November 1, 2008

What Matters versus What Counts, Encore

Any time you're busy with analysis, construction or movement, you're working on "distinctions". Such efforts generally result in ideas like Part X not Part Y or more vs. less; newer vs. older; or near vs. far (and here vs. there) ... These general differences each go on to be both specified and named with much more precision, for particular situations.

These efforts aren't happening by accident. So we often take it for granted that we should really bother seriously with their outcomes. But this default attitude might be a mistake.

Now that John Bogle's new book Enough is published, one of the fundamental concepts underlying archestra's separated definitions of "value" versus "worth" will be in the spotlight on a multinational basis for a while.

Outside of the book, but to recap archestra notes, there are a number of ways to summarize the working idea involved, such as the three cases below. In all of them, there is the underlying base dynamic that some kind of effort, let's call it work, is producing some measured distinction -- more... better... enough, or whatever -- that didn't exist before the work was done.

But all of the cases point at the need for understanding that unless we know what matters, counting by that measure is always possible but risks being (at least) irrelevant or even (at most) irresponsible.

The Who Cares Case: In this instance, unless a distinction causes us to consider each element it creates in some way different from before, the distinction would not be "significant"... But if the distinction is significant then we say it has value. Still, the value that it has may be irrelevant to some parties, while crucial to other parties. So that same value has a different worth to one party versus the other. The problem, then, is in diligent pursuit of a worthless value.

The Hero Case: in this instance, the usual reference is the old saying "it's not whether you win or lose, it's how you play the game." On that note, first consider the ersatz "Government Employee's Credo" which says:

We the Willing,
Led by the Unknowing,
are doing the Impossible
for the Ungrateful.

We have done so much,
for so long,
with so little,
that we are now Qualified
to do Anything
with Nothing.

The issue being described, by the largely "invisible" public service workforce, is really the issue of character, which is often described as "the quality you choose to exemplify when nobody is watching". This is pointing at the decision to pursue the correct value, especially in the face of substantial opportunity (or worse, pressure such as from politics, greed or fear) to avoid responsibility for pursuing it.

The Do the Right Work versus Do the Work Right Case: In this case, the issue comes up in so-called "performance" measures, where confusion between compliance and progress is rife. The classic examples today are problems such as "learning to test well" versus "acquiring actionable knowledge"; the pre-crash share price of Enron; and of course the ever popular joining up with the legions of "the unhappy rich". Scorekeeping is seemingly inevitable, but there's nothing better than keeping the wrong kind of score to put new clothes on the emperor.

In short, value is what counts, but worth is what matters. Sadly, so much of what appears to be valuable can easily turn out to be worthless.

Posted by Malcolm Ryder at 9:33 AM

August 16, 2008

Why Leading Thinkers Won't Be Thought Leaders

In the ideas game, cutting edge thinkers are typically too far ahead of the approval criteria for implementers, and since "thought leaders" derive their credibility from the probability of implementations occurring, most leading thinkers don't become thought leaders.

To get probability on their side, leading thinkers usually have to choose to think about something that approvers already want to implement.

This certainly distresses the notion of "innovation", except within the sense of "infusing the accepted with newness". But that is not an outright knock on anything; it simply points to a reason for having the notion of "pragmatic innovation".

Much leading thought throughout history has been pretty rapidly dismissed as "impractical", which of course should have meant "unable to be put into practice"... But with 20/20 hindsight we are able to know at least that what is undoable for one outfit is merely inconvenient for another. And yet another may have no resistance to the idea at all and let it rip, wherefore the popular "disruptiveness" tag in the vocabulary of the betting pundits who track ersatz innovators.

Thought leadership is safe. It doesn't carry along with it the stockades, burnings-at-the-stake, smear campaigns, or other proven techniques used to enlighten leading thinkers about their impracticality. In fact, when you get right down to it, thought leaders are "voted into office", more or less like successful consultants, which means that they are the product of followers, not vice versa. This explains why the best-known thought leaders hardly ever have a hardluck story about finding followers...

In the other camp, leading thinkers sprout of their own accord and may carry on for quite some time with no followers at all. Some leading thinkers get lucky: they wind up being befriended either by a thought leader or by an influential producer who can spell "pragmatic" but isn't worried about it for the time being. But conventionally, the bridge between leading thinkers and thought leaders is the kind of engineering called "R&D".

The problem is that if R&D is not funded well enough, then the bridge may not reach all the way across. So the issue mainly comes down to who will sponsor the way that the R&D is adequately funded.

Leading thinkers really are often into fundraising, but a lot of fundraisers aren't any good at it. In a healthy organization that wants to be progressive as well, the case for funding thought leaders is not so hard to make, but the exceptional organization strategizes funding of its leading thinkers.

Posted by Malcolm Ryder at 9:28 AM

July 9, 2008

What's In Your Portfolio?

For providers (instead of consumers), Portfolio Management is a robust and widespread discipline that has meaning which crosses industries and departmental functions. In short, it organizes opportunities deemed to be beneficial into suites of categorized commitments that make the opportunity "actionable" . But portfolio management is most often associated with related efforts that represent either the authorizations of the action, the methods of the action, or the customer of the action -- in effect tracing the run from supply to demand. The efforts articulating this run are, respectively, programs, projects and solutions. One confusing aspect of the way these efforts are supported is that portfolios are mistakenly thought to be components (or "children") of programs and supersets (or "parents") of projects. In fact, that is an erroneous association: instead, as illustrated below, a portfolio is a model that relies on the other three efforts to be actualized. Further, it is the interoperations of these efforts that powers and stabilizes the portfolio.

Why is portfolio management often misplaced amongst these efforts? There are two predominant reasons. For one, practitioners of these efforts often mistake scorecards and dashboards for portfolios. And two, portfolios are often pursued under "performance" requirements (i.e., requirements to increase the rate of return on equity), whereas the actual purpose of a portfolio is to provide a model for the commitment to the opportunity, defining how value will be recognized, not how "value will be generated and captured".

The language that helps to understand where portfolios help goes like this: "what is the benefit of the investment model?" Obviously, one model could be modified or even discontinued and replaced, while still addressing the same apparent opportunity. At the least, this simply acknowledges that two competitors may chase the same prize in different ways, with both making progress (without predicting which one will prevail or even whether one necessarily must). But within the model, other key actions are generally positioned as catalysts or governors -- including things like identifying a distinctive market niche and specially producing for it, tracking the cost of scaling up for the demand level in that niche at a given quality benchmark, and exercizing policies to keep decisions and approvals predictable throughout changing circumstances -- all relative to a certain type of enabling stakeholder who is the primary beneficiary.

Posted by Malcolm Ryder at 9:21 PM

July 5, 2008

Beyond the Spin: Measure What You Give

Does your organization really measure what you give, or does it mainly spin what you measure?

Bruce MacEwen's industry-leading website Adam Smith, Esquire offers an opportunity to gaze into the abyss of metrics and walk away without jumping. In the article
"How High Quality Are Your Lawyers? (How Can You Tell?)"
a close reading shows contrasting business models contesting notions of "performance @ cost" and "value @ quality". In the competitive situation covered, one upstart model strategically goes after a chunk of the opponent's business by bringing customers the performance/cost equation, surprisingly leaving the traditionalist competitor to justify how pricing for that same chunk of business could rationally be based on value/quality. What makes this all interesting, notes MacEwen, is the idea that 99% of what the traditionalist does is what the upstart can steal away.

For those of us who fell out of the old hot habit of saying "disruptive innovation" once a month, this looks like news, but not new news. Still, there are some fresh perspectives worth bringing to this contest.

As seen in the diagram below, the different models above are easily distinguished by what they actually offer, making it inappropriate (for managers) and intellectually dishonest (to customers) for either of them to masquerade as the other. Customers buying into cost/performance are investing in the promise of efficiency, while those buying into value/quality are investing in the promise of reliability.

In MacEwen's article, we are sensitized to the problem that high-prestige value/quality law service firms institutionalize a significant unmanaged cost in the form of "available overachievers", against which these firms then build a hedge by charging premium prices beyond rational evidence of economy for the customer. But what is sold as the justification for this pricing? Their quality?

To be sure of avoiding management posturing, "quality" here must mean only one thing: adherence to the promised appropriateness of the deliverable versus the stated need. Consider that meaning against the question of what it takes to get quality: the value/quality firm proposes that by exceptional capability they eliminate the risk of not getting quality. Therefore, the key variable that this firm actually addresses is unpredictability in the customer's need. As an operational tactic, the value/quality firm hoards talent in order to avoid outsourcing and to presume agility.

But the cost/performance firm basically argues (by demonstration) that legal work requires only competency to sufficiently meet most stated needs -- not a matter of being exceptional but instead simply correct for the task, which eliminates unnecessary effort from the equation right off the bat. Of course this presumes a degree of predictability in scope of need -- and agreement on the scope becomes the main feature.

The discussion above intends no effort to offer a wisened critique of law firm strategy. That said, on the surface there are no truly important differences between marketing professional services in law versus other disciplines where subject matter expertise is the raw material and advice is the product.

Idiosyncracies in the legal services industry will of course provoke distinctive problems and solutions there, yet these are probably driven more by the state of mind of the customer - which is the underlying important difference because it is the competitive arena. Oversimplifying MacEwen's article, the difference between the value/quality firm and the cost/performance firm is that the former sells confidence while the latter sells credibility.

Are there spats? One accusing the other of con games, and the other accusing the first of being incredible? MacEwen's article says yes; but what is further interesting (per evidence of the illustration above) is the opportunity that both types of firms can objectively profile themselves on common ground (efficiency, capability, reliability and acceptability) -- and use those profiles to determine how to optimally segment and grow a shared market. When they don't do that, you can bet it isn't because the customers don't care.

Posted by Malcolm Ryder at 9:59 AM

June 18, 2008

When is "value" not valuable?

A wonderful discussion on Bruce MacEwen's website Adam Smith, Esquire included this challenging note from Paul Lippe about what logic is available to explain the connection between quality and value. While he questions "reputation" as an indication of warm fuzzies like "quality", he also kicks off his note citing the less fuzzy implication that better performance presumes to justify higher price:

"I'd be curious if anyone can come forth with any data to show that in fact (as opposed to in repute) more expensive law firms produce better results, e.g. can it be shown that the investment banks who had the largest losses on their mortgage portfolios were served by lower reputation law firms?

Once this conversation settles down, I will start a separate string (and perhaps a wiki to really pull something together) on what I consider to be the core issue: how can we develop a definition of VALUE in legal services that is meaningful and useful, and not simply measuring inputs like hours spent, diligence of lawyers, law school attended or reputation of the firm. With such a definition of value, I think we could expect that some lawyers' reputations and income would go up, but some would not."

Let's dig into that overall observation by making the undercurrents obvious.

1. "Value" is a label for the significant distinctions attributed to something. "Value" in professional services is 3-dimensional, at minimum. A certain method of co-operation with the customer interacts with a certain type of target outcome at a certain level of effective cost to the customer. The method, outcome, and customer cost are variables, each having a range of acceptability, which in turn allows some universe of acceptable overall impact to sprout from their combination. Now, from that dynamic, some professional service providers are great at being predictably consistent within a smaller universe (range of impacts) that the customer prefers. Some are great at being agile enough to cover a larger universe, keeping up with a customer who has more volatile preferences. And there are several other "flavors" of competency that a service provider may have. Ultimately the provider wants to be paid for the competency, and then be paid even more for a competitively greater level of competency. But the customer wants to pay for customer satisfaction, which is something different. And what mediates the balance of the two things is often just culture. I wouldn't choose to drive a perfectly good Tercel to the White House Christmas Ball, but I could; and I wouldn't choose to drive a Bentley to the 7-Eleven, but I could. In fact, I could use either car to get to either destination.



2. That's all well and good in theory, but in practice the realization of the potential value is hugely affected by the ability of the customer to appropriately and effectively align to it. (There is even plenty of historical evidence that customers sometimes buy based on how they wanna be seen, not based on how they really are.) That reality is the "forest". Relentless pursuit of profit is the bulldozer that strips the forest. Atomic metrical inputs like law schools and hours spent risk merely being "trees", where excessive attention obscures the view of the forest and therefore obscures the proper understanding of the value.
Profit and arbitrary metrics actually must not dominate an analysis of value. Instead, value, properly identified, can be correlated with profits and other interesting measures, and the correlations may be revealing or even exciting.


3. The final point from the above is that it is probably important to use rigor in discussing value, because "value" is not a reliable synonym for other things that deserve their own names, such as "competency" and "satisfaction", and "culture". It's important to know what is actually being taken into consideration and not gloss over things for convenience, because otherwise we find out too late that we're actually sitting on some key coordinate that does not allow us to "get there from here" (i.e., to the necessary value) on time. Meanwhile -- if we would like to elevate the discussion of value from the 3-D space of CustomerCost /Outcome/Method to the 3-D space of Competency/CustomerSat/Culture, while remembering to map the current coordinates in both spaces, well that's fine.

Posted by Malcolm Ryder at 12:17 PM

April 29, 2008

Information Overdrive

Profitability through information management gets fresh illumination and color on Page 8 of the March 2008 issue of BPMStrategies, where Tom Dwyer, VP of research for the Brainstorm Group, walks us through a 21st-century operational blueprint in his article, "Using BPM, BDM, and SOA To Create A More Agile Supply Chain".

In the Brainstorm illustration on that page, the title of the Venn diagram (below) suggests that a blank area in the top center intersection would have been labelled "Actionable Insight".

The question we first posed to Dwyer was: shouldn't this intersection be titled "Policy Compliance" and stand as the third factor, instead of "actionable insight"? One can readily argue that a full reckoning of profit and advantage (the very central theme) must include this risk management dimension, and it proves to be so in actual practice but simply has (typically) more influence as a constraint than as a lever.

In a brief offline interview, Dwyer replied, noting how his system works:

"The point that I was making was to identify three elements that contribute to profitability by optimizing the management and execution of a supply chain... The three I chose were all meant to be levers or enablers to achieve higher profit... [Within those three] the combination – or intersection – of intelligent applications built on a responsive infrastructure and accurate, timely data is what enables 'actionable insight'... I would agree that achieving policy compliance at the lowest cost would definitely impact profits... but I would not choose the constraint of policy compliance over the enabler of actionable insight. "

Interpreted with lots of wiggle room, Dwyer's descriptions in the BPMStrategies article strongly suggest that the role of agile technologies is to generate transparency [largely internal] across the heterogeneous organization -- while the role of integrated real-time data is to generate transparency [largely external] across the organization's multichannel embrace of suppliers and customers. Respectively, albeit oversimplified, this amounts to an organization knowing what to do and how to do it, complemented by knowing what it should be acting on and why. In both cases, timeliness of correct information is critical. But to highlight the most important issue, it is the matter of being actionable that makes being insightful worthwhile.

Additional consideration of Dwyer's formula leads to this summarization: knowledge management, business intelligence and performance management may converge to drive sustainable competitive winning, if you know how to make them converge. We view this as a matter of management information systems being deployed strategically rather than just tactically.

Strategically deployed, the information must allow the enterprise to identify and leverage its positioning, capability, and internal alignment, so as to understand whether revised operational mechanics are appropriate to the actual environment of the organization's practice.

To put this back into the proper original context of Dwyer's discussion: the improved mechanics in question are driven by business process management (BPM), business decision management (BDM) and service oriented architecture (SOA). The strategy challenge is to realize and exploit the correspondence of these approaches with the management of information. For example:

Development: SOA : Process efficiency

Production : BPM : Performance Effectiveness

Research : BDM : Actionable Insight

In a follow-on to this discussion, we could consider the recently published arguments in The New Age of Innovation by C. K. Prahalad and M. S. Krishnan on how global resource networks represent the new supply chain mechanics and how the arguments express the information/mechanics correspondence. For example, in the coverage of the book provided by Information Week's Bob Evans, the key idea noted is that Darwinian forces of customer-centricity require transformation of a supply process into a service, causing the B2B (business-to-business) supply chain linkage to operate more in B2C (business-to-consumer) mode -- which changes the kind of information necessary to manage success. Says Evans: "resources must be shifted continually... " and "processes must be shifted from a focus on millions of customers to the individual."

Punchline: for many enterprises, the prospects of future success resemble hitting a moving target from a moving launchpad. To be able to execute that strategy, there will first need to be a strategy for enabling the execution.

Posted by Malcolm Ryder at 7:09 AM

March 23, 2008

Suddenly, It All Made Sense

Finally, that track that everything went off of, and where to get back on.
For the hi-res view, click here and go full screen or print.

Posted by Malcolm Ryder at 6:42 PM | Comments (0) | TrackBack

I'ma Get Open Source on Yo' Ass

Yahoo joins Google and builds a nonprofit to run OpenSocial so that the OpenSocial developers can have a freezone for exchanging "intellectual property assets" without a moola market. As the Associated Press stated on the Yahoo website, "the idea behind the Google-initiated OpenSocial platform is to create a common coding standard for the ['social tools'] applications so they work on hundreds of Web sites."

We decided to look up the meaning of "tools" to be confident of the richness in the breaking story. Using Yahoo's search engine, we kept coming up with entries like this exemplary one from Dictionary.com:

tool - noun: a person manipulated by another for the latter's own ends

No avoiding the thought that Yahoo would now be Google's tool; so we used Google's "Web Definition" search functon to see what happened. The search on "define tool" ripped in under two seconds to the most appropriate place we can think of, the socially open Urban Dictionary:

1. tool 4455 votes up, 517 votes down

One who lacks the mental capacity to know he is being used. A fool. A cretin. Characterized by low intelligence and/or self-steem.

3. tool 1708 votes up, 443 votes down

someone who is a complete idiot/ one who is used by other people, and usually dosen't even realize it/ someone who can't think for themselves/ an asshat.

People who wear huge logos on their shirts are tools.

This would be a good moment to mention that Google has given up its rights to the OpenSocial branding, as part of the deal. No fools in Gtown central.

Clearly you can be a tool without being a social tool; so how wack it is that three of the most powerful companies in the free world are aggregating the tools. This might make them social, but a better question is this: does going social on a social network make you a tool if you weren't one already?

The sports pages of the conventional business press can be expected to focus on that, backhandedly, in their ongoing coverage of the market strategy smackdown between the G force and MondoSoft. But of course, that's hardly the key story.

The key story will be the one that inevitably will break on the non-profit NPR when someone looking for a job at Google tries to sue Google for using their social site residue as an excuse to not hire them -- residue found on hundreds of websites thanks to the easy proliferation path of OpenSocial.

"So, Mr. Lovitz; how do you explain your involvement in this August 2007... occasion... at the Omega Hip VIP room?"

"Uhh... Acting!"

Posted by Malcolm Ryder at 6:42 PM

February 6, 2008

Proof Politicizes Architecture

Management requires an ongoing accountability for effectiveness. Normally, this accountability is the recognized set of terms for "proof". The accountability includes some model of measures, and while the model may be good or bad, the agreement by interested parties to use the same model makes it the argument that counts the most, even if it is wrong.

The model then represents the ruling hypothesis about effectiveness and, in short, memorializes the belief system in place about how to make progress. This fuels, in turn, a prevailing culture of proof that casts its influence over the several necessary layers of enablement that allow for effectiveness to result. The problem is that this influence may be inappropriate, and to avoid being misled by it we need to know why.

The answer is that the layers of enablement are variables, and the combinations of their variations offers more than one path to effectiveness. To describe an occasion of how effectiveness resulted, we would monitor variations within threshholds on as many as seven layers:

1. Effectiveness is usually a measure of the degree to which an actual outcome matches a desired outcome.
2. But the outcome is a strength of reaction to an impact generated by some agent.
3. The level of impact observed can itself be more or less than expected, or desired, or needed -- and often there is insufficient attention paid to distinguishing the three characteristics (which is what allows the seeming inevitability of unintended consequences).
4. The cause of the observed level of impact is a state or an output.
5. The agent of that state or output is a quality level of process.
6. The runrate of the process consumes inputs.
7. The level of supply of inputs allows the processing.

In this view, the bottom four layers predispose whatever can happen in the top three, which is why the bottom four are so routinely captured by the design of an architecture. But if the architecture is unfamiliar or expensive, the distance between layer 4 and layer 3 is quite large. The burden of proof will fall to the architect to demonstrate bridging the gap.

With some "proof-of-concept", the effort is made, but it must be accompanied by its own "concept-of-proof" that relieves it from the pressure of "measuring up to" the top two layers.

It takes gutsy decision makers, or ones with little to lose, to accept this -- rather than to impose the top-line measure as the justification for considering the architecture at all. Innovators and early adopters accept their proof points at level 4, while laggards are hard pressed to dig below level 1. Consequently, the architecture in question gets positioned on the spectrum somewhere between demonized and championed.

Posted by Malcolm Ryder at 10:37 AM | Comments (0) | TrackBack

November 8, 2007

Knowledge Workers : the wisdom of the Crowd?

No great company can expect to compete without a great stockpile of knowledge and, therefore, knowledge workers. Question: the more k-workers, the merrier, right? Answer: it depends.

The concept of the "knowledge-driven organization" is the strategic rallying flag for businesses bred amongst the Information Society. But that enthusiasm doesn't automatically translate from ambition to reality. Faced with the pressure of quarterly earnings reports, many companies can't decide whether the daunting task of becoming knowledge-driven is a "do" or a "die".

Yet most career hierarchies in an organization -- a.k.a., "success" ladders -- are marketed with the idea of "demonstrated expertise." This ought to mean that careers are the channel by which organizations actually apply the knowledge in residence. In turn, that ought to mean that organizations are already inherently knowledge-driven. If that's the case, today's idea of knowledge management being something new must indicate something that has heretofore been missing. So where's the gap, and why?

The reality is, careers are fundamentally about influence, not knowledge; and most careers are promoted on the basis of power; and typically the power is manifest in "productivity", not "skill", and productivity is measured in outputs, not inputs. Just as athleticism gets you on the team but not necessarily off the bench, for most players the primary key is to fit into a prescribed position -- which translates into measurable productivity good or bad. And as the authors of Mass Career Customization (Harvard Business School Press) describe it, the positions that typically matter in an organization's career tracks are management. Net: when it comes to career success in the organization, the way management itself is prescribed or defined will generally trump knowledge. This puts knowledge workers in the position of needing a strategy to make management repeatedly buy into their knowledge.

Cathleen Benko and Anne Weisberg, two executives of Deloitte, hit the issue from two directions in their book. One direction looks right at productivity through the lens of performance results associated with female executives. The distinctively superior results that the authors find there inspire the question of which female qualities are so naturally more productive. The implication is that innate qualities of women produce higher performance in the corporate ladder. But what evidence of these qualities makes the qualities explicit? Why would these same qualities generally drive corporate success, and can men practice them too?

At this point it's worth pointing out that most careers, really, are built on making one's decisions agreeable, not on intellectual athleticism -- but then again only smart women seem to have big corporate careers. The classic dilemma of these smart women has been, how smart is it to have a life outside of the company if we want a strong career inside the company?

Benko and Weisberg's discussion gives some answers to that, but it still leaves us (intentionally) with the idea that even for those workers with these better female qualities (one notable mention is about "multitasking" as a woman's talent) a corporate ladder is hostile territory, whereas a new and trademarked model -- a lattice -- will promote and keep more women (and likewise men) in a profile that drives business performance. Mass Career Customization (MCC) offers a way to make the important "career" qualities explicit and "tunable" like the different ranges of a graphical sound equalizer. The trick is to get the company to accept these tunings, or profiles, and the book is largely an explanation of how and why the company should.

The issue of knowledgeworkers intersecting organizational structure is the very singular topic of the Benko-Weisberg book. The issue amounts to more than one thing, but the most consistent thing it amounts to is a view of organizational structure managing knowledge workers as assets. One major reference used by the authors is (click here if you want it) the Deloitte Enterprise Value Matrix, and the book's major offering -- MCC and an alternative to the corporate ladder -- is given an ROI argument by being presented through a Deloitte-style framework.

A dispassionate reading of the Deloitte matrix reveals it to be an internal pipelining of assets from resource cost to strategic investment. But there is a story broader than the corporate boundary, which is the connection between the information society and the knowledge-driven organization, and the ecosystem that it generates around and through the company.

In this story, one plot-line is the following path of assumptions, which amounts to traversing the bottom, middle and top rungs of the ordinary hierarchical corporate model for workers' value:

But while the MCC framework promoted in the book finds an alternative to that pattern for the employee, there's an even bigger message for the company itself to draw from the book. As knowledgeworkers, we like to feel that we're selling our intrinsic value to the company, but companies have their own reasons for buying or not.

The bigger value framework posed by the book Mass Career Customization has terms of measurement different from productivity and from the Deloitte matrix, where the employee must determine how much value the employee can have to the company. Instead, as seen below, the key terms are about how the company can have value in the new ecosystem generated by the Supply of Employees, the Demand for Employees, and how they relate to the Information Society supplying them versus the Knowledge-driven Organization using them.

This is probably where the individual knowledge worker can start to really understand the company's motivation to support what the reviewers at Hill and Knowlton called "a career engagement that is adaptable to changing priorities over time."

Posted by Malcolm Ryder at 9:14 PM | Comments (0) | TrackBack

September 29, 2007

Beyond Alignment: Balance?

What actually makes any "Top Ten" list interesting is knowing something, maybe a lot, about what didn't make it onto the list.

Baseline Magazine's Topline section ran their top ten best practices for IT-Business alignment in August, with Robert Hertzberg laying out "core principles" that should help companies get past what he called "messing up this fundamental aspect of I.T. management"... What it said, in its own words, is that "a lot of these [practices] are about structures and processes... but think beyond alignment." Since the article handily lives in full online (and also still in print for the diligent researcher), we can just revisit it here both in summary and with an eye towards what it didn't say.

After a couple of readings, the ten items in the list group into an interesting basic story. The highlight of this story is that the best practices all seem to hinge on meetings and facetime, documentation, and/or interaction and teaming. Put simply, without communications, most of the practices don't happen or don't matter. But there's more. In summary fashion, here's how the high-level dynamic stacks up: communications mediates between what we care about and who cares. More specifically, as shown in the pictures below, the core ten practices list advises to model and measure commitments (what we care about), and to organize support and awareness (who cares).

Looking at the themes represented in the core ten list, it turns out that this means managing risk, strategy and ROI on the one hand, and managing projects, relationships and incentive on the other. So what was left out of the list? It's not so much a matter of line items as it is a matter of further identifying what must be done about what made the list. Curiously, the Baseline list, claiming to be largely about structures and process, didn't use any of many key terms that one might expect in a discussion aimed at I.T. managers. In the images below, we can see the general correspondence of the themes found in Hertzberg's list (upper image) to the way I.T. managers might ordinarily implement structures and processes to support the core practices (lower):

Given this "big picture", the most interesting and maybe disturbing omission in the original Hertzberg list was any clear reference to the roles of managed knowledge and of managed I.T. architecture as factors of alignment between the Business and I.T. We can only speculate whether this is some kind of sign of the times, or instead is meant to be implied by whatever lies within the list's advised "thinking beyond alignment".

But as suggested in the illustrations above, alignment itself may be something needing a degree of redefinition. What if the key to preventing the "messing up" is first and foremost about balance? Namely, balance between the attention to what we care about (the left side of the pictures) and the attention to who cares. For example, many practices aim to "optimize" efforts within a single area, presuming that the results will be valuable in some absolute way. But whenever the energy given to the issues on one side of the picture aren't matched by corresponding emphasis to issues on the other side, it is arguably unreasonable to expect good things to happen, and it is easy to expect counterproductive exaggerations of some kind to occur instead.

Posted by Malcolm Ryder at 11:14 AM | Comments (0) | TrackBack

September 21, 2007

CIO 2.0 part Two

When Gartner Group published its Resource Synchronization Chart at ITXpo 2000 seven years ago, it identified a 4-level maturity model that identified the highest level of maturity -- System Synchronization -- in terms of a "business unit's view of IT Value" in association with "IT Asset Management" and "Operations Management".

Seven years later, it may be the case that only some large interesting companies, not the numerous smaller or just plain boring ones, are going to be recognized as having reached system synchronization.

What is the BU's view of IT value at this synchronization level? "Facilitate Business Value Creation". When we look at what "value" has to mean, it almost always means "a distinction with a difference", as opposed to the popularly known opposite, a distinction without a difference. A proper understanding of this will mean not just glamourizing year-over-year growth, but equally well recognizing companies that successfully maintain themselves where others can't even play.

Value comes in the difference that a distinction makes, while the distinction itself comes from actions taken. Actions are the source of alternatives, contrasts, innovations, or namely all the things generally associated with well-executed strategies that provide a competitive (survival) advantage in a business ecosystem. Action is essentially labor, and technology is essentially labor enhancement. So the question of aligning technology and business has never been complicated, not for the Pony Express and not for Amazon.com, but also not for dentists and not for a pro baseball club.

Politics and economics in implementation are where most of the complication typically arises, but with companies that mainly play in markets actually created by superior labor capabilities, a refreshing absence of confusion about IT can exist. The real challenge is for those companies to know that they are doing the right work -- literally, to know that they are making the right difference.

Except in some Darwinian sense, it does not logically follow that our CIO 2.0 is supposed to know what the right difference is. If that were the case, we wouldn't need chief marketing officers. But where does "the right difference" come from, anyway? From the perspective of someone who both cares about the distinction made by the labor and who can reward well enough. What is more sensible, then, is that all executives who can articulate how labor and opportunity are related to serve the interest of a market should be responsible for organizing the enterprise appropriately. The responsibility is what makes them executives or chiefs. There is no demonstrated reason why CIO 1.0 couldn't be qualified to do that. But there has always been plenty of evidence as to why CIO 1.0 has not been allowed to do that, if not at the hiring gate, then afterwards. The question is, why is that going to change now?

Meanwhile, we just can't know how many great "marketers" have been undermined by inadequate labor. As for convergence, well, rebranding good ideas is important because it gets fresh audiences paying attention. But the biggest problem to solve in the business-IT relationship is not going to go away until organizations learn to prefer "resource" accounting over "property" accounting. And what is a resource? An asset with a job to do. Guess what happens when bad assignments are made.

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CIO 2.0 part One

Faisal Hoque, father of the Business Technology Management Institute, talks about the issue of solving the right problem instead of the wrong one in the CIO Insight article "Convergence, Yes; Alignment, No." As CIO Insight put it, Hoque noted that "rather than a goal, alignment is a stage on a journey to a more complete merging of IT and business that he calls convergence." With convergence, Hoque explains, "The business model is so intertwined with IT that there's no separate orientation."

What are the key features of this view for the top IT manager, for the CIO of the future? The same as for the CIO of now.

The first is the working definition of IT, which must position IT as business technology. This means technology of the type of business, not technology owned by the corporation of business. Here is a brief primer on business technology:

The second key feature is the working definition of "management". In the abstract, this has to mean "drive and authorize all key decisions about the utility value of the phenomenon at hand throughout its lifecycle." Naturally, the scope of this responsibility may involve or even necessitate collaboration and power sharing, and this means that a model of value-generation must exist to which all can subscribe. If this is to occur with IT, the concept of "IT" must be "operationalized":

From there, the third key feature, the point of it all, is to apply the operational potential to the business needs: this is how the IT model becomes the "dynamic" of the business model.

dynamic

1817, as a term in philosophy; 1827 in the sense "force producing motion," from Fr. dynamique (1762), from Ger. dynamisch, introduced by Leibnitz 1691 from Gk. dynamikos "powerful," from dynamis "power," from dynasthai "be able to have power," of unknown origin. The fig. sense of "active, potent, energetic" is from 1856. Dynamics as a branch of physics was in use from 1788.

Online Etymology Dictionary, © 2001 Douglas Harper

Given the numerous points at which IT could be mapped to needs, it isn't hard to appreciate that the current state of a business operation may have to go through significant re-modeling (transformation) to base the business model itself on the influences of IT. Speaking of that, the evolution of IT's realization as a business enabler actually is a goal, not just a stage. But the sneaky punchline to this is that the business may not need to be its own "IT-enablement" provider. Fusing the IT model and the business model (value management) is not the same problem to solve as the problem of establishing competency in the role of IT provider (performance management).

(This discussion continues in the follow-on article CIO 2.0 part Two.)

Image credits:
http://www.how-to-draw-and-paint.com/images/BasicHorse3.jpg
http://www.chss.montclair.edu/~pererat/7751.jpg
http://www.tsc-global.com/index1.html

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September 19, 2007

Make IT a Business Strategy

In the CIO Magazine article Let the Business Drive IT Strategy, the visibility of many views on strategy helps to paint the map so that people concerned with IT strategy management can see where their relative starting points are, not just their goals.

But in that map, how did we wind up in so many different starting places that we decided to call by the same name?

Here is a 50,000 foot high view to consider. What does "IT Strategy" mean? Strategy for what? The candidates are found in two dimensions.

First - what is used:
- Services
- Resources
- Information

Second - how it is organized for use:
- Provision
- Architecture
- Property (assets)

Make a 3x3 matrix of the above, identify what needs to happen in each cell and who needs to care (owner, operator, consumer), and then on the business side at least everyone can see what they are trying to talk about.

With that view, it then becomes meaningful to talk about the business's ideas of performance (goals), value (impacts), and risk (policy and culture) -- with the objective of assigning people to be responsible for them and then investing to make those people successful.

This isn't about "succeeding with a strategy"... it is about actually managing with a strategy.

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April 28, 2007

Knowledge as Capital

The McKinsey gang examined corporate performance on two fundamental indicators of sustained competitive advantage—revenue growth and profitability—over an 11-year period from 1994 to 2004. Their finding:

"...we found that ...nine companies had higher market-to-book ratios than their competitors did. (The M/B ratio is a measure of corporate performance that compares a company’s market cap with its book value.)...the top nine performers strongly preferred organic growth: they made few acquisitions and divestitures when compared with other companies in their industries...
In our view, their ability to generate value from knowledge-intensive intangibles (such as copyrights, trade secrets, or strong brands) represents a good starting point for further exploration of their superior performance."

Just connecting the dots.

To connect them yourself, log in at The Elusive Goal of Corporate Outperformance -- McKinsey Quarterly 28 April 2007

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March 24, 2007

Big Brass versus Crystal

Some balls are easier to juggle than others. But is that stance any way to run a company?

Something we certainly think we'll have to read is Michael Raynor's book The Strategy Paradox. Why? Because, as Deloitte puts it in their website's introduction to the book, "Management orthodoxy demands that strategies be built on commitments, which leaves no alternative to basing today’s decisions on assumptions about an unknowable future." This observation quickly drives down to the more important point they cite from Raynor: "The board should not evaluate the chief executive officer (CEO) based on the company’s performance but instead on the firm’s strategic risk profile..."

Since a review of the book is not where these paragraphs are going (yet), please visit Deloitte or even Raynor himself. What the heck: skip all that and read the book.

Before I read it, I'll turn my cards face up: if Raynor's book winds up telling me something other than that enterprise architecture, theory of constraints, and real options analysis is what's needed (and we assume it should), then I'll probably talk about it again. Maybe here, like, you know, in the next paragraph that could follow this one. Why not. While we're at it, let's go dust off our books about Royal Dutch Shell, do 'em again, and come back in a while.

For those of you with not that much time on your hands, a suitable companion piece is still available from Strategy+Business thanks to our buddies at Booz Allen, whose website offered this bit last year (as announced through emails to the faithful). I'm going to assume that advertising this for them will leave me in friendly territory vis-a-vis their copyright on what they sent, shown here for your convenience:

Sharpening Your Business Acumen
by Ram Charan

Dallas, March 30, 2006 -- The ability to see the big picture, anticipate external trends, and adapt accordingly requires plenty of practice, but can create unique moneymaking opportunities. It requires executives to transcend old rules of thumb and take strategic risks that don't follow precedent; to envision the effects of change before change happens. Here's a six-step thinking process to help anticipate external influences in the marketplace and craft smart strategies accordingly.To read the full article:

http://www.strategy-business.com/enewsarticle/enews033006

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March 18, 2007

Personal Value, Company Worth

Despite the buzzing about organizational flatness, it is still customary to think hierarchically about the relative importance of individuals in the corporate workforce. This is continuously fortified by the dual notions of "promotions" and "tiers" that characterize most organization charts.

The attendant mythology is that if people are higher up the chart, then they are more important. More factually, there's little debate that more organizational power resides at higher altitudes -- but what must not be lost on everyone, meritocracy notwithstanding, is that even higher power is not the same as higher performance.

Org charts are just a sketch, with limited ability to explain three key issues.

1. How does the individual decide what kind of contribution to make? Does he want to be influential or just billable? Particularly critical, or broadly resourceful? What does it take, and is it possible in his workplace?

2. Conversely, when a particular company initiative or problem rolls around, what kind of value is most needed from the individual, and therefore what individual has the appropriate profile to meet the need?

3. Finally, is the company really cultivating the potential for getting the contributions that it most needs -- or is it just coasting on organizational conventions?

From the standpoint of performance, not only can higher ranking individuals be objectively evaluated in the same way that lower ranking ones are, but every individual actually thinks in the same terms to decide what kind of value he or she is really going to bring to the organization's performance. For everyone, there are the same two steps: they make decisions about modeling themselves, and they align the personal model with the circumstances. The effects are not uniform -- not for one person over time, nor for different people in the same moment. But what actually gets done by the organization is pretty much the consequence of all these individual decisions pitted or adapted against the day's environment.

To see how the self-model fits in at work, first walk through the self-modeling picture:

Here, within the main oval, we see the four key reference terms that the individual uses to describe their predisposition coming into the work situation: Billable, Critical, Resourceful, and Influential.

It's fair to see these terms as multiple "ambitions" occurring simultaneously but with varying degrees of strength; thus at any time the individual has a "profile", which may fluctuate from one time to the next.

Some individuals fluctuate more than others. But more to the point, there are surrounding factors that encourage or inhibit the person's profile, and that is how the rest of the picture comes in.

From the management viewpoint, the objective notion of the individual's value is simple, and twofold, in summary:

In effect, this is what the company is trying to do with or get from the individual.

When evaluation time rolls around, the question is largely one of whether the individual has committed to these two conversions as much as the company wanted him to. (In our research, we've noted that most observers initially believe the terms provided here are mis-ordered, and that the conversions should be "skills into quality" and "time into revenue". But, through most simple ROI analyses for intellectual capital and capacity management -- mandatory stuff for an enterprise -- that belief is quickly shown to be misguided.)

So, to understand why any success was possible or achieved in the person's alignment with the company's wish, it is necessary to see how the person's self-modeling fits into the company's model.

As arranged below, the remainder of the terms from our first illustration are indicators of that company model. They bring up the points at which the company makes things more or less hospitable through making investments that resolve key resources and constraints.

If the company doesn't make the investments, then the constraints do not enhance; instead, they become "restraints" -- and the resources (people) cannot be effectively heightened in value.

Roughly speaking, that final illustration compares "what kind of workplace" is available (worker in context) with "what kind of company" is there (work in context). Not coincidentally, these are the two key perspectives that the worker intuitively brings to the situation, greatly affecting his motivation (at least) or ambition (at most).

Back in the initial illustration above, the interdependencies involved in that comparison of workplace and company are laid out along the main oval, where they can be individually inspected.

Companies often make defacto decisions regarding those interdependencies that seem like no-brainers but may really be value-inhibiting. For example, assignments are an ordinary feature of the organization's workday. But assignments link skills to time and literally position the worker in the workflows. Thus, the potential of the business process is critically afffected; meanwhile, the logic of the process design is either a smart reason to invoke the worker or a not-so-smart reason. Bad processes can easily mis-position (i.e., waste) a worker, just as a bad worker can make a process ineffective. Management needs them both to be "good".

Likewise, it isn't hard to understand that overworking the person (in the "billable" link of time and revenue) lowers morale, or that training (education) would beneficially link skills and the quality wanted from the use of time.

Similarly, other "ordinary" aspects of the company will predictably map to the dynamics underlying value-capture. Depending on the point-of-view, these aspects may be recognized through other names or circumstances. For example, in our illustration's set of work-in-context constraints:
- Policy = "governance"
- Expertise = "intellectual property"
- Process = "organization" (dynamic, not static)
- Capacity = "goodwill" (of the stakeholders)

This helps us envision what impacts are really being obtained from things we know we're already thinking about or doing. But as arranged in the original oval, the most interesting part of the dynamics shown may be their bilateral nature. For example, just as education should be derived from investing in expertise, the picture asserts that strategy execution should be cultivated from policy (governance) -- certainly not only the reverse.

It is easy to recognize that the corporate valuation relies on those very issues of policy, capacity, etc. But now it is also easy to see how they are not just "performance results" but instead actually success factors -- due to the need for the company to invest in them as constraints to be managed around workers.

By tracking decisions and actions about the key factors illustrated above, we get answers to performance questions that may not have been apparent before.

Posted by Malcolm Ryder at 7:28 AM | Comments (1) | TrackBack

February 1, 2007

I.T. Without ITIL

The most exotic thing about information technology has always been terminology. It is the key to the scientific success of the field. But quite naturally, the complexity of the science also has meant that the terminology works steadily against any increase of ease in the field's practical management. More and more cats pop up that need to be herded. The net result -- a nightmare of semantics -- caused what the Gartner industry analysts noted over five years ago: the overwhelming majority of cost in I.T. comes from not technology complexity, but management complexity.

Perhaps that's why it is that in these last three years or so, the I.T. Infrastructure Library, or ITIL as it is commonly now known, gained traction with the kind of momentum carrying an industry standard. ITIL describes a huge range of management processes using a vocabulary of enormous logical consistency, which can make the semantics of management suddenly unambiguous despite IT's complexity.

At the same time, the sheer scope of ITIL is fear-inducing. Many of those who would use it fall into one of two groups: those who look for evidence that there is actual practical import to sticking the toe in the bathwater; or, those who religiously convert. Analysts like Forrester Research say that the former group is about 60% of the gang, while about 10% are fully pious and immersed, leaving the rest either just thinking it over or dabbling.

On the spectrum between the larger and smaller group, the larger keeps its practitioners cordoned off (but not quarantined) in a swim lane... handling the semantics of ITIL as another special expertise hoped to achieve some natural ascendency, the same way an innovation outstrips or obsoletes legacies. The smaller "immersion" group swims the rough open waters of large-scale revolutionary change in culture. Because ITIL is primarily documentation, there is not a real threat that either approach will alter it's ability to provide consistent guidance. But giving good advice is not the same as causing it to be followed. The top obstacle to following ITIL, ironically, is still confusion. Why is this the case? Simply put, corporate IT groups are forced to move at a pace that is much faster than their ability to absorb ITIL, and they are loathe to risk, much less give up, hard-won benefits from pre-ITIL practices. Yet behind those benefits, they often don't have an effective overview of where they already are. Thus, following along ITIL's paths, they constantly run into forks in the road that don't offer the obvious correct choice. Net: ITIL is a maze.To get over this hump, they still need a way to see, in short order, how they can connect the dots between their current practices and ITIL's.

Following suit, the perspective represented in the picture below simplifies the identification of the pre-ITIL circumstances, locating the starting line for a move to ITIL without the threats of disruption or of time running out.

The key assumptions in this picture are as follows.

First, no one really cares about I.T. except for whether it is perceived and proved to be useful.
Second, there are only two major points of view on that utility: the lifecycle of items composing the IT infrastructure; and, the production that composes IT operations.
Third, all of the IT management, whether in infrastructure or in operations, is essentially about two things: how things are (i.e., states), and how things happen (i.e., transactions).
Those three assumptions, when aligned as shown, organize every critical aspect of driving value from IT utilization. From this point, the rest is a matter of additional levels of detail.

Since management is popularly understood to be impossible without measurement, and since measurement can't happen without semantics, it is hugely important that the perspective drawn so far does not rely on confusing semantics and meanwhile shows analysis as an ordinary, not exotic, activity covering the field.

Within the general framework, four main phenomena surface as the major management subjects. Driving these down into daily practices makes sense under the assumption that the point of the practices is to establish value in the utilization of the info technology involved.

The utilization is established on two fronts. One is to give form to the actual information technology that users can ultimately access and exploit; this is what is called "IT Services". The other is to give form to the mechanism that creates and sustains that access and exploitation; this is what is called "Support Services".

In an unconventional but easily proved distinction, IT Services is about the provision of the IT configurations; whereas, Support Services is about linking the IT to usage requirements, as systems for use. (These systems are essentially and primarily logical, and secondarily take on physical form as the peculiarities of the company hosting them might allow them to at any time.) Usually, in effect, it's the difference between supply and demand, between service level management and service level agreement, and so forth.

As seen in the picture, the two kinds of services cover (i.e., attend to) the four major subjects in a certain way.The types of services relate to each other because they work on the same subjects. But the services differ from each other in what it is about the subjects that are the key points of their respective concern and influence. These key points are added into the framework's quadrants to clarify the high-level of analytic detail that really matters for the services. This level of detail is the one that initially accounts for the co-existence and co-influence of the two generic types of services (IT and Support).

For followers of ITIL: the difference between IT Service and Support Service is not indicated in the normal ITIL vocabulary. Instead, the generic concept of "management processes" proxies Support services that bring IT services to the user or customer. ITIL largely provides a taxonomy of those management processes, and most observers first engage the taxonomy of "delivering" IT Services (defining and developing them) versus "supporting" IT Services (maintaining and optimizing them). But at least half of the trick in adopting ITIL is to orchestrate its management processes into standing "Support Services" as described in this discussion's framework, which is oriented towards managing the value of utilization.

Posted by Malcolm Ryder at 4:50 AM | Comments (0)

January 21, 2007

ROI and The Rush Job

or, The Productivity of Production

Years ago, the only way to get custom-printed photos on a rush basis was either with a LOT of money -- or NOT a lot, through a pretty darn good photographer friend, emphasis on the friend. Smelling an opportunity, and not pld enough to eschew self-abuse, I broke into a really crowded field of commercial photographers by offering the unthinkable: "fast, cheap, or pretty: pick any three." For six months, I didn't charge premium or "rush" prices: I just didn't sleep, and I custom-printed photos for delivery by rush deadlines.

Don't try this trick at home! It jump-started my business, but the six months cost me a couple of years of longevity that Science says I won't get back. A negative ROI. In general, production organizations know this could happen to them, too, and they sanely stick to the rules: "fast, cheap or pretty; pick any TWO."

The problem is that customers sometimes don't care about the rules, especially if the customers hold the production organization captive. A typical example of this is an IT organization in a corporate setting. Although it seems irrational, IT routinely has to solve the dilemma of offering all three outcomes.

Susan Conway, in her article Keeping the Think Factory Humming in Optimize Magazine's January issue, actually offers a fairly straightforward idea -- that getting cheaper (through tools) allows more effort to getting faster (reducing cycle time) and thus becoming prettier (through enabling continuous improvement of quality). Running in that direction, from tools up to quality, there is an increasing "enablement" applied layer after layer to the circumstances that must generate value from production.

Although she calls that value "efficiency", it is both more than and different from that; and the deceptive linearity of her run-up doesn't point at how those layers, or links in the chain, actually get connected: namely, simultaneously, not sequentially. It's not the "links" themselves that make the difference, it's the connections between them that do -- the linkage.

For clarifying why this is true, an important reference to have is Goldratt's Theory of Constraints -- in which the notion of a weak link is explored as an effect, not as a cause. We make the link weak by what we do around it; it is not inherently so. Likewise, we make the link stronger. This prevents us from taking the "linking" effort for granted. More to my point, it calls out the simultaneity that must be addressed: all the links matter at the same time...

Let's take that idea to heart. As a producer, how do you do Fast, Cheap and Pretty all at once?

We might make a new Pontiac Solstice, which shows that it can be done. But the usual situation is that each target characteristic can influence the production differently and even dominantly versus the others; so it matters that we know what their co-existence really demands.

Typically, we feel that we already know what each individual characteristic is about, but how about their combinations?

For example, what's an exemplary instance of Fast plus Pretty? How about Muhammed Ali's left jab. Effectiveness, wrought from precision, which was wrought from discipline, which was wrought from training. It's the precision that is its key distinction -- the organizing principle that creates the linkage, and its value, between Fast and Pretty.

And away we go:

Fast + Pretty? the left jab. Precision is the secret. Relies on discipline (from the training).

Pretty + Cheap? the sari. Elegance is the result. Exploits pattern (from the technique for folding or wrapping).

Cheap + Fast? the omelette. Balanced to the occasion. Leverages the facility (of a standing "factory" -- the hot skillet).

In other words, if we knew we needed both fast and pretty, "precision" is a good aspect to pursue, and to get there, we're going to need the discipline of having been trained into consistency. And whether wrapping a sari, or doing math equations or calligraphy, the elegance of "less is more" relies on drawing the optimal pattern through technique. What about that omelette? Balanced, neither too much nor not enough for the appetite, you grow it quickly from very little, on the already hot pan. While that pan is hot, you just keep crankin' 'em out.

But back to bigger work, what is production up against? The point is to get one deliverable from combining all three characteristics. Like that incredible car from Pontiac. The prerequisite is you'll have to be organized to pull it off.

This illustration calls out the three key constraints in managing the connections of the production -- design, controls, and sources. They are fit and related amongst the initial objectives to be met.

For example, when we talk about "sourcing", we're concerned with the scale of production that we need from the process, and how much that is going to cost. We'll source production from a factory that gives us the desired economy of scale from its process.

The model also looks more directly at what we think each initial characteristic feature is, here more carefully identified. For example, "pretty" typically means that the production output has high compliance to specifications. Or when we say "fast", what we're usually talking about is how quickly the product can be provided every time it is requested.

And earlier, the path to noticing standardization was from training that creates "discipline". But now that we've noticed standardization and its place as a principle, we can recognize and include other key influences that are related to it, such as policies.

Pulling these constraints and principles more to the foreground, the following picture shows how Archestra's ActiveROI model similarly organizes management in IT production organizations to drive productivity for the business it supports. As seen here, ActiveROI describes the systemic relationship of the constraints of design, controls and sources through implementation of architecture (design), portfolios (sources), and policies (controls). Investing in this systemic management practice puts the organization on the footing for not just efficiency (a small piece of the puzzle) but for holistic generation of business value.

[See more on ActiveROI by searching Archestra. ActiveROI, originated by Malcolm Ryder and commercially developed at Renovance LLP, pops up in various disguises in your Google or Yahoo search results, but it should not be confused with marketing companies, other persons, or machine intelligence projects that like the name so much they use it too. For updates to the model, and for a list of its authorized promoters, search the Archestra archives exclusively, and/or contact M. Ryder at Archestra.]

Posted by Malcolm Ryder at 11:56 AM | Comments (0) | TrackBack

October 13, 2006

How to measure IT's contribution

Flashback from CFO: Magazine for Senior Financial Executives, Spring, 2005 by Malcolm Ryder

Regarding the notion of estimating how much revenue to allocate to every kind of corporate resource in proportion to each respective resource's contribution ("Revenue Is What Matters," Letters, Fall 2004), I have to wonder what purpose there is to that.

Not being an economist myself allows, perhaps, my view on this matter to spawn a useful question. Namely, without a definition of "contribution" there is no logic to the presumed "proportion," and don't we already know from real life that contribution means impact and that impact is defined by the system of measurement?

What most of us in IT and everyone in science have learned is that we can't talk about impact without talking about complexity, which means talking about interdependencies and frequently about the obscure order found within apparent chaos. If at Company X a $50 spreadsheet program in the hands of a $100K--per-year employee results in a discovery that generates $10 million in revenue, that's a great trick. And yet even if Company Y copies the same set of "resources," it probably won't get the same results.

The reason why accountants have not set or proved the so-called value of IT is because value is not generated by resources but instead by dynamics, and accountants don't measure dynamics. I agree that what is needed is a look at the answers already found in other disciplines.

For example, meteorologists measure systems and motion, such as high pressure, low pressure, and temperature, and from that they can attribute daily and even hourly impact to real causes instead of merely to gases. Likewise, coaches who actually know how to coach can tell you that the influence of the most talented player on the team can turn the team into a loser, where a much lesser talent can influence the team to win and so gets put on the field.
So the key is to break free of the notion of "resource" that is rooted in a concern for corporate property and learn to see that the elemental dynamics of situations are the real resources.

For most companies, the closest they come to this awareness now is their understanding that some company assets, like people and technology, must service something that they call processes, with processes representing the company's hypotheses of desirable dynamics. Logically, then, the process is the closest they come to defining the resource that should claim some of the credit for the revenue. What does the process cost, and how well is it managed?

Malcolm Ryder/Chief Strategist/Renovance LLP/
COPYRIGHT 2005 CFO Publishing Corp.
COPYRIGHT 2005 Gale Group

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September 29, 2006

The difference between Value and Valuable

In our management comfort zones, if we're not in the skeptic's cart, we'll usually associate "strategic" with "valuable" in an almost automatic reaction, with the additional thought of "higher" value coming along for the ride. It just feels like the enormous discipline required by strategy makes the higher value of strategy harder to come by than non-strategic value...

But the big news is that value doesn't come from strategy. Instead, value comes from execution. The essence of value is that it is a difference with a significance -- and that difference doesn't just pop up on its own.

Strategy might define what will be considered "significant" about a difference, and of course that's the real job of strategy: to identify and promote pursuit of what is most important. But literally making that difference occur is what execution is all about.

Thus, while the priorities and positions set by strategy are what we'd consider to be "valuable", that simply means that with them we have a reasonable hypothesis of the potential for value to be gained. The value is not actually there, however, until execution draws it out from real circumstances.

So what are we saying that is not already obvious? Strategy is not action. Strategy, as a plan or an idea, is the money hidden under the mattress while the markets swirl around. Everyone can guess at how valuable a strategy might be, but since real value comes from execution, the irony is that the promised value of strategy generally competes with the real value of execution.

Judging from recent popular management literature, it would seem that strategy loses this competition more often than not. But this is because we tend to discredit the importance of a strategy that must keep changing in order to stay competitive with the outcomes of execution. If the strategy "had it figured out" but then had to change, then wasn't the strategy wrong? And won't it be wrong again if it has to change again?

Think through this, however, and what surfaces is that strategy is not a static reference but instead a dynamic mentality. Like a blueprint, it is essentially a set of design principles iterated for a target moment and location of delivery. The moment and location can change, resulting in a new blueprint while the principles remain the same.

We accept that these days we usually must work against moving targets, but that simply means that we have to have means of deciding in advance what our positions and operations should probably be in the foreseable future. Charting these P's and O's, and then navigating according to the chart, covers a lot of the discipline and commitment in strategy, leaving execution with the job of producing the current movement while also protecting the opportunity for the subsequent ones.

So, while we should measure execution according to that "productivity", we should remember to measure strategy by the strength of the logic with which it identifies leverage in pursuit.

Posted by Malcolm Ryder at 7:31 PM | Comments (1) | TrackBack

August 25, 2006

What Matters versus What Counts

How do you decide the "most valuable"... the "best"... the "most significant" ??

Why Andre Agassi is on my list.

http://msn.foxsports.com/tennis/story/5892448?CMP=OTC-K9B140813162&ATT=199

When determining and understanding "value", it's all about what kind of difference the observed difference makes.

Posted by Malcolm Ryder at 1:44 PM | Comments (0) | TrackBack

July 4, 2006

Business Value in IT Strategy

This picture describes the way that IT planning perspectives share the responsibility for discovering, integrating and balancing business priorities stemming from financial, environmental and operational requirements.

Strategists should consider, for example, how to place opportunity versus risks, resources versus capacity, and architectures versus agility.

These placements will then call attention to the nearby surrounding influences of real options, change management and economy of scope -- influences on analysis and design efforts in developing strategy with the apparently available opportunities, resources and architectures.

Those influences set the perspectives from which opportunities, resources and architectures are considered. The picture shows that they are related perspectives. The relationships feature overlapping perspectives, such as "risk mitigation" being handled by both real options and change management.

As a result of organizing within these influential relationships, strategic positions can enjoy inherently systemic support from the interplay of financial, environmental and operational events. This alignment of support makes the positions more sustainable, allowing the business to use them as a reliable foundation for its ongoing execution.

Posted by Malcolm Ryder at 11:02 AM | Comments (0) | TrackBack

June 18, 2006

Operations Value versus Operations Performance

To say the least, operations are a lot of costly effort. Then, because we're concerned about what our expended effort is worth, everyone wants to measure value and measure performance.

But not many bother to distinguish the two well enough.

The point of measuring performance is to determine what one's effort is worth. In fact, we'll often think and say that if performance is good then the effort was "valuable". But it doesn't necessarily follow that the effort wasn't valuable if performance was not good. Why not?

Don't confuse "value" and worth: instead, think of worth as the target impact of the overall effort -- or in other words the goal.

Meanwhile:
- Performance indicates how close to the goal your effort got you;
- Value indicates what was effective about how the effort got you there.

The danger in confusing the two is that steps taken to "correct" or "enhance" previous results can too easily turn into solving the wrong problem. For example, in the name of getting better results, changing value doesn't necessarily change performance -- nor vice-versa.

To choose and make the right kind of change, and to know how it will finally help, each kind of change -- value or performance -- must be accurately conceived, and their relationship to each other must also be defined.

I.

First, consider value. Put simply, value within operations is identified in the production of a significant difference.

Ordinarily, we think that "significant" means that things didn't just get different but that they got closer to what is desired. But more strictly speaking, any difference that alters the dynamics of conditions from what they had previously been must be recognized as "significant". In that case, determining value means understanding the meaning of whatever actual difference has occurred -- whether the meaning is desirable or not.

One of the main reasons to recognize different roles in organizations is to be able to focus on different kinds of value being created. For example:
- Leaders see themselves as creating culture.
- Managers see themselves as creating viability.
- Implementers see themselves as creating capability.

So they each have different ideas about value -- and also possibly about performance. More importantly, these different approaches have to be leveraged in a way that actually does improve overall performance, which means there must be some model or "performance logic" that explains and reconciles how the various approaches get the job done.

Let's take the example of what a business wants from an IT organization. To understand this relationship properly, it must be recognized that a business person who has responsibility for leadership, management or implementation is in the role of a "leader", "manager" or "implementer". Where IT is concerned:
- Leaders want IT to provide advantages through innovation and cost-reduction.
- Managers, serving the leaders, want complexity and risk minimized, and availability maximized.
- Implementers want customizations and configurations to be prefigured and completed, not ad hoc and hurried.

And to fully understand that state of affairs, it must be recognized that ideally an IT person can take on all of these roles as well. What should happen is that in sharing a given role, the business person and the IT person should divide the labor called for within that role, and conduct the labor to make the appropriate kind of difference with that role.

The division of labors starts with clarity on what the issues are to which each role should be primarily attentive.
- Leaders see change in terms of Opportunities and Threats.
- Managers see change in terms of Strengths and Weaknesses.
- Implementers see change in terms of Norms and Exceptions.

With the issues distinguished by role, a given role's two main viewpoints on responding to them are as a Decider and as an Enabler.

II.

In the Business/IT example, it is common that the Business takes the Decider view and IT takes the Enabler view. But -- to cite an instructive case in cooperative role-fulfillment -- these days IT executives are usually strongly urged to acquire the ability to understand things from both points of view, and to exploit that ability within their responsibility and domain expertise for managing IT.

In pursuit of goals (i.e., worth), everyone wants change to be positively valuable instead of indifferent or destructive. In the normal business context, recognized value is associated with the ability to positively influence the customer's acceptance of what you want to offer. For this purpose, the roles align with each other to systemically (not systematically) address each other's requirements and leverage each other's contributions. Leaders look at the market and respond to it; but Managers respond to the leaders, and Implementers respond to the managers. In the flow of requirements from leaders to implementers, this alignment -- or better, coherence -- can draft progress towards the goal. The point is that each role makes a kind of difference that nurtures the effort of the role next in line. In the following illustration, we go further and argue for a fully interconnected set of relationships.

Given this "closed loop" view, the final link of alignment would appear to be that Leaders will also look to Implementers in some way, not just to the market. Superficially, it's hard to argue against that link being "evaluation" or "assessment" -- that is, leaders taking the time to decide whether the implementers (were able to ) have realized what is needed.

But based on long-standing arguments in the field, most organizations need a better understanding of what this last apparent link is really about. The starting point for clarification is simple: Leaders should not tell implementers what to do -- but instead tell implementers what is needed. The better Business gets at defining needs, the more likely it will wind up with something valuable that it wants -- so it falls to Leaders to assure that Business Needs are well defined and communicated. For example, in the classic case of trying to coordinate business and IT interests, leaders need to set the business agenda for IT -- but business should not set the technology agenda.

But how do they forge their cooperation?

III.

In general, agreement, not command, is the "constructive" mode for their coherence or alignment:
- The business agenda for IT is made up of objectives; it should be all about when and why. Leaders and managers should agree on that -- on when some condition should be developed or pursued, and why. This will be reflected in planning.
- The production agenda is made up of requirements; it should be all about which and how. Managers and implementers should agree on which activities should be executed and how. This will naturally be reflected in the choice of producers but will also be reflected even more basically in processes.
- The technology agenda is made up of resources; it should be all about what and who. Implementers and Leaders should agree on what gets used and who gets to use it. But that agreement will be based on business needs. Policies, especially, will hold this connection.

The set of agreements describes how the continuously interacting roles stay contained in the loop.

How does this model the logic of performance instead of just the range of value types?

Going back to the basic definition of "performance", the focus is on how far the effort has taken us towards the goal. The key idea of the performance logic is that certain types of value are created by the effort, and the value-types combine to foster progress towards the goal. The "logic" of the progress is in how the value-combinations create advantages for, or remove barriers to, progress -- and the punchline is that progress itself must be defined before it can be measured. In the model offered by the diagram above, performance is seen in the additional degree to which a goal-oriented change means capability (through implementers), viability (through managers), and acceptability (through leaders). Said differently: what can be done, how well can it be done, and how much will we support doing it? To the extent that those factors account for successes already noted, their combination may be used as a predicter of future success. For the most part, amongst roles that generate these "success factors", the coherence provided by plans, processes and policies mirrors and directs the logic and its re-use.

The table below pulls together the above thoughts in a representation of discovering and cataloging the generation of these success factors. It overlays the distinction of the key roles with the main viewpoints within each role. The table lays out the task of identifying what decisions and enablements can be associated with each role -- and from there, alignment would be tested or attempted in plans, processes and policies.

IV.

Postscript:
Because production flows from implementers to the leaders, Managers bear the responsibility for proving that implementations can be aligned sustainably with the business objectives. In effect, Managers act as the "agents" and "brokers" for Leaders.

Of particular note in the IT example scenario, change is the biggest problem in IT, because it challenges standards, forecasts, and budgets -- all the things that make it possible for managers to minimize complexity and risk. For that reason, Change Management must be something that Leaders are willing to be champions for, otherwise they should not expect managers to do well.

Posted by Malcolm Ryder at 7:25 AM | Comments (0) | TrackBack

May 31, 2006

Debating IT's Value

The April 14 2006 web version of CIO Magazine brings this refreshing editorial "Credit Where Credit Is Due" to the ongoing jousting about how to measure the business impact of IT. In the editorial, MIT's Erik Brynjolfsson advises that, based on recent research conclusions, we need a new approach to talking about IT and business success.

What is "success"? From the perspective of the goals of the measurer, it is performance versus goals. Not coincidentally, when the business and its stakeholders think of "value" they typically think of performance versus goals. It makes perfect sense, then, that each business would want to recognize its particular success factors -- the aspects of its performance that drives it towards its goals. Naturally these goals may or may not coincide with those of other companies at the same time of reckoning. After all, any given time, two companies might not agree on where they need to try to be, but even if that coincides they might not agree on how to get there.

Good debaters know that a lot rides on how a question is phrased, and the right phrasing about IT's value is "what *kind of* value does IT offer to supporting the success factors of business performance?" This makes it more obvious that getting the success factors right is the first step in measuring IT value. In other words, the reason a tool is valuable is because the work that it's doing is valuable work.

This seems blindingly obvious; and more to the point, it is in no sense a new idea. As a concept, it doesn't need to change at all -- rather, when mulling over IT and trying to explain why we ought to have something, we need to abandon the distracting obsession of using asset metrics instead of using performance logic.

Posted by Malcolm Ryder at 6:58 AM | Comments (0) | TrackBack

February 27, 2006

Getting Governed: Handling the Risk of Value

Remember life before governance?

We planned the work, and then we worked the plan.
A lot of the planning was about defining the "we" -- and cascading that definition down from the high (market) level to the low (task) level.

In this cascading, our business starts out as a model for certain kinds of market interactions, and then an organization is created to operate according to the model. We have a strong idea about what kinds of things are required for the interactions to succeed, so what we focus on is making sure that we know someone is responsible for attending to those requirements. We distribute those responsibilities -- expecting the organization's dynamics to more or less derive from that distribution.

So far so good. Then the fun begins: people actually start doing things, and on any given day the cause-effect relationships of what they do to what they accomplish is most of what we ever think about -- except of course for considering the value of what got made.

Between the resulting shortcomings and the advantages, the unnecessary and the useful, we make most of our judgement calls about what should continue "as is" and what should change.

The big hypothesis is that the model we started out with will generate sufficient redeemable value, if only it is executed vigorously enough. We're experienced enough to recognize that there will be obstacles, but to get around them or through them, we're willing to redesign the way we meet the requirements.

How much of that flexibility is a good thing?

I.

Most businesses initially take a pragmatic approach to flexibility that looks at whether results seem to be proving the prevailing method of satisfaction. The habit: do more of what works, less of what doesn't, and look mainly for external indicators that something different should be done.

The "performance" mentality is driven by pragmatism. But what has also developed during the last five to ten years is a perspective that holds the entire enterprise responsible to a community of stakeholders -- which expands the range of external drivers and, correspondingly, requirements.

In some arenas, this new perspective argues that the broadened scope of responsibilities actually increases the likelihood not of episodic performance but of sustained performance. The intuitive logic of this is as follows: as an aspect of competition in a hypercompetitive world, it's too risky to alienate or disrepect any stakeholder of significant influence -- namely, one who has the freedom to take their support to a different business (such as customers), or one who has a critical opportunity to undersupport their host (such as sponsors and employees). Performance is therefore seen as the result of stakeholders being motivated to beneficially cooperate in their provision of a hospitable environment for the business's competitiveness.

Environment? As represented by models such as "balanced scorecard strategy maps", stakeholder cooperation means logically promoting desired outcomes by chemically reacting in more or less the same alignment seen in a value chain. This reaction is casually thought of as a "process" because it represents cooperation as interdependencies -- and then represents interdependencies as a set of serially productive influences. If A then B; if B then C; etc. But a proper understanding of the influences is that the "links in the chain" are actually dimensions, co-existing and intersecting at all times, creating an operating "space" within which the organization tries to find, extend and orientate itself.

In contrast, a "governance" mentality is a more functional outlook than environmental. Closely related to the problem of methodological quality, governance argues that the organization must execute systematically but that its system cannot be managed without enforcing limits on the complexity of its internal interactions. As opposed to the competitiveness that is the ultimate concern of the performance perspective, the governance perspective is ultimately concerned with the effectiveness of the organizational structure in its given configuration.

So what is the argument about effectiveness that governance makes?

II.

Three thoughts lay out the governance view on effectiveness.

(1) Governance and Performance share a strong concern with impacts, but where performance looks at impact from a benefits point of view, governance looks at impact from a risks point of view.

(2) Governance distinguishes effectiveness from impact. "Effective" means that a certain way of doing things is acknowledged and desired for the predictability of its effect. The concept's true significance is in its use for identifying and thus selecting functional options according to a pre-measured balance of value versus risk. (Not all value is beneficial; value is identified as a significant difference, but benefit imposes the requirement that the difference is relevant.)

(3) Governance focuses on the likelihood of the organization's functionality being systematically coherent enough to maximize value while minimizing risk. It's natural elements of disciplinary intelligence are architectures, policies, and approvals -- all of which organize constraints on demand.

Performance, in contrast, concerns itself with "efficiency" -- in terms of how much input is necessary for a given level of output "on-demand". Performance doesn't expect governance to work on efficiency.

But what performance sometimes forgets is that the kind of capacity made available as input (to demand fulfillment) is a product of governance. Poor governance can easily mean poor (or unreliable) input.

In real life, not just in theory, performance's demand on capacity has not been a good thing for businesses lacking governance. The most notable consequences include corrective movements such as Sarbanes-Oxley and the crackdown on software license violations -- as well as gutted share prices and other industry news headliners. Less notable as general news are breakdowns like post-facto productivity failures in mergers, missed time-to-market, or violations of contracted service levels. To an important degree of frequency, these outcomes spring from innovated and improvised execution that has been directed yet disruptive, dedicated but ultimately incoherent.

Governance implements a certain way that real-time functional capacity is produced -- in the same way that fitness and technique combine to power an athlete's responsiveness to opportunities and threats. Ideas, strategies and plans are based on confidence levels in effectiveness.

III.

Governance focuses management on effectiveness by forcefully modeling execution as opposed to just process. Execution is dominated by the decisions that occur before action is taken. Process models assume a certain range of circumstances, but processes must be invoked. Execution is a management function establishing the decision that activates a process. Whether formulaic or improvised, execution precedes process and is primarily attentive to the circumstances that present or argue for the alternatives in hand.

Governance is concerned, therefore, with the quality of the decisions, and with preventing execution from being displaced by process. Here, decision quality refers to the risk/value balances that establish response-capacity on terms predictable by all key stakeholders -- and execution intends to manage impacts and help build benefits accordingly.

The il