance a major force to be leveraged in value management.
At the high level, this is referenced through the framework by its correspondence of the organization's processes, services and portfolios to the goals for progress, production, and achievement.
Naturally, real organizations are not governed only in terms of the intersecting issues presented here. However, governance must attempt to identify the most critical types of decisions to attend to at the various locations and levels of the organizational structure. A primary objective of the framework is to describe the sources and flow of information that can sufficiently account for the effectiveness of the organizational structure.
In that regard, a management ability (BPM) to associate competency and policy exploits certain types of information that can organize appropriate behavior. In like fashion, an ability (BI) to discover and exploit value-laden opportunities for that type of behavior keeps the governance in service to the goals of the business.
The final note for this introductory discussion is that the framework is intentionally abstract so as to allow it to be applied to organizational units of widely differing scale and flavor. There is no reason why a small business unit would have less of a need for governance, and no logical reason why the essential points of governance would be different. Instead, the most likely difference is in the level of awareness that the business unit has about what kind of opportunity governance would bring to the unit if successfully instituted. This is not intended to make any point about the intricacy of particular best practices in governance applied and distinguished between "corporate" or "IT", "profit" or "non-profit", and so forth. Those practices are rightfully derived from the communications needs held by stakeholders in the responsibilities that distinguish their domains from each other. Yet the framework presented above argues for the similarity of management across those domains, and calls out for a certain breadth of awareness that is about explaining why control becomes valuable.
For a related discussion of IT Governance in particular, see the article Surveying IT Governance by clicking here.
For an in-depth discussion of related value-creation issues, click here to see the article, The Business Creation of IT Value, which looks at how business management takes the organizationof IT and develops it to support the business position. While this is not strictly an example of implementing governance in IT, as a followup to the discussion here it illustrates how the problem of "Business-IT alignment" works out in overlapping areas of governance and resource optimization.
Indeed, if we look at coordinating the issues of managing organizational behaviors and resources, we return to the earlier observation that there is a correspondence of the organization's processes, services and portfolios to the (governed) goals for progress, production, and achievement. Seeing "IT" as a corporate resource, the correspondence might be articulated (see illustration here) as an allocation of IT organization responsibilities to those three aspects of the business position.
The thought it leaves us with is the question of how running IT "for" the Business relates to running IT "as" a business, and how business governance and business strategy connects to IT governance and IT strategy. From the framework introduced in this discussion, the indication is that strategy is an area in which governance has an influence -- and that influence is likely to shape Business objectives in ways that IT's influence will have to respect. Thus, IT's own governance will have to establish IT's business-like predisposition and position for compatibility with the way the Business's objectives are meant to be addressed.
Posted by Malcolm Ryder at 1:27 PM | Comments (0) | TrackBack
February 3, 2006
Decide, Design, Deploy -- Then Assess
More than any other role in the enterprise, managers are the focal point for accountability of execution results. On the one hand, this means that the organization's overall visibility of its progress is created by managers. On the other hand, it means that poor visibility is attributable to the way managers view things. It therefore becomes crucial for management and the organization's other stakeholders to have a given view that they both understand the same way.
Evaluations and assessments strive to create that shared view. But while most organizations mandate evaluations, many use them without any strategic impact on the direction of change or the continuity of improvement. Confusion is easy when the effort is to describe comprehensive responsibility for consequences. Managers sit at the center of this disappointment, but they need not. The solution is to be sure that all parties know beforehand what it is that the evaluation can really explain. For managers, evaluations should explain not just a nebulous idea of "results", but a specific idea -- progress. And for all parties, it is necessary to understand that evaluations and assesments are not the same; without this understanding it is far more likely that one or both of them will be ineffective or mis-used. Too much effort will be spent boiling an ocean or too much spent looking in the wrong place for answers.
I.
Three kinds of issues dominate visibility of progress.
One: "performance" must have the same definition for everyone. The generic definition would be "the degree of achievement towards a set goal, as generated by execution under demand." This is the context within which "progress" makes sense. The equation must be that the results of execution must amount to achievement, not just difference.
Two: a consistent understanding must be established of what is meant by "results". Here, the relationship between execution goals and impact goals is the subject. That is, since execution adds, moves, and/or changes things, one result is about whether those differences work out just as prescribed; but another result is that the influence they have works out as is needed. Progress is really the direct measure of whether the prescribed differences were obtained. The equation is that change equals requirements.
Three: the ability must be developed and used to accurately identify both what is "necessary" and what is "sufficient" -- and distinguish them! This subject is often complicated by confusion over where it is in the realm of execution that "needs" ought to hold top sway. This is not so much a debate about whether satisfying needs should be the driving purpose, but instead about who gets to declare the needs to which all production should align.
For those three interlocking reasons, the idea of evaluating performance is inherently a complex one. All organizations do a number of things that they call "performance evaluation" -- but the huge variety in how one outfit does them versus another is exactly why there is an industry for "best-practice" advice on the matter instead of only for precision techniques.
II.
Given the above, any organization could likely find significant differences in its view of achievement, progress and production -- once it knew to look for differences. This is one practice-level aspect of evaluations.
That said, two different organizations using the same practices should be able to understand things the same way, albeit this makes sense only to the extent that they both ought to -- and a given practice still allows wide differences in technique. So why bother with evaluating things on the practice level?
Answer: a "practice" is not mainly about "the right way to do something". Instead, it is really about associating ways of doing things with value. In this case, the point is to get value from the evaluation effort, instead of just going through the motions of supervisory responsibility.
Typically, organizations have a lot more familiarity and experience with the technical aspects of evaluation -- while not necessarily knowing where their technique fits into general best practice. This might signal a situation where there is ambiguity about whether the evaluation is actually solving the right problem (or any problem at all.) What issue is the examination really expected to resolve, and why?
An important starting point in clearing that up is to apply not only the above distinctions about "results" but also -- and even more importantly -- the following ones that reflect the difference between the beneficiary's stakes and the provider's stakes.
III.
What do organizations want "good performance" to mean? Essentially, it should mean that the organization's target stakeholder agrees that the organization's activity has created value for the stakeholder. The stakeholder's sense of received value can be quite varied -- ranging from relief to opportunity, and from intangibles to tangibles. From the provider's viewpoint, this extrinsic value is a goal of the provider's intrinsic performance.
Unfortunately, it is very common for external measures of an organization to be called "performance measures" -- but most often what is really being measured there is the extrinsic value of the organization's effort. Properly recognized intrinsic performance, which is an internal goal of the organization, is essentially a characteristic that the organization wants to acquire.
To be specific, the desired characteristic is the ability to produce an extrinsically valuable achievement. To get that characteristic, the organization has to get internal progress from its execution.
That gets us back to the issue of accountability and progress. The general question that performance evaluations try to answer is, "Did the way we do things get us the results we wanted?" If the answer is yes, management should be able to take the credit. But if the answer is no, then management could likewise take the blame.
In the credit and blame game, it's easy to react to a broad range of direct and indirect consequences, and lose focus on what should be specifically discussed about management -- namely, progress. Evaluations that seek to show comprehensive "responsibility for consequences" are too often boiling an ocean or looking too much in the wrong places for answers. Avoiding those problems is easier when we stay focused on accountability for progress.
IV.
How do we describe "the way we do things" and begin to account for progress? Most management activity can account for eventual progress in the way the management activity affected things at three different phases:
- decisions;
- designs; and,
- deployment.
In "making" progress, management has a short list of essentials to worry about -- all fitting under the umbrella concern of "can we do well what we are required to do?" Requirements generally come from:
- the dynamics of prevailing circumstances that are creating opportunity or risk,
- from formal restraints or orders, and
- from literal limitations of resources.
Correspondingly, the essential elements of execution that are to be managed are:
- Awareness (appropriateness of choice of response)
- Competency (effectiveness of response versus demand)
- Discipline (behavior or application consistency versus rules)
- Capability (the inherent functionality of a resource)
Managers "make" progress by cultivating and coordinating those elements -- through decisions, designs and deployments -- in ways that are specifically compatible with the terms on which activity is approved, by the organization, for responding to designated circumstances. As a final concern of management, the approval of the actual activity may come before the action or afterwards. While the terms of approval may be constant, the action may be prescribed beforehand, or justified afterwards -- reflecting the existence of some range for management discretion. Use of that discretion may become a particular point of evaluation -- one that questions the skill of the manager or the logic of the terms of approval, or both.
Taking progress as the subject, an evaluation is not really a "performance" evaluation except in terms of the performance of the manager who is responsible because of his or her presumed capability to manage.
Instead, regarding the measured execution results, the evaluation is a progress evaluation and what that evaluation is trying to explain is how the actual execution relates to the actual differences made towards meeting requirements.
V.
One of the profound realizations from that clarification is that execution always points in the direction of requirements. Wherever the requirements go, execution is responsible for meeting them. In real life, this means that the "fallout" of proper execution can easily feature enormous amounts of change, cost and discontinuity, because it was unavoidable as a consequence of the requirements. Therefore, if an evaluation of execution seeks to judge it by how much it was able to rein in change, cost, and discontinuity, then the evaluation itself is not measuring progress -- thus it is not measuring the intrinsic worth (the logical benefit) of execution. In such a case it is easy to see that execution might get modified as a reaction to factors that have not actually been linked to enabling the execution to better contribute to intrinsic performance. Anyone preparing or reviewing a business case will wrestle with this threat.
Clearly, however, factors such as change, cost and discontinuity are necessary to factor into the big picture -- the one shared by multiple stakeholders. After all, if execution is not sustainable, or if the side-effects of progress are corrosive to the organization's stability, then fundamental rethinking should be taking place. The difference between an evaluation and an assessment lies exactly here -- an assessment explains how the subject's results relate to the larger sphere of enterprise influence.
An evaluation can explain whether a job was really well done. But an assessment can explain what an evaluation cannot: namely, whether the job was the best "right" thing to do.
Posted by Malcolm Ryder at 5:35 AM | Comments (0) | TrackBack
December 13, 2005
The Value of Being In the Know
Imagine trying to create value without being knowledgeable. Not good. But how do we know what value the knowledge creates?
I.
FIrst let's go to a working definition of "value", to tell us how to consistently recognize when value, instead of something else, has been created.
- value: the significant difference that is made by a distinction.
This generic definition is important because it is portable and unchanging across different kinds of situations. However...
In any particular situation, value might be created in a variety of ways. Its two key parts -- significance, and distinction -- can exist independently of, and prior to, each other. This allows some complexity:
- a single distinction can be significant in multiple ways, but not all of those ways are necessarily relevant to a given stakeholder. And...
- there can be more than one way to get to the given significant difference; not all ways are necessarily tolerable or practical at a given time and place.
Thus, the two parts can have a many-to-many relationship with each other, which means their combinations can vary and thus generate value in many diferent ways.
We'll have to sort through that variety when assessments roll around. We should objectively identify different kinds of values. Then, based on relevance and practicality, we can determine what kind of value might be most within our grasp, but finally we also have to decide how much that kind of value means to us and why. This separation of "value" from "worth" is the precision awareness provided by an assessment. The assessment helps us think through potential values in terms of worth, and ultimately we'll commit to the most worthy values.
As an example of concern about "what value is meaningful", companies considering taking on knowledge management (KM) are commonly concerned about the economic impact of KM's value. If KM is valuable, they want to know how and why, with regard to that specific impact.
In figuring it out, we have to start with "how" the value of knowledge can be recognized.
II.
One approach to identifying what value knowledge creates is to first state the desired type of value and then apply knowledge in situations that logically should drive that type of value creation. If applying knowledge produces a measurable change towards the desired value then we attribute that value to that knowledge. An example situation would be "problem-solving". Here, we know that we want a solution and that getting to a solution is a multi-faceted issue. Measuring the effects of applying knowledge might yield findings such as:
- solution obtained much sooner than otherwise has been the case
- solution obtained with greater efficiency of required resource consumption
- solution obtained where previously there hadn't been one obtainable
In fact, "faster, cheaper, and prettier" are very reasonable terms by which to measure the effects of applying knowledge. They typify agreed notions of value (i.e., significant difference) that people already know what to do with.
This is an approach that is compatible with "accounting" -- at least in the sense that it describes tangible results correlated with the level of effort invested and consumed in the situation.
An approach wholly different from that, however, is from the other direction -- where applying knowledge appears to predictably, and even reliably, cause changes, but the significance of the changes is undetermined. Here, the problem lies in not understanding what to (literally) "make of the change"...
When applying knowledge has effects of indeterminate usefulness, the accounting perspective does not help to identify and manage a recognizable value. Accordingly, we need another view -- one that perhaps introduces previously unseen useful effects to accounting, but at minimum discovers the usefulness of previously unobserved effects.
III.
In the latter case above of knowledge-driven changes, management has a special problem: we need to determine whether applied knowledge has re-organized conditions in a way that provides a different set of opportunities and risks than what had previously been established -- not just a different level of preconceived value. The more important the new opportunities and risks are, the more valuable we can say was the knowledge involved. But as with any change management, we need to determine whether the knowledge-driven changes are the "right" ones -- and whether the value is a kind that we really want.
One practical way to recognize this issue of reorganization is through the idea of "technique". Technique organizes the way things are used in action. In practice, acquiring good technique is the same issue as being "trained" (reorganized) to a point of better functional capability. The two most important aspects of technique, making it a target for adoption and improvement, are that (1) it provides an operational advantage against stress, and (2) the means of that provision are sustainable. These are compelling differences to attribute as value.
Technique organizes the way things are used in action -- but so does a "process". So what's the distinction there?
Technique is to "process" as Policy is to "approvals". Approvals define the selection of permissions, but policy defines the logic of permissions according to prevailing conditions. Likewise, where process defines the selection of connecting actions, technique defines the logic of actions according to prevailing conditions. A process that amounts to bad technique is no more tolerable than approvals that amount to bad policy.
Most oganizations today can think about technique by thinking about "best practices", contrasting that against what might be considered the "best procedures" world of processes and rules.
But if we take the example of best practices and investigate it for its contribution to value, much of what immediately comes to mind is the view from the opposite direction -- that is, practices which are not "best" are inhibitors or liabilities that we want to remove. This helps to focus our attention more on the aspect of protecting "opportunity" and on how opportunity is maximized or minimized under the pressure of demand.
Now, we see that Opportunity can be set alongside Operation as a second critical perspective in assessment. Where assessment of operations deals with progress, assessment of opportunity deals with potential.
- Potential represents the degree of protection provided for an opportunity to obtain the desired impact.
- Progress represents the degree of achievement in realizing the potential.
Accounting typically examines Operations for progress; but value assessment also needs a mechanism that examines Opportunity for potential.
IV.
Before beginning that opportunity examination, we must be careful to furthermore separate "opportunity" from "objective"...
In practice, objectives are usually identified and promoted specifically to represent the perceived or desired endpoints of paths -- paths seen as "opportunities" that describe the potential for reaching a goal. The paths have been conceived for the purpose of meeting the objectives.
Managing operations focuses on moving things along those paths; but covering the known paths is more about performance than it is about value. Meanwhile, accounting is heavily performance-oriented. It wants to discover and explain "progress." It expects knowledge to stage and promote progress by changing operations to realize the potential.
In contrast, managing opportunity means path-finding and path-determination, which comes from strategy. Strategy is heavily value-oriented. It is mainly about finding and validating the paths where potential is first created. It expects knowledge to stage and promote potential by changing opportunities to realize the desired impacts.
Thus, in the defined opportunity produced by the strategy, we see the definition itself as the "significant difference" and therefore attach value to it (separately from any pursuit). Then, we have to weigh the opportunity's significance to the objective, independently of weighing the importance of the objective itself.
For example, we may see the strategy as the map to success. Following the map will still be a critical constraint on achieving the goal, but the requirements for following it (i.e., progress) should not be mistaken as the criteria for weighing the importance of the strategy's value (i.e., potential).
- Instead, the strategic opportunity must be relevant and viable, and considered against alternatives.
- Meanwhile, regardless of the importance of the objective itself, if the opportunity is critical to the objective then by definition the opportunity has great weight.
V.
The map that strategy creates is a highly valuable asset even before we start to actually follow it. We want knowledge to do two things: to make us better map-makers; and, to help us make better maps.
Those differences indicate yet another key to assessing the value of knowledge -- namely, to distinguish "intellectual assets" from intellectual behavior. Knowledge changes both things, so they each are dimensions of knowledge influence, affecting both operaions and opportunity. Additionally, they affect each other.
Managing assets and managing behavior are not the same activity, but with valuable assets such as distinctive ideas (like strategy or procedure), we naturally also want behavior that improves and leverages their value.
For example, we want high performance in compliance to a valuable procedure -- which makes that behavior itself valuable. But that sense of behavior should be understood as "skill".
Intellectual behaviors such as analysis, decision-making, and invention are also coveted skills -- but they make their distinction, and ultimately their value, in their ability to create and modify important circumstances and intellectual assets.
If we say that we can apply intellectual behaviors and intellectual assets to a situation, have we covered the bases for saying that we have applied "knowledge"? Not quite.
Under the pressures of demand, an organization's assets primarily represent its capacity while its behaviors represent its competency. But in our overview of knowledge, a third and final dimension, joining intellectual assets and intellectual behaviors, is what we might call "intellectual predispositions" -- which brings preferences to join capacity and competency.
Now, with those three dimensions of knowledge influence, we can begin to catalog the types of differences that we want assets, behaviors and predispositions to make, and in that way list key terms of assessment. We can cover opportunity comprehensively, and we can also "backfill" issues frequently ignored about operations.
Amongst our catalog of differences, we must also have clarity and confidence about what final impacts we really need, and then about whether the contributions of the assets and behaviors (capacity and competency) are actually supporting both the progress and potential towards the target impact.
If our key objective is maximum positive economic impact, the challenge will be to distinguish how knowledge drives economically significant progress, and how it drives economically significant potentials, related to the desired ultimate impact.
We'll especially want to understand how knowledge helps our progress, potential and desired impact to align with each other. Or else!
The fact is, we could do a bang-up job of executing on differences that don't really matter amongst our goals and priorities, yet still affects our economies -- for example, perfecting compliance to standards that don't solve our problems.
And highly potent value can be created that doesn't have much economic impact -- for example, a well-executed product perfect for only a very tiny market.
What will emerge, though, is that the interrelationship of these issues is not strictly linear but instead is interwoven -- more of a network of influences than of a chain. Managing assets, managing behaviors and managing predispositions each have their own way of affecting progress, potential and desired impacts. But the way that knowledge affects one dimension also affects the others, which changes their alignment. In that way, managing knowledge value is a lot like managing a network.
VI.
To envision the scope of interrelationships in the alignment, consider the following.
This matrix is one way to describe how knowledge influences alignment. Here we see the representations of numerous familiar business instruments that are directly related to knowledge and that in turn are distributed to shape operations, opportunity and objectives. Our familiarity with the items in this view also lets us see more readily that changes in one place can alter the support, status or direction of another place in the picture.
Managing knowledge will include managing the making, certification and purposeful utilization of it at each point in the matrix. But through our familiarity with these instruments, we already recognize that the point-to-point connections are vital to the health of the business effort. Given that, managing knowledge value comes in when we know what difference we want the knowledge to make at each point, and how those differences relate to each other.
With things put that way, it's easy to say that at all points we just want knowledge to make things "better".
But better should mean that they become more reflective of the target impact while improving the way they interrelate. For example, a faster, cheaper or prettier way to do something is better if it keeps or increases the level of support it offers to other factors that depend on it. Otherwise, diminished support can easily make the other factors riskier and likely more costly. The sensitivity to this is typical of taking a portfolio management approach rather than an accounting approach. What we're working with is the "knowledge portfolio"...
VII.
From here we can begin to sum up how knowledge is valuable.
Our matrix has a left-to-right connection of three perspectives: operations, opportunity and objectives. As management modes, what forwards knowledge influences from operations through to objectives and beyond is technique, strategy and purpose. We readily recognize this in certain management artifacts:
- Earlier, Best Practices (through technique) was an example in which the influence of knowledge on operations was directed in support of opportunity.
- In like manner, Planning represents strategy's bringing knowledge influence on opportunity, with which we would likely support objectives.
- To that, we can add that an organization's Positioning represents the knowledge influence that purpose has on objectives, which we use for supporting stakeholders.
Together, the three things illustrate the organization's competency, capacity and preferences systemically establishing themselves -- three characteristics that we already know are criteria in economic justifications. These characteristics are also recognizable thematically as in the examples within the picture below:
Meanwhile, vertical linkage in the matrix connects the three knowledge dimensions. Looking back at the cycle of leveraging knowledge value under demand, we saw a picture that corresponds to these dimensional links: predispositions should direct appropriate behaviors; and in turn, behaviors should produce relevant assets that communicate and transport capacity from one time and place to another in the organization's experience.
In that picture:
- intent is a source of conditions;
- form is a source of content; and
- function is a source of capability.
Knowledge affects the measurable conditions, content and capability of the organization -- characteristics that we already know are monitored for the economic impact of their use. Overall, the cycle addresses the question, "of the things that we want to do, how do we get them done?" This explains why improvement initiatives focus on investment, refinement, and redeployment in those three areas. While those initiatives typically look to business "intelligence" as a primary means of gauging the importance and progress of the efforts, we saw that "knowledge" is more instrumental to shaping the actual changes that the efforts make. In other words, that is why knowledge is valuable.
VIII.
One of the key challenges to working on improving the value of knowledge is to assure visibility of why certain kinds of knowledge is appropriate in given situations. In general this is thought about as "expertise", but in an important way that misses the point. Along with information overload, an organization also has a degree of complexity that often obscures the reasons why knowledge is available or not in given circumstances. Automation certainly tries to address this problem by minimizing it risks. But behind that automation should be a visible logic of knowledge management that corresponds with the assessment matrix and alignment cycle we have now seen.
As a closing explanation, but one that is a work in progress, the following picture identifies that knowledge is more likely manageable when its form and function aspects are more visible. This visibility helps to begin the process of optimizing the current knowledge deployments into a configuration that, as outlined by the discussion above, will more systematically support programs for increasing their value.
Posted by Malcolm Ryder at 12:18 PM | Comments (0) | TrackBack
December 5, 2005
Managing versus Measuring
We always say that we can't manage what we can't measure.
But what are you doing? Are you just measuring the management? Managing the measurement? Or, actually managing the item on which you're using the measurement and management processes?
I.
Management is essentially about determining whether the state of things needs adjusting and then intervening with adjustment actions that are appropriate. On their own, both environmental conditions and activities can be hugely indifferent to the particular desires of an organization, and to be routinely leveraged they must be perceived in consistent, non-random ways. Therefore, one can't manage what can't be described. Measurement is just one aspect of the fundamental management need for description, and it must be complemented by other forms. (See the illustration here and again near the end of this discussion.)
To understand this, it's important to immediately broaden our sensitivity about measurement -- away from "metrics", up to to the general functional problem of "description", and back down much closer to "definition".
Defining current states is a mandatory part of the management equation, but that doesn't amount to management. Instead, if the adjustments are the whole point of having management, then actually it's more critical that we define the adjustments. It's what kind of an adjustment, and how much of an adjustment, that drives the only difference we expect from what we'll later on still call "management"...
And just as all rectangles are not squares, not all definitions are measurements. Definitions are descriptions, and "measurements" are just a form of expression that descriptions can take.
But because measurements are so prolific, complicated and frequently debatable, we're concerned enough to ask the question, "can management be done without that form of description?"
II.
Let's say that you have a task to put a stone in a box, but the stone is initially too big -- which we determine simply from trial. How are you going to "manage to" get the stone into the box? Do you need measurement to get the stone certifiably "in the box"?
You could chip away at the stone to make it smaller, and keep trying after chipping it to put it in the box. Your action makes the stone different. Eventually you'll get the stone into the box.
- On the other hand, if you don't care how long it takes, how small the stone winds up, and other such things, you don't need measurement -- you just need the stone to finally fit into the box. But each attempt to fit the stone in the box is actually a measurement.
- And on the other hand, if it matters how long it takes, how big the stone finally is, etc., then of course you need even more measurement.
We tend to think of the latter case as being managed and the former not; but strictly speaking they are both managed. That is, in both cases, proactive adjustments are determined and made deliberately towards the target state until the target state is true. We see that measurement figures in differently but both times. Most importantly, the target state is true only when we agree that it is true, and we use the measurement to gauge the distance from the agreement.
So far, to act towards the target we still haven't necessarily invoked measurement, but to know that we're reaching the target we must have it.
Practically speaking, the key element is actually the agreement beforehand, which means that the terms of agreement are the key to describing the target state. These terms may be non-metrical, while still being highly differentiating. For example, objectives are often stated to represent the terms of agreement by which most comparisons will be made. Compatibility, not compliance, is usually the subject of this perspective on things.
But let's get back to measurement. Measurement provides a kind of additional certainty to definitions, by sharpening the definition's ability to express distinction -- typically in terms of "amounts". For example, even a qualitative binary distinction - true vs. false - can be considered almost purely measurement if the real question posed is "how much 'false' is there?" and the answer is "None."
Yet in that example, it's obvious that we must still know beforehand which conditions actually mean "True". Can we identify (define) the conditions without measurement?
Sure, if we can distinguish them in other ways.
First we should look at why we can do that, and then at why we should do that.
III.
In the example above, it can be argued that management didn't require measurement to make "stone in the box" become true. But measurement is required to confirm that it actually is finally true. So the point is that the success of the management is what we need measurement to expose.
Let's make that thought more concrete with another example. If a test case is looking for exactly a 3-foot length, any length tested will need to have been measured before we can say that it complies. Compliance is determined purely by comparison to some standard (in this case, something that we already know is 3 feet long). What makes the comparison work is that the standard has already been selected. Actually doing the comparison -- that is, simply applying the standard to the test item -- is an action that might be "managed" or accidental, but we can confirm the outcome only through measurement, and the confirmation is what tells us whether or not we need to try againto hit our target.
This is all adding up in a certain way:
- definition is aimed at identifying the distinction of the target conditions
- the difference is described and recognizable by terms of agreement
- compliance to those terms is largely detectible or provable through testing
- the testing would rely on a standard to help establish the degree of compliance to the terms
- more than one condition might be part of the standard
But there is another way to work in terms of a standard: procedure.
Procedure prescribes steps that are expected to produce compliance. The assumption built into a procedure is that during execution each step of the procedure should become true. Largely without measurement, we can simply follow the procedure. In this case, most measurement used is dedicated to determining how much execution complies with the procedure (supervision), and to confirming the effects of making adjustments (intervention) -- but the choice to use the procedure is far more significant: it means that given the responsibility to direct the course of events, we have agreed to the procedure's logic. Exercizing the logic, with whatever level of competence, is the most differentiating characteristic of what we are calling "management"...
IV.
So, as it turns out, the urgency about measurements is not really about manageability but instead is about predicting the effectiveness of the management, and about increasing the accountability of the management. In short, they are about making management scientific.
However, management need not be scientific in order to be management. What management really depends on even more than measurement is logic. Measurement should be a means of testing and tracking the logic, but logic must be derived even in the absence of desired measurements. This takes place in the form of assumptions and objectives. Management logic can form a closed loop or system when its assumptions and objectives are followed with ratings. (Current ratings influence future assumptions.)
In completing that loop we also get the broad outline of the framework for management description:
- Assumptions represent the key initial distinctions acknowledged in the management effort; this includes discovery of identities and definitions
- Objectives represent the point of view that finds comparative significance in what is done and monitored; this includes test criteria and terms of agreement
- Ratings represent the actual visibility on the value of conditions, achievable from foresight to hindsight; this includes standards and priorities.
With those anchoring observations, we can see the universe of description that management needs.
This framework intends to position the many modes and artifacts of description in a way that highlights where they make the key difference to management's overview of conditions. Against that, it sorts out and addresses the basic management concerns that drive decisions to intervene:
- preferred states;
- adjustment progress; and,
- the impact of changes.
In the illustration it is easy to see the range of formats for describing conditions, along with the fact that they are not necesarily metrical in nature. However, it is also evident that measurement plays some role in every area of description -- such as, by establishing trending ("track"), marking off milestones ("score"), or detailing cost/time limitations on requirements ("specify")...
V.
Our key management challenge is to conceptually arrive at definitions identifying one thing versus another, so that we can properly identify their relationships and leverage the relationships.
These definitions, when treated *as if* they are 'facts', are the normal basis of managerial logic. Communities of practice may develop and even enforce 'standards' of definition, but this ultimately does not prevent management from being practiced based on other standards or knowledges and in non-scientific yet still logical modes.
As for measurement, it has the task of identifying and comparing differences in an accounting mode. Three other issues ensue:
- to actually do the measuring;
- to measure the things that matter; and,
- to match the right measures with the right management.
Otherwise, measures simply become an unreliable tool being used for "solving the wrong problem."
Posted by Malcolm Ryder at 7:46 AM | Comments (0) | TrackBack
November 30, 2005
Communications in Performance Management Pt. 2
"Performance" rates the value provided under demand.
With that working definition, it's easy to see why modelling processes is so important: the process model is expected to account for how the organization successfully and predictably handles the stress of the demand and allows "performance" to be engineered.
That is, process modelling interprets performance in an explicit operational language that connects capabilities to requirements.
Process Management attends to those connections by maximizing the availability, economy and efficiency of the connections. To leverage potential connections, the management effort carefully but quickly associates the model of a process with the requirements of a demand. The associations that prove to be the most frequently successful lead to two things: refinements of the models, and standardization of the selections made amongst potential connections. In that way, we decide that the reliance on processes is improved according to the definition of "success". Net: we decide that "process improvement improves performance."
But the number one problem in managing performance is not a matter of correct processes; rather, it is a matter of knowing what is currently really going on. This knowledge is not simply a matter of timely fact-finding but instead of sophisticated interpretation of the state and trajectory of current conditions. Assuming that the right facts are discovered and studied, we rely on the analysis of facts to accomplish this interpretation. Properly done, the analysis must examine facts to determine their significance to the definition of success. So, given our working the definition of "performance", the analysis of facts is potentially critical, but it is irrelevant unless the current definition of success is well established.
In practice, success is generally identified as a "goal", but what practically matters are the characteristics of that goal. Whenever a goal has multiple stakeholders (which is, most of the time), it is necessary to not only "get there" but to get there "in the right way". The understanding of the right way to get there must drive management decisions about what processes are "best" against demand. The right way is defined through "terms" of success.
Meanwhile, the immediate priorities of the different stakeholders can and do change independently of each other, so in a given instance of demand the most proper (balanced) response may be very specific to the moment. Politics notwithstanding, this inherent complexity also means that the management effort itself may not be practical (towards high performance) except through on-the-fly collaboration that allows the true current terms of success to be properly recognized.
Net: modeling the collaboration is more important than modeling the process.
Collaborative management fundamentally acknowledges that different perspectives must be reconciled in a process, not just that the process should mechanize the stability of operations. As seen in the following picture, each stakeholder has a point of view offering at least two perspectives -- perspectives that can raise and evaluate issues, actions and likewise events.
Therefore, proper management calls for an integrated management communications platform that allows all members of the organization to:
- continuously observe and immediately understand the context and implications of operational events; and...
- communicate the issues pertinent to the observations and understanding, and...
- appropriately collaborate on timely follow-up decisions and actions that create or restore critical alignment of activities to the directions of strategic and tactical goals.
Observation becomes meaningful when the items within view have definition. In performance management, the importance of communications is to indicate the impact of events, but this cannot be done unless both events and impacts are specifically and suitably defined. The caveats are that Events are defined within the mode of monitoring, and Impacts are defined within the mode of interpretation. Consequently, the actual implementation of these management activities can be highly specific to time and place -- and for any given implementation, the modes of monitoring and interpretation must be logically related to each other. Thus, "one size does not fit all."
Understanding is accomplished when:
- those above-made definitions of events and impacts allow their associations to be determined and classified, and when...
- those classifications can be used to account for the status and dynamics of circumstances, both present and future.
In implementation, the degree of understanding achieved is usually represented in a level of compliance to rules and plans that are intended to control, by force of design, the status and dynamics of circumstances. These exert their influence as "requirements" for the processes that are ultimately selected to respond to demand.
To establish and maintain credibility as an agent of performance, management must be directly responsive to the implications of current circumstances. As shown in the diagram above, a performance management solution must bring practical visibility to the fact that any of the terms of the operations environment, and any of the values in the management context, may change at any time. Changes will affect both the events and the impacts observed, thus their relationship can change and take on a different meaning.
Ultimately, what the “business” must gain from performance management is the ability to better orchestrate the changes -- in order to direct affairs in a logically calculated way towards the meaning that the business desires.
Posted by Malcolm Ryder at 7:52 AM | Comments (0) | TrackBack
September 26, 2005
Competency, Competing, and Strategic Behaviors
When we try to discuss organizational performance, it is often through the question of whether the organization's competencies prove to make its competitiveness effective. And these days, the problem of "competition" versus "competency" merits being called interesting especially because we've found out so much more about how being competent doesn't add up to being competitive despite the costs and lost sleep involved.
Sadly for the management teams of most large organizations, there seems to be no way to avoid spending a huge amount of money on the organization's becoming "more competent" -- because not spending the money almost guarantees that it won't happen. Meanwhile, becoming competent takes time and there's a risk of the competency being irrelevant by the time it matures.
What really helps, then, is to understand how investing in competency does begin adding up to being more successfully competitive.
I.
Ideally, it's possible to clearly state what makes up "competency", so that the necessary investments are well-exposed. Without being overly technical right away, most people would agree that in any given circumstance, competency generally means "effective behavior."
One especially intriguing look into the effective behavior issue is the Booz Allen & Hamilton model of organizational DNA, featured regularly in their publication strategy+business... Organizational DNA dwells on how organizational behavior springs from the internal "programming" of the organization, and suggests that reprogramming will invoke different behavior.
Back in the fourth quarter of 2000, Booz Allen stated, "What sets the top performers apart is the 'how' -- the way they organize and operate to realize their aspirations... The solution lies in changing the organizational environment to encourage decision-making that is aligned with the overall objectives of the company."
The Booz Allen model is aimed at producing solutions that improve organizational alignment with strategy. In this general vein, a typical presumption is that management decisions explicitly pursue an "optimal" prescribed behavior only approximated by real behavior awaiting improvement. Everyone is looking for the secret to improvement.
By 2005, extensive field testing of the DNA model allowed Booz Allen to confidently state:
"To change an organization effectively, concentrate on the deliberate design of four key organizational building blocks:
Decision Rights: the rules and mechanics that govern who makes which decisions -- and how.
Information: the metrics that measure performance, and the practices that transfer knowledge.
Motivators: the incentives, objectives, career alternatives, and other elements that drive people's behavior.
Structure: the overall organizational model, including the 'lines and boxes' of reporting relationships and job descriptions."
Naturally, there are many costs associated with the "before-and-after" reprogramming of each of those conditions... However, the focal point of the Booz Allen "DNA model" is more about the flow of what we often call "political capital". This initially appears in the emphasis on decision rights. But in fact, all of the DNA model's four building blocks have been included because they are (arguably) the factors most affecting decisions.
The DNA model points at the way that decisions (not just the rights) are distributed and made by everyone in the organization, with decisions being the driver of how the organization looks and behaves. While the changes the model supports are to affect the environment for decision-making, the point of the Booz Allen approach is to position and exploit decisions themselves as the generator of performance-critical behavior.
The big issue lurking under that idea is about the difference between how suggested corrective (.e., managed) changes to the environment affects performance and how "natural" changes do. Every day, a huge number of intentional but independently made decisions collectively and "naturally" alter the environment. In detailing that organizational environment, the Archestra view finds and describes a set of basic influences "accounting for" the organizational behavior as encountered by strategy. Since we describe that environment differently from the DNA model, the course of managing it could significantly differ as well.
II.
As does the Booz Allen DNA model, the Archestra account emphasizes that several essential functions underlie (i.e., both constrain and support) the organization's potential behavior at any point. And, when that potential behavior is realized, the behavior is the environment for what comes next. But our functions are different.
DNA says that this environment affects decision-making for better or worse. But the Archestra emphasis is that key performance decisions do not just wait for a friendly environment. Instead, strategic alignment means some decision-making -- not all -- has to work on how that behavior is realized from the underlying functions in the first place; while other decision-making is then critically responsible for whether the behavior executes strategy successfully.
To illustrate these two different layers of effects, first we directly call out the basic "modes" of organizational alignment that provide the environment in which strategy must survive.
Within these modes of alignment, there is a hierarchy of influence, with the most dominant at the top and the least at the bottom. In the interplay of these influences, "competency" leverages taxonomy and standards but is largely constrained by culture. Given that, one thing we can point out is that culture largely determines the competitiveness of a competency.
The alignment hierarchy also exposes an additional crucial dynamic. Namely, within the organization's overall functionality, external or exotic influences such as taxonomy or standards are more readily swapped in and out of the organization from one time to another than are more internal or intrinsic influences such as competency or culture. However, once in, external influences are significantly constrained by intrinsic ones.
In the picture, we see specifically what items the influences work on, noting that those items independently change all the time. Overall, the decisions that bring in and/or shape the four "alignment" influences produce the predisposition aspect of the behavioral environment.
III.
Meanwhile: another essential aspect of the organization's behavioral make-up consists of the way the organization responds to the circumstances that it believes it inhabits -- in short (and coining a term), its responsivity. Typically, this responsivity is what the alignment modes must work on, but when they arrive they find natural forces already at work.
The three key natural influencers of "responsivity" are:
- motivators which encourage certain action)
- generators (which enable and manage action)
- indicators (which suggest action)
More specifically, the interplay of those three influencers "maps" the intuitive dimension of responsivity as in the following picture:
Day to day the organization sees itself in a mirror, noticing key elements (of needs, options and requirements), and directly reacting to what it sees.
But the deeper issue is the way that those key elements are linked by the natural influencers, generating the overall intuitive responsivity -- so what are the origins of those influencers?
In the picture, those origins are awareness, execution, and assessment. The next step in discussing "effective behavior" examines those issues.
IV.
Our first illustration above details the underlying four parts of "predisposition". Likewise, the three underlying parts of "responsivity" shown in our second picture can be described more specifically. For that, one approach is to see the parts -- awareness, execution and assessment -- as tendencies or "characteristics" developed from particular organizational activities and observations.
Awareness is developed from the following factors:
- Decisioning
- Modeling
- Measuring
- Communication
The net effect of awareness is to create the "working image" that the enterprise will have of the circumstances within which it believes it operates. The working image presents options of varying attractiveness to the enterprise. The options are thus motivational. This four-tier hierarchy of "awareness factors" also features, from bottom to top, increasing complexity in the development of the working image.
Execution is developed from the following factors:
- innovation
- collaboration
- optimization
- change
The net effect of execution is to proceduralize activity in the cause of "recognized progress." Understandably, these tend to be the major issues on everyone's operational management agenda. The four factors are stacked relative to each other with the most reactive activity (towards progress) at the bottom and the most proactive at the top. All of the factors are about exploiting requirements, and all of them are at risk without "alignment". Arranged hierarchically, each of these four factors is critically dependent on the factor below it in order to be successful at generating maximum impact.
Assessment is developed from the following:
- Value
- Performance
- Quality
- Risk
The net effect of assessment is to establish the meaning of the "current state" and thus validate or challenge the existing perception of needs. In the context of progress (from execution), assessment tries to understand whether the difference achieved is important enough (or not) to defend the means by which it was gained or to change them. While each of the four factors is a kind of importance per se, they are hierarchically ordered with the issue on top being the most indicative of (i.e., directly relevant to) a specific strategy and the one at the bottom being least so (although perhaps more relevant in general to all strategies).
Summarized from the viewpoint of strategy, awareness must offer encouragement; execution must offer enablement; and assessment must offer clear ideas.
V.
The combination of a working image of circumstances, recognized progress, and an accepted meaning of the current state characterizes the intuitive dimension of responsivity. Again, day to day, the organization sees itself in a mirror made up of those aspects and reacts to what it sees.
But for a full appreciation of how that version of awareness, execution and assessment might really play out as behaviors, the following view gives another perspective crucially important to performance management:
As featured above, behavior is coordinated by approvals, assignments and accounting. Together, they make up the political dimension of responsivity, mediating the otherwise "intuitive" responsivity of the organization and intervening between predisposition and actual results.
The most prevalent characteristic of this coordination is that it is negotiated -- not once-and-for-all, but repeatedly and without guarantee of consistency, due to the continual and irregular influence of internal and external change on the organization. Yet the political formatting of responsivity is what most organizations believe will spawn "effectiveness"...
Since this means that the underpinning assumptions and conditions of the strategy might vary beyond expectations, the organization must grapple with how strongly a policy of adherence to strategy will be enforced. Successful enforcement means resolving the tension between the organization's predisposition and its politics. Even more importantly, since intuitive responsivity is continuously forceful at setting things in motion, the balance of predisposition and politics must "train" the intuition towards the strategy instead of away from it.
VI.
Given the above pictures of predisposition and responsivity, our full account of organizational behavior is based on how the two things affect each other.
From a management standpoint, effective Predisposition presents its influences with dependencies summarized as follows:
- Culture's function of granting permissions involves the relative strength of permission granted
- Competency's orchestration of abilities involves the maturity of the resulting combination
- Standards' presentation of rules involves the degree of adoption generated for those rules
- Taxonomy's offer of definitions involves the stability of those definitions across time and place.
Management can deliberately attend to those dependencies. The current predisposition constrains the likely effectiveness of the functions that make up intuitive responsivity -- by the way that strength, maturity, adoption and stablity are established for each function.
On the other hand, political responsivity will counter-offer different criteria of acceptability and importance to shape behavior, whic can pose a significant problem. If positions, assets or stakes are challenged in any combination, their owners may push for settlements, using approvals, assignments or accounting that either ignore effective predisposition or must attempt to change its underlying terms.
Consequently, if politics compromise the optimal predisposition, then the predisposition will compromise the intuitive responsivity that is the real environment for strategy.
As outlined by these worksheets for detailing intuitive responsivity, very many variables can be changed. Management's challenge is to know where, when and why changes occur -- and to control them by type and degree for benefit to supporting the strategy:
- Awareness details, which combine to envision current states
- Execution details, which combine to create future states
- Assessment details, which combine to determine overall status
VII.
In the intuitive responsivity arena, the awareness aspect's hierarchy of factors bears a superficial resemblance to the Booz Allen DNA model, especially in its inclusion of decisioning. But... the set of awareness factors does not Instead, it presupposes that most decisions have both traction and persistence only when the other three "awareness" factors support them, so if you want a new decision to succeed then you have to "tune" the other factors to support it.
Posted by Malcolm Ryder at 5:36 PM | Comments (0)
August 23, 2005
Business Enhancement and Constructive Innovation
This just in from the 23 August 2005 Member Edition of the McKinsey Quarterly: McKinsey surveyed what global executives think about technology and innovation. Their results stated:
"Fifty-three percent of CIOs and CTOs cite the ability to innovate as the most important capability for growth... [but] 33 percent of technology executives see improving their companies' current products as the key driver of growth -- a significantly higher proportion than the 19 percent who favor developing new products..."
In other words, when growth is the objective, improving existing products is more effective than developing new products, so is "innovation" -- the top tool -- primarily important for product improvement, instead of for new product development?
This is interesting largely because of the persistence with which the business value of IT is debated. Looking at overall business spending on IT, various analysts (collectively) calculate that only 10% to 30% of the spending on IT is dedicated to what is generally termed "new initiatives" as opposed to "sustaining initiatives"... On the surface, it would seem that IT is already doing what the business wants!
But that makes us wonder what IT organizations consider to be "new" -- because we want to know what part of that "new" is about growth: a little of it, or most? And does "sustaining" include improvement? Or do budgets actually leave out improvement as a target? Meanwhile, where does "improvement" best fit in: with "sustaining", "new" or both? Sorting it out looks like this:
This larger perspective helps to organize our questions and formulate better ones. For example, now we know to also ask how both new and sustaining activities contribute to growth, and we can imagine that they contribute to other objectives as well.
In fact, a better and higher-level unifying theme for the language of IT's business impacts is the idea of strategies for business enhancement. The importance of this phrasing is that it separates the problem of how something is getting done from why something is getting done.
In the case of the McKinsey survey finding, "growth" is the "why" of what people want to get done. The exact point of interest in McKinsey's findings is that the folks who "run IT" believe that the reason why products should be changed is that it will cause the business to grow. Although it doesn't initially seem like it, the baseline contrast to consider in those findings is the emphasis on products rather than on something else -- not so much about whether development is more important than improvement. What do we do about products, to drive growth?
And yet, development versus improvement is still a big issue, because those are two pretty different types of capabilities. More importantly, they are two different types of responsibilities to charge to the business managers, who either way will look for support from IT. The business, not IT, needs to establish the case for why one or the other offers the better competitive advantage that we can assume will foster growth.
II.
One of the most basic management beliefs is that growth comes from "competitive advantage". This idea means that the company's most significant difference to its customers and partners is preferable to the difference offered by other companies. Furthermore, it means that achieving the particular differentiation must be a sustainable capability if it is to be realized as a critical success factor in the business. Sustainable need not mean "permanent" -- but it does mean consistent throughout the period of need.
The secret in understanding this position, however, is that the "difference" can be of type (characteristics offered) or of amount (supply offered).
Strategically, in the customer's eyes, dissimilar offerings (e.g., products) are different in approach to their needs, while similar offerings are different in quality provided.
Meanwhile, for the provider, what the idea of "advantage" always includes is a gap of one kind or the other between its offering and other companies' offerings. The challenge in business enhancement is how to create and preserve the most opportune kind of gap.
Approach and quality are paths to two different kinds of value, so either one can be a source of advantage. This indicates key ways to think about how products are handled.
Development seems obvious as a way to tackle "approach". A new kind of product is probably the default example of "innovation". Improvement, likewise, seems to be the default for "quality". A product upgrade is a normal example of this.
In both cases, the customer or partner envisions being able to do something "practically" unprecedented due to the particular product; and the distance between the old ability and the new one is the value gap.
In fact, we should appreciate that in both cases, the value gap does not exist primarily because something hadn't been thought of before, but instead because it hadn't been available before. This is why we need an expansive definition of "innovation"...
Meanwhile, what really lies behind the notion that products can drive growth? In reality, "Growth" reflects the market taking advantage of the availability, while "advantage" reflects the supplier finding a way to expose and leverage the gap when other suppliers have not.
Therefore, consider the fact that without changing the product at all, using it in an unprecedented way might generate value where there had not been value before. The context of the product is actually more basic to value than is direct change to the product.
Said differently, if the circumstances are right, new value can be generated without a change to the product. But in turn, this means that the ideal reason for a change to the product is to increase its relevancy to the circumstances into which it is introduced. At the least, we need to master our identification of the circumstances.
III.
Taking a cue from the popular saying that competitive advantage is gained through something that "changes the rules of the game", we can imagine modeling the product's circumstances as the set of perceived rules and/or the apparent system presented by the dynamics of the circumstances.
From there, it's really a question of how we use what the model shows us.
We should assume that the model describes why availability is deficient -- but, that the problem is just an illusion that can be dispelled with one of the following:
- an alternative model (such as a different perspective);
- by closer inspection of the existing one (revealing a "loophole");
- or by high-speed iterative refinement (eliminating interference).
Thinking along those lines, here is a possible breakout of business enhancement options.
Innovation - change the rules and/or system.
Offer Choice - displace the value gap in the current model, by presenting a different model with equal viability. (Transistors versus vacuum tubes; DVDs vs. VHS)
Renovation - reinterpret the rules and/or system.
Offer Resilience - circumvent the value gap in the current model, by combining the boundaries of its given expectations in a different way. (Ali's Rope-a-Dope against George Foreman; Annie Hall's wardrobe)
Optimization – master the rules and/or system.
Offer Quality - close the value gap in the current model, by eliminating barriers to delivering prescribed features. (High-mileage SUVs; synthetic diamonds)
All three of those options can generate a value gap between the supplier and its competitors. But what is equally important is to understand what value gap currently exists in the market (i.e., the mind of the customer or partner), according to the model of the market, and then to choose the best of the three options for attacking it -- Choice, Resilience, and Quality.
In reality, because value is determined by context (the stakeholder's circumstances) more than by anything else, each of those above possibilities might be addressed through either development or improvement -- whichever is more necessary for the targeted context.
But where business growth is the issue, and growth is built on the value, is innovation primarily important as a path to product improvement instead of to development?
Our answer is threefold:
- Growth can be triggered by identifying a new kind of customer. Matching the product to the new "customer-context" might require invention and/or modification. When the customer attributes value mainly to the "new", we are saying that innovation is an effect -- but the approach to that effect might not be innovative...
- Where growth is concerned, product improvement should be seen not just in terms of quality but also relevance and availability. The point is to make the difference that is important at the time to the paying customer. In order to literally make the necessary difference, an innovative approach might be necessary, and there we are thinking of innovation as a cause.
- Distinguishing innovation-as-a-cause from innovation-as-an-effect can profoundly affect the identification of related activities and their priorities. The concept of "whole product", which includes all the issues that surround an item and successfully fit it to the customer, tells us that since customers decide the value, they practically define the idea of the product that is the set of key characteristics to be invented and/or modified.
This warns us that when we are working on operational investment objectives, the most logical generic semantics of "innovation" are that it is one approach to meeting requirements.
Innovative development and maintenance of products in their lifecycle is one level of consideration. Innovation can help meet product requirements at any point in the product lifecycle, from concept to upgrade or retirement.
But as to whether "new products" are more important to business growth than are "improved products", the matter is one of whether business innovation is necessary to meet market requirements.
Posted by Malcolm Ryder at 4:41 PM | Comments (0) | TrackBack