Ideas Warehouse - big thoughts

Making sense of BPM

2005-12-08T20:54:00.000Z

Process is a very broad term…

The term ‘process’ could be used when discussing SAP functionality, and in a different breath, to describe Visio diagrams – so can it really be both? Well, yes. SAP functionality is the execution of a process. A Visio diagram is a simple pictorial representation of a process flow.

Add to the mix the concepts of ‘process automation’ and ‘process management’ and it’s hardly surprising that the business person is confused when talking with the IT team, and even more so when looking at some software vendor’s websites.

In an area buzzing with definitions, one common process-related acronym is BPM – which stands for Business Process Management which was typically used to describe a type of software. In response to deepening sophistication in approaches to process, IT analyst Gartner has recently redefined BPM as an umbrella term to describe ‘approach, methods and software’. Their full definition follows:

Gartner: Definition of BPM

BPM is a management practice that provides for governance of a business's process environment toward the goal of improving agility and operational performance. BPM is a structured approach employing methods, policies, metrics, management practices and software tools to manage and continuously optimize an organization's activities and processes.

So, where does this leave you? Probably a little confused. You’re in a business function and you want to improve your operation. You can tell the difference between SixSigma, CMMi and EFQM. You’re looking for tools that can help you with this improvement.

However, all software under the BPM banner looks the same at the outset – or at least seems to offer the same benefits, especially if you read vendors’ claims on their websites.

‘…has been helping to build better businesses for more than three decades.’

‘…continually manage and deliver improved business performance.’

‘…helps organizations gain better insight into their business, improving decision-making and enterprise performance.’

‘…to help customers reduce costs, improve service and achieve agility.’

These quotes were taken from the websites from a major ERP vendor, a process automation start-up, a business intelligence player and a process-modeling vendor. So which is which? Beats me. Which is why my clients are constantly asking me to unravel the ‘process conundrum’.[1]

And just when you thought you’d understood the different vendors’ solutions, a spate of acquisitions of complementary technology changes it all again.

BPM tools unraveled

Clearly there is software that supports Business Process Management – at the last count there were more than 200 vendors. This space will consolidate as some vendors combine through M&A, some retrench to focus on a small niche, while others fail and die.

This consolidation is creating vendors with a broader set of functionality, and Gartner has coined the term “BPM Suites” to describe them. The BPM Suites will have capabilities in each of the five circles in the diagram.

These capabilities fall under three broad headings which make sense to the end user rather than the Marketing Department of a BPM vendor. They are Simplify – Automate – Monitor.

Simplify

This concerns the capture and understanding of a business process from an end-user’s perspective. Ideally, this should be approached top-down in live workshops to get alignment and consistency from a senior level down to the shop floor and across the end-to-end process. The processes may be costed to establish the value of any proposed changes, and simulation may be used to establish the best way to streamline the process and assess impacts.

Automate

Once the processes have been captured and streamlined, they can be automated to improve productivity further. Automation can be implemented in a number of ways:

Pure-play: If the process is very people-oriented it may require a ‘pure-play BPM’ software application which enables forms to be strung together to support the end-to-end process. A simple example is the expense process. It requires data to be captured in an expenses form by the claimant, which is then sent to the manager for authorisation. The form will sit in the manager’s work queue until they review it, add their electronic signature to authorise, and then send it on to the accounts team to pay it.

Biz Rules: A further level of sophistication is to add some business rules. In our previous expense example, rules may determine who has to authorise expenses, based on the total value of the claim, or there may be escalation rules if the immediate manager is away. These rules will need to be coded and managed

Enterprise Application Integration (EAI): At the next level of technical detail, the process may require that existing software applications are involved to complete the process alongside the forms. This integration requires the data to be pulled out of the existing software application databases, in context. Continuing our expenses example, in order to work out an escalation route, the reporting hierarchy needs to be understood by accessing the personnel database. In many cases multiple applications and databases need to be coordinated to complete the process successfully.

Monitor:

Once the processes are captured, streamlined and automated, they should be monitored to establish that they are performing, to identify opportunities for fine tuning, or to show where more remedial work is required. Any metrics that are reported need to be pulled from existing systems and presented in the context of the processes, so a manager can see clearly what decisions to make.

Simplify then Automate, don’t simply Automate

Some software vendors seem happy to dive in and automate the current processes, hoping that automation will identify any weaknesses and opportunities for streamlining. Call me cynical[2], but these are more likely because the Automation vendors do not have strong products in the simplification area. For them, talk of simplification means that any project has probably been delayed for six months. Therefore, they fall into the ‘Simply Automate’ camp.

Simplification software vendors are not saints either. They appear unwilling to help the organisation automate the streamlined processes, as they’d prefer to focus on identifying other areas of the business that could be streamlined.

However, there can be a smooth transition from simplification through automation to monitoring. Currently this is achieved through integrations and alliances between vendors, but pretty soon we will see full BPM Suites offering all the capabilities.

This is much like the world of operational applications ten years ago. Once there were standalone customer systems, stock control, order management, accounts and manufacturing. Now they have been rolled together and delivered as ERP systems made up of tens of integrated modules. The same aggregation of products is starting in the world of BPM. An example of the start of this roll-up is the acquisition of Staffware (Pure-play BPM) by Tibco (EAI).

So, looking at this set of software in a different way- the top of the triangle is the strategic direction setting, leading to a top level process diagram or strategy map and related key targets such as profitability, revenue growth, ROCE (Return on Capital Employed) etc.

This top level process and metrics are broken down hierarchically (modelling, simulation, metrics, alerts) working with end-users in workshops to build consensus and alignment with the top level processes. These lower level processes are automated with varying levels of technical integration into the core applications in the company (Pure-Play, Biz Rules, EAI). The automation may draw on the core Enterprise Applications (SAP, Microsoft, Oracle[3]). The Enterprise Applications and Automation applications generate performance reports and metrics, which is where the Business Intelligence vendors sit with their Reporting applications. A subset of the data reported is the key metrics which need to be presented in the context of the relevant process step, and as scorecards.

Benefits of simplification

So can an organisation get benefits through Simplification without using any Automation vendors? Yes. Many organisations already have core operational systems which work, and simplification simply enables them to optimise how they use their systems. Here are some real life client examples of simplification

‘Project scope was a SAP & Siebel rollout, which was reduced from 36 to 18 months, the quote process reduced from 14 days to 10 mins, and no additional spend to achieve Sarbanes-Oxley.’

‘For a project based software development organisation, $50m new business, $21m savings from process improvement and achieved CMMi Level 3 – six months early.’

‘A distributed paper-based operation in 80 offices. Rationalisation & streamlining processes across 1,000 people generated $8m savings in year 1, and a further $15m in year 2.’

The additional benefit of addressing simplification before automating is that the automation effort is focused in improving value-added activities, i.e. it is not automating the ‘invoice error correction process’. Streamlining will eliminate this process by fixing the invoicing generation process to eliminate errors so they don’t need to be corrected.

Integrating modelling tools and automation tools

Very visual hierarchical modeling is key to communicating change across end-user organisations. But these models are also critical in eliminating any ambiguity in describing the business requirement, which often occurs with a purely textual document.

The information held in the models needs to be transferred into the more technically-detailed single-level modeling that the automation vendors provide for IT analysts. The interface is based on ‘similar looking’ models, but the IT analyst plays an important role working with the end-users to interpret and validate the processes to be automated. This activity enables the additional technical and contextual information to be added to the process model so that it can be automated (executed). [4] Compromises or changes from the end-users could dramatically increase the performance of the automated application, or massively reduce the development effort.

Therefore, blindly (or automatically) converting the end-user’s view of process into a technical view, pressing the button and having a running application is neither desirable nor feasible. There was a dream of a company where the end users can change a process by moving boxes and lines around, and in the morning the core applications (SAP) have been reconfigured. That would make the company infinitely agile, but I doubt that the end-users could keep up and understand the changes, leading to complete anarchy.

Benefits from automation

Automation should build on and multiply the benefits achieved by process simplification, and as the models have been built top-down there can be confidence that there is alignment between the lowest level automated activities and the aims & objectives at the top of the organisation. So can you get benefits from automation without some level of simplification or streamlining first? You may certainly see benefits, but these will never be as significant as when combined with simplification.

The benefits you get from automation are:

‘Quickly implement the appropriate controls in order to enhance compliance capabilities in Accounts Payable and Accounts Receivable processes.’

‘Identify distressed deliveries and act immediately before the shipment arrived back at the company. These capabilities saved money on each shipment and greatly improved the customer experience.’

‘Guide users through the validation and approval process for incentive compensation which reduces the amount of human error in the previous cycle of manual calls, e-mails, and faxes.’

Standards, standards everywhere and not one everyone agrees on

Standards must be developed so that the integration between Simplification vendors and the Automation vendors can be as clean as possible – in both directions. There have been a number of standards proposed for interoperation of the Automation vendors. But this is not the most important area, unless the organisation is looking to standardize on one automation vendor. Of more importance is the integration between Simplification, Automation and Monitoring, and there are emerging XML standards.

Let’s be clear. You wouldn’t expect a normal end-user to be able to read or write BPEL, BPMN or other similar standards. BPEL (Business Process Execution Language), pronounced ‘Bee-ple’, is essentially an XML programming language for defining the automation of a process, which a process engine use to run (automate). BPMN (Business Process Modeling Notation) is more end-user friendly, but both BPEL and BPMN are focused on the systems elements of a process i.e. the bits than need to be automated, which is only part of the models held in the Simplification vendors’ software applications.

The integration journey

So the end-to-end journey for BPM is shown in the diagram:

‘Senior management set strategic direction and then build out an end-user hierarchical model of processes and metrics (Simplification). This model is transferred into a set of IT tools that allow technical context detail to be added and then the process to be executed (Automation). The metrics generated are fed back into the end-user model to present them in the context of the processes (Monitoring).’

How this happens, in the nitty-gritty detail is the topic of a more detailed paper ‘The nitty-gritty of the integration journey’. It describes in detail, based on practical examples not theory, how you can build a complete solution, integrating each of the technologies. It will also discuss how this approach supports the design principles of Service Oriented Architecture (SOA) development and delivery.

Conclusions

Correctly applied, BPM can add a huge value to organisations, as they fight to streamline processes to eliminate non-value-added activities, and then automate those that are left to reduce costs, improve accuracy and compliance. Once the processes can be monitored and problems highlighted, users can see the metrics in the context of processes and make better decisions and improvements.

This correctly positions BPM at the heart of any organisation’s intent of improving their performance.

[1] Conundrum: A paradoxical, insoluble, or difficult problem; a dilemma. Not to be confused with an Oxymoron, which is where two terms contradict – such as Military Intelligence or Microsoft Help.

[2] A Cynic is what an Optimist calls a Realist.

[3] I’m hesitant to list any other vendors as they could be acquired by these three and it would date this article

[4] or ‘Orchestrated’ to use the Service Oriented Architecture (SOA) lingo.

Performance = Process & Metrics, but which comes first?

2005-09-27T21:18:00.000+01:00

Performance in business these days (and for the foreseeable future, I would imagine) is usually defined in budget discussions, then measured and reported by your Finance Department and for publicly quoted companies reported to the City. The Finance Department will of course liaise with the business functions/divisions to put together the budget, and (where the data is not collected automatically in some system) gather reporting figures.

The blatant misreporting of figures by a number of companies over the last few years has shown that the numbers don't tell the whole story. They describe the results of actions however inconsistent, flawed or manipulated those actions may have been.

So endemic is the perceived problem of reporting that the Sarbanes-Oxley Act has been passed that forces top management to sign that the numbers have been produced correctly. This means that they must have confidence in the way the numbers have been producedSo much confidence they are willing to bet their job on it.

You could say that the numbers are the one common language in business, but as a common operational language the numbers on their own are just not enough, you need to draw together both the activities and the numbers.

Linking processes and metrics

Think about this: top management defines company goals and strategy and takes the lead on a number of key major initiatives. They will have defined the 'Critical Success Factors' (CSF) and will have outlined a budget. I am sure they will have included the Key Performance Indicators (KPI) so that the finance department can measure and assess the result. The people in charge of operations translate the efforts to be made into operational processes and this runs down the hierarchical chains of the company.

Yet the problem is that in many companies the two activities of (a) the definition of Key Performance Indicators and (b) translating them into operational processes to make it all happen, are not linked. Each goes their own way.

As a consequence, the people in the finance department (who are doing all the work to prepare the budgets, deliver management reports and so on) have few links to what is really happening, and, conversely, the people in the operational end of the company probably have no understanding as to how their actions help in actually realising those budgets.

Enter the common operational language, where strategy gets translated from the top down in an uncomplicated way by defining processes linked to performance metrics. Whenever there are questions about how to do things (the operational people), or how well things are getting done (the finance people), anyone can have a look at the tools that have been used to record and describe these processes and find the most up-to-date information.

Corporate Performance Management

What I have described is sometimes called Corporate Performance Management, Business Performance Management or Enterprise Performance Management, i.e. the principle of displaying metrics and associated processes so that the overall performance of the business can be monitored and improved.

However, some IT analysts (such as Gartner) started off with a data- or metrics-centric view of performance management. Their view of performance management consisted of fixing the planning and reporting cycle. Currently, in most businesses, this is a series of MSExcel spreadsheets which are distributed throughout the organisation. This is being replaced by Planning systems for the budgeting cycle, and Business Intelligence and Scorecarding systems for reportingThis is not surprising as the Business Intelligence vendors are using their marketing budgets to drive the definition of CPM

What analysts are now recognising, driven by clients voicing their needs, is that there is a process element required to get the full picture. The previous metrics-only view is not really Corporate Performance Management, but Corporate Performance Reporting. There is no ability to change, as there is no relationship to process – the things that people really do.

No surprise then, that many of the Business Intelligence software vendors (such as Cognos, Business Objects and Hyperion) are now looking at how they add process management to their Corporate Performance management suites of software. I believe that this is more likely to be by acquisition (of software or software businesses) or through strategic partnerships than internal development, as the Business Intelligence vendors' world and expertise is in the management and manipulation of vast quantities of data. They have no experience in managing processes in the form of inter-related diagrams and their linked documents and applications. Combine that with the management of multiple versions and compliance and you have a very different problem.

What comes first: Metrics or Process?

Based on the understanding that both process and metrics are needed, then which comes first? This is a pertinent question as there are many companies who already have scorecarding initiatives which are defining metrics.

So what exactly do I mean by metrics?

You have a company which develops, manufactures and sells electronic equipment. Part of the strategy says that you need new product development to produce five new products, each with a minimum of £30 million sales each year by the third year as a Critical Success Factor (CSF).

The metric here is the number of new products with a minimum of £30 million sales per year

Therefore the underpinning Key Performance Indicators (KPI) in the six-stage product development process include:

20 new ideas at stage two
budget tolerance up to 5% at stage four
product approval sign-off process to take less than 30 working days in stage six.

This gives you a hierarchy of interlinked measures, so that people at every level in the company understand their responsibilities and have clear accountability.

So, if you believe the Business Intelligence software vendors – just install their software and start measuring things for which you have data. This is because their software is good at aggregating all the corporate data and presenting it in a meaningful way – as reports or scorecards. However, this is not as valuable as working out what you should be measuring and going to find that data.

Once people start being measured they will start to change their behaviour. This is human nature. Over time areas of poor performance will be identified and, in analysing the processes that are broken, you need to make improvements in the processes. This requires people to change – for a second time. You will also begin to fully understand the measures, associated with the new processes, that you really want to hold people accountable for.

So this demonstrates that the metrics-first approach requires people to change twice – once as you start, and then once again as you implement improvements.

However, a process-led approach starts with an analysis of the operational processes. This reinforces the strategic direction from the top. At the highest level you define the core processes and the corresponding measures. Both the process and the metrics are broken down hierarchically, level by level, at the same time.

The act of discovering the processes helps you simplify them and improve them. At each level the metrics reinforce the new processes. Therefore change is only needed once and it is supported by shared access and adoption of the processes and metrics.

"If getting people to change is difficult, then changing twice in a relatively short space of time is more than TWICE as difficult."

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Forget everything you know about being a leader

2005-09-22T00:48:00.000+01:00

Marcus Buckingham teaches CEOs how to get the most out of their people and their organizations. His first lesson: Forget everything you think you know about being a leader.

There is a noble promise at the heart of the new world of business: Everyone has the right to meaningful work, and people who do meaningful work create the most value in the marketplace. Even as the talent wars have fizzled into pink-slip parties, few senior executives would dispute the vital importance of finding, engaging, and developing the best people. Ask any CEO, "What's your company's most precious asset?" Without hesitation, the answer will be, "Our people." Ask the same CEO, "What's the primary source of your competitive advantage?" Chances are, the reply will be, "Our unique culture."

This kind of talk drives Marcus Buckingham nuts. It's not that he disagrees with the sentiments -- he's spent his 15-year career as a pioneering researcher and a global-practice leader at the Gallup Organization, making the link between people, their performance, and business results. What troubles him is the lack of rigor behind the rhetoric. "There's a juicy irony here," says the 35-year-old Cambridge-educated Brit. "You won't find a CEO who doesn't talk about a 'powerful culture' as a source of competitive advantage. At the same time, you'd be hard-pressed to find a CEO who has much of a clue about the strength of that culture. The corporate world is appallingly bad at capitalizing on the strengths of its people."

Buckingham, on the other hand, is remarkably good at communicating his subversive message. He has produced two best-selling books: First, Break All the Rules: What the World's Greatest Managers Do Differently (Simon & Schuster, 1999), with coauthor Curt Coffman, and Now, Discover Your Strengths (The Free Press, 2001), with coauthor Donald O. Clifton. Meanwhile, Buckingham has helped build a ballooning consulting practice at Gallup, with more than 1,000 clients, including Best Buy, Disney, Fidelity Investments, Toyota, and Wells Fargo.

His mission, as he describes it, sounds almost quaint: "to create a better marriage between the dreams of workers and the drive of companies to win." His methodology is anything but quaint. Buckingham has led an effort inside Gallup to crunch three decades' worth of data on worker attitudes into actionable insights on human performance and productivity. First, he and his team tapped into a database of more than 1 million Gallup surveys that focused on workers from around the world. Although these workers had been asked many questions, there was one big question behind the interviews: "What does a strong and vibrant workplace look like?" Buckingham eventually distilled 12 core issues (called the "Q12" in Gallup-speak) that represent a simple barometer of the strength of any work unit.

Next, Buckingham's team ran massive number-crunching studies to analyze how answers to the Q12 shaped hard-core business results. The link between people and performance was vivid. The most "engaged" workplaces (those in the top 25% of Q12 scores) were 50% more likely to have lower turnover, 56% more likely to have higher-than-average customer loyalty, 38% more likely to have above-average productivity, and 27% more likely to report higher profitability.

Buckingham and his colleagues made one other finding that startled them: There was more variation in Q12 scores within companies than between companies. That is, in each of the more than 200 organizations that he analyzed, Buckingham found some of the most-engaged groups and some of the least-engaged groups. His conclusion: There is no such thing as a corporate culture. Companies are made up of many cultures, the strengths and weaknesses of which are a result of local conditions.

"It's staggering," he says. "Few of the CEOs in our study could say which work units in their company were engaged effectively and which weren't. They didn't know where their culture was strong and where it was weak, whether it was getting better or getting worse -- or how much this variation was costing."

Talk about speaking truth to power. CEOs don't understand what makes their employees tick. They don't know how to get the best performance out of the most people. They can't say where their companies are strongest or weakest -- or why. And that's just the first of Buckingham's series of assumption-busting messages. "The major challenge for CEOs over the next 20 years will be the effective deployment of human assets," he declares. "But that's not about 'organizational development' or 'workplace design.' It's about psychology. It's about getting one more individual to be more productive, more focused, more fulfilled than he was yesterday."

In several conversations with Fast Company, the tireless Buckingham offered an overview of his pathbreaking research and identified five attitude adjustments that redefine the essence of leadership in business.

Attitude Adjustment #1

Measure what really matters. (By the way -- the numbers you're using now don't matter.)

Numbers are crucial to running a company, and CEOs love them. Yet the numbers that most leaders use to manage the people who are part of their business are mostly off target. The CEOs who come to us are almost always fixated on two questions: How is our average performance improving over time? and How do we stack up against our competitors?

Both of those questions obscure what's really important. Averages hide the fact that within any company are some of the most-engaged work groups and some of the least-engaged work groups. But this range is what is most revealing.

You can divide any working population into three categories: people who are engaged (loyal and productive), those who are not engaged (just putting in time), and those who are actively disengaged (unhappy and spreading their discontent). The U.S. working population is 26% engaged, 55% not engaged, and 19% actively disengaged.

In essence, then, the CEO's job is to improve the ratio of engaged to actively disengaged workers. But here's the problem: Few of the CEOs in our study could say which work units in their company were effectively engaged and which weren't. They didn't know where their culture was strong and where it was weak, whether it was getting better or getting worse.

That's where the Q12 comes in. Survey the workforce every six months, and the result will be a vivid picture of which work units are engaged in a way that leads to the best performance and which workers are not.

I work closely with Best Buy, the big electronics retailer. When they started surveying their employees in 1997, they were in the 45th percentile of our Q12 database. By the end of last year, they were in the 70th percentile. More important, in those four years, 99 stores improved their Q12 scores significantly, while just 18 stores had scores that fell. The 99 stores that improved their engagement level dramatically improved their P&L budgets. The stores whose engagement level fell missed their P&L budgets. These are the numbers that matter.

Attitude Adjustment #2

Stop trying to change people. Start trying to help them become more of who they already are.

CEOs hate variance. It's the enemy. Variance in customer service is bad. Variance in quality is bad. CEOs love processes that are standardized, routinized, predictable. Stamping out variance makes a complex job a bit less complex.

There is, however, one resource inside all companies that will hinder any attempt to eliminate variance: each individual's personality. Human beings are the one irreducible complexity in every company. And you can't eliminate that complexity by forcing people to become more like one another. You can't standardize human behavior. Of course, that's precisely what most leaders attempt to do. That goal -- standardizing human behavior -- is the driving force behind most executive-training programs and leadership-development courses. What's the quickest way to build a coherent culture? Get everyone to manage the same way.

Not only is that approach psychologically daft, it's hugely inefficient. It's fighting human nature, and anyone who fights human nature will lose. The best managers don't even try to fight that fight. We studied 80,000 of them from 400 different companies -- people who excelled at getting great performance from their people. These managers followed the same basic set of principles: People don't change that much, so don't waste your time trying to rewire them or trying to put in what was left out. Instead, spend your time trying to draw out what was left in. When it comes to getting the best performance out of people, the most efficient route is to revel in their strengths, not to focus on their weaknesses.

Let me give you an example from my company. Our senior VP of marketing, Larry Emond, doesn't have a lick of empathy. It was surgically removed at birth. He also lacks a quality that I call "developer": getting a kick out of seeing someone else grow. Now, I could spend my time admonishing Larry. I could try to explain to him why that blistering email he dashed off had a crushing effect on several people. But he still wouldn't get it.

You might think that Larry is doomed to be a poor manager. Absolutely not. Larry's strength is that he has the qualities of self-assurance and a strategic mind-set. He doesn't need to have empathy to achieve results. People feel that Larry encourages their development, because he keeps thinking about how they can be part of this future he's describing.

Now Larry's approach seems obvious -- why would you do anything else? And yet, in most organizations, Larry would be confronted by some nice, well-intentioned HR person -- probably going off of feedback from a 360-degree survey -- who would say, "Larry, as a leader, you need to be more responsive to your direct reports." There would be a lot of, "Tone that down, Larry." Well, how about, "Dial that up, Larry"?

If you are clear about the outcome that you want, instead of standardizing the qualities and steps that you think are required to get to that outcome, you should honor the fact that Larry's nature is irreducibly unique -- rather than wasting time and money wishing that it weren't so. What goes for Larry goes for all kinds of people in companies. The best strategy for building a competitive organization is to help individuals become more of who they are.

Attitude Adjustment #3

You're not the most important person in the company. (Believe it or not, your middle managers are.)

American culture is CEO obsessed. We celebrate the hard-charging heroes and mythologize the iconoclastic visionaries. Those people are important. But when it comes to getting the most productivity out of everyone in the company, they're not the most important people. Our research tells us that the single most important determinant of individual performance is a person's relationship with his or her immediate manager. It just doesn't matter much if you work for one of the "100 Best Companies," the world's most respected brand, or the ultimate employee-focused organization. Without a robust relationship with a manager who sets clear expectations, knows you, trusts you, and invests in you, you're less likely to stay and perform.

I admit, it seems like the most obvious point in the world. But do we revere the role of the middle manager? Hardly. We don't even like the term! We'd rather transform everyone into grassroots leaders, change agents, intrapreneurs. We look at managers as costs to be cut -- or, at best, as leaders-in-waiting, people who are putting in time before they get the big job.

So what exactly do great managers do? First, the best managers start with a radical assumption: Each person's greatest room for growth is in the area of his greatest strength. It goes back to my last point. Good managers believe that each person is wired in a unique way -- and these managers are fascinated by this individuality. Rather than seek to round it out or fill it in, the best managers do everything they can to sharpen and amplify that uniqueness. And then those managers work with people to help them understand their strengths, to build on them, to give them the confidence to be different.

Attitude Adjustment #4

Stop looking to the outside for help. The solutions to your problems exist inside your company.

Talent is a multiplier. The more energy and attention you invest in it, the greater the yield will be. That's why the best leaders are relentless at seeking out, shadowing, studying, and highlighting the lessons of their own top performers.

The funny thing is that most CEOs spend their time benchmarking best practices in other companies. They want to know how they're doing relative to their peers. I tell my clients, Don't go on a tour of Disney, Southwest Airlines, or Discover Financial Services. You have some of the world's best managers working inside your own company. Look to them first. Learn from your own people first.

At Gallup, we've spent years documenting the simple, charming secrets of these extraordinary people. In the corners of every big company that we've studied, there are hundreds or thousands of them toiling away in relative obscurity. If you find them and shine a light on them, they will point the company's way to the future.

Take another look at Best Buy. It's like a controlled laboratory that is devoted to understanding the power of local managers and local work groups. In a sense, the company's strategy is built on uniformity -- everything from store layout to product positioning to uniforms to operations manuals are standardized across the country. Yet even across 400 nearly identical environments, there's an amazing range of employee engagement and business performance. In the Best Buy store that has the highest Q12 scores, 91% of employees strongly agreed with the statement, "I know what's expected of me at work." In the store with the lowest score, just 27% agreed.

Not incidentally, the store with the highest Q12 score ranks in the top 10% of Best Buy stores as measured by P&L budget variance -- and the store with the worst Q12 score falls in the bottom 10%. To improve overall corporate performance, Best Buy's leaders don't need to look outside the company. They just need to figure out how to build on the strengths of its best stores.

Building on these strengths means identifying internal best practices and shining a light on your best managers -- people like Ralph Gonzalez. Ralph is a store manager who was charged with resurrecting a troubled Best Buy in Hialeah, Florida. He immediately named the store the Revolution, drafted a Declaration of Revolution, and launched project teams, complete with army fatigues. He posted detailed performance numbers in the break room and deliberately over-celebrated every small achievement. To drive home the point that excellence is ubiquitous, he gave every employee a whistle and told them to blow it loudly whenever they "caught" anybody -- whether coworker or supervisor -- doing something "revolutionary." Today, the whistles drown out the store's soundtrack, and, by any metric -- sales growth, profit growth, customer satisfaction, employee retention -- the Hialeah store is one of Best Buy's best.

But here's what really impressed me. Most companies would take a best practice like Ralph's whistle and say, "That's a great form of recognition. Let's give out whistles in every store." Best Buy did something much smarter: It extracted and spread the core lesson from Ralph's best practice, rather than institutionalizing the practice itself.

Attitude Adjustment #5

Don't assume that everyone wants your job -- or that great people want to be promoted out of what they do best.

There are two myths about talent that feed the conventional -- and misguided -- approach to career tracks and leadership development in most companies. The first myth: Talent is rare and special. Wrong. We all have talent. What's rare and special is a worker who finds a role that suits his or her talents. The second myth: Some roles are so easy that they don't require talent. Wrong again. We hear a lot about developing more respect for frontline workers and customer-facing employees, but peel the onion and you run into a rigid hierarchy of jobs. The compensation system evolves out of that hierarchy. So do titles and careers.

We say that we want to build world-class organizations. That's meaningless if we don't value world-class performance in every role. Yet the people who touch customers the most -- hotel housekeepers, outbound telemarketers -- get the least respect and the lowest paychecks. The assumption is that anyone can do that job and that nobody would want to do it if they were given a choice to do something else. Frontline talent has a prestige problem, and it's turning into a corporate-performance problem.

We studied the 3,000 housekeepers of a 15,000-room luxury-hotel chain. It turns out that great housekeepers are not beaten down by the relentless grind of cleaning rooms. On the contrary, they seem to be energized by doing the work. In their minds, the work they do asks that they be accountable and creative and that they achieve something tangible every day.

Unfortunately, the only way we have to reward excellence on the front lines is to promote people out of the very roles that they do best. We turn great housekeepers into supervisors, virtuoso shelf stockers into salespeople, and managers into leaders. A major challenge for CEOs is to define excellence in every role -- and pay on it, award titles on it, distribute prestige on it, and make it a genuine career choice.

Satisfaction at work depends on nothing more than self-knowledge. And that gets leaders right back to their main task of engaging their employees at every level. What are you doing to turn your people's talent into the kind of performance that thrills customers, whether those customers are internal or external? The beautiful thing about a culture that is built by focusing on individual strengths is that no one can steal it. And any advantage that's hard to steal is an advantage that lasts.

Polly LaBarre (plabarre@fastcompany.com) is a Fast Company senior editor based in New York.

Sidebar: 12 Questions That Matter

If you want to build the most powerful company possible, then your first job is to help every person generate compelling answers to 12 simple questions about the day-to-day realities of his or her job. These are the factors, argue Marcus Buckingham and his colleagues at the Gallup Organization, that determine whether people are engaged, not engaged, or actively disengaged at work.

1. Do I know what is expected of me at work?

2. Do I have the materials and equipment that I need in order to do my work right?

3. At work, do I have the opportunity to do what I do best every day?

4. In the past seven days, have I received recognition or praise for doing good work?

5. Does my supervisor, or someone at work, seem to care about me as a person?

6. Is there someone at work who encourages my development?

7. At work, do my opinions seem to count?

8. Does the mission or purpose of my company make me feel that my job is important?

9. Are my coworkers committed to doing quality work?

10. Do I have a best friend at work?

11. In the past six months, has someone at work talked to me about my progress?

12. This past year, have I had opportunities at work to learn and grow?

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Managing Innovation - an oxymoron?

2005-09-18T08:44:00.000+01:00

Don't Laugh at Gilded Butterflies
Rather than chasing wonder new products, big companies should focus on making lots of small improvements. Economist Staff, The Economist

The Gillette company's website flashes out a message to the e-visitor: "Innovation is Gillette", it claims. There are few big companies that would not like to make a similar claim; for they think innovation is a bit like Botox — inject it in the right corporate places and improvements are bound to follow. But too many companies want one massive injection, one huge blockbuster, to last them for the foreseeable future. Unfortunately, successful innovation is rarely like that.

The latest manifestation of Gillette's innovative skill will appear in stores in North America next month. The global leader in men's "grooming products" is rolling out a successor to its popular three-bladed Mach3 range. It will not, as comedians had long anticipated, be a four-bladed version (Schick-Wilkinson Sword reached that landmark first, in September 2003, and Gillette has taken it to court for its pains). Rather, it will be the world's first vibrating "wet shave" blade. The battery-powered M3Power is designed to bounce around on your skin to give (yes, you guessed it) "a smoother, more comfortable shave".

For a company that claims to embody innovation, this is less than earth-shattering. On the innovation scale it falls closer to Brooks Brothers' new stain-proof tie than to the video-cassette recorder or the digital camera — especially since there is a suspicion that Gillette may be keener to create synergy between its razor and its batteries division (it owns the Duracell brand) than it is to usher in a genuinely new male-grooming experience.

But the launch is symptomatic of an important business trend: blockbuster new products are harder and harder to come by, and big companies can do much better if they focus on making lots of small things better. Adrian Slywotzky of Mercer Management Consulting says that, "in most industries, truly differentiating new-product breakthroughs are becoming increasingly rare." He claims, for example, that there has not been a single new dyestuff invented since 1956.

Even in relatively zippy businesses like pharmaceuticals, genuinely new products are fewer and further between. Spending on pharmaceutical R&D has doubled over the past decade, but the number of new drugs approved each year by America's Food and Drug Administration (the industry's key regulatory hurdle) has halved. Drug companies still live in the hope of finding a big winner that will keep their shareholders happy for a long time. But this focus means that many unglamorous, but potentially interesting, compounds may be bottled up in their laboratories.

The Road to Invention
Big companies have a big problem with innovation. This was most vividly described by Clayton Christensen, a Harvard Business School professor, in his book, "The Innovator's Dilemma" (Harvard Business School Press, 1997). Few conversations about innovation take place without reference to this influential work.

The Oxford English Dictionary defines innovation as "making changes to something established". Invention, by contrast, is the act of "coming upon or finding: discovery". Whereas inventors stumble across or make new things, "innovators try to change the status quo," says Bhaskar Chakravorti of the Monitor Group, another consulting firm, "which is why markets resist them." Innovations frequently disrupt the way that companies do things (and may have been doing them for years).

It is not just markets that resist innovation. Michael Hammer, co-author of another important business book ("Re-engineering the Corporation", HarperCollins) quotes the example of a PC-maker that set out to imitate Dell's famous "Build-to-Order" system of computer assembly. The company found that its attempts were frustrated not just by its head of manufacturing (who feared it would lead to most of his demesne, including his job, being outsourced), but also by the head of marketing, who did not want to upset his existing retail outlets. So the innovative proposal got nowhere. Dell continued to dominate the business.

Mr Christensen described how "disruptive innovation" — simpler, cheaper and more convenient products that seriously upset the status quo — can herald the rapid downfall of well-established and successful businesses. This, he argues, is because most organisations are designed to grow through "sustaining innovations" — the sort, like Gillette's vibrating razor, that do no more than improve on existing products for existing markets.

When they are hit by a disruptive innovation — as IBM was by the invention of the personal computer and as numerous national airlines have been by low-cost carriers — they are in danger of being blasted out of their market. This message found a ready audience, coming as it did just as giant businesses from banking to retailing, and from insurance to auction houses, were being told that some as-yet-unformed dotcom was about to knock them off their pedestal.

Innovative Lessons
William Baumol, a professor at New York University, argues that big companies have been learning important lessons from the history of innovation. Consider, for example, that in general they have both cut back and re-directed their R&D spending in recent years. Gone are the droves of white-coated scientists surrounded by managers in suits anxiously awaiting the next cry of "eureka". Microsoft is a rare exception, one of the few big companies still spending big bucks on employing top scientists in the way pioneered by firms such as AT&T (with its Bell Laboratories) and Xerox (with its Palo Alto Research Centre, the legendary PARC).

This will prove to be a wise investment by Microsoft only if its scientists' output can be turned into profitable products or services. AT&T and Xerox, when in their heyday, managed to invent the transistor and the computer mouse (respectively); but they never made a penny out of them. Indeed, says Mr Baumol, the record shows that small companies have dominated the introduction of new inventions and radical innovations — independent inventors come up with most of tomorrow's clever gizmos, often creating their own commercial ventures in the process

But big companies have shifted their efforts. Mr Baumol reckons they have been forced by competition to focus on innovation as part of normal corporate activity. Rather than trying to make money from science, companies have turned R&D into an "internal, bureaucratically driven process". Innovation by big companies has become a matter of incremental improvements within the processes that constitute daily operations.

In some industries, cutbacks in R&D reflect changes in the way that new products travel down the "invention pipeline". During the late 1990s, for example, Cisco Systems kept itself at the cutting edge of its fast-moving high-tech business (making internet routers) by buying a long string of creative start-ups financed originally by venture capital. The company's R&D was, as it were, outsourced to California's venture capitalists, who brought together the marketing savvy of a big corporation and the innovative flair of a small one — functions that were famously divorced at AT&T and Xerox.

These days there is less money going into venture capital, and a new method of outsourcing R&D is on the increase. More and more of it is being shifted to cheaper locations "offshore" — in India and Russia, for example. One Indian firm, Wipro, employs 6,500 people in and around Bangalore doing R&D for others — including nine out of ten of the world's top telecom-equipment manufacturers.

Pharmaceutical giants continue to get their hands on new science by buying small innovative firms, particularly in biotech. Toby Stuart, a professor at the Columbia Business School in New York, thinks that this shows another change in the supply chain of invention. He says that many of the biotech firms are merely intermediating between the universities and "Big Pharma", the distributors and marketers of the fruits of academia's invention. Universities used to license their inventions to these firms direct, but small biotech companies make the process more efficient. They are well networked with the universities, in whose "business parks" they frequently locate their offices. They may not, of themselves, be very innovative.

Companies need to resist the feeling that it is not worth getting out of bed for anything other than a potential blockbuster. Product cycles are getting shorter and shorter across the board because innovations are more rapidly copied by competitors, pushing down margins and transforming today's consumer sensation into tomorrow's commonplace commodity. Firms have to innovate continuously and incrementally these days to lift products out of the slough of commoditisation. After it used innovation to create a commoditised market for fast food, McDonald's struggled before recently managing to reinvigorate its flow of innovations.

Finding a Niche
Another factor to take into account is the fragmentation of markets. Once-uniform mass markets are breaking up into countless niches in which everything has to be customised for a small group of consumers. Looking for blockbusters in such a world is a daunting task. Vijay Vishwanath, a marketing specialist with Bain, a consulting firm, says that Gillette's bouncy blade may yet end up as no more than a niche product — fine if it is profitable.

Mr Chakravorti believes that the problem lies with the marketing of new innovations. It has not, he says, caught up with the way that consumers behave today. "Executives need to rethink the way they bring innovations to market." Too many are still stuck with the strategies used to sell Kodak's first cameras almost 120 years ago, when the product was so revolutionary that the company could forget about competition for at least a decade. Today, no innovation is an island. Each needs to take account of the network of products into which it is launched.

Companies that fail to come up with big new headline-hitting blockbusters should not despair. There are plenty of other, albeit less glamorous, areas where innovation can take place. Management thinkers have identified at least three. Erik Brynjolfsson of the MIT Sloan School of Management, says that the roots of America's productivity surge lie in a "genuine revolution in how American companies are using information technology". Good companies are using IT "to reinvent their business processes from top to bottom".

Reinventing, or simply trying to improve, business processes can offer surprising benefits to firms that do it well. The software that runs many business processes has become an important competitive weapon. Some business processes have even been awarded patents. These are controversial and, because they may stifle rather than encourage the spread of new ideas, are probably not in the wider public interest. Yet Amazon obviously views its patent for one-click internet purchasing as valuable, and there are plenty of other examples, particularly in the financial-services industry.

Nevertheless, there is no doubt that, patented or not, what Mr Hammer calls "operational innovation" can add to shareholder value. In an article in the April issue of the Harvard Business Review, he asks why so few companies have followed the examples of Dell, Toyota and Wal-Mart, three of the greatest creators of value in recent times. None of them has come up with a string of revolutionary new products. Where they have been creative is in their business processes.

While superficially mundane, Wal-Mart's pioneering system of "cross-docking" — shifting goods off trucks from suppliers and straight on to trucks heading for the company's stores, without them ever hitting the ground at a distribution centre — has been fundamental to the company's ability to offer lower prices, the platform for its outstanding success. Is it not over the top, though, to glorify such a common-sense change with the title "innovation"? For sure, it does not call for a higher degree in one of the obscurer corners of science. But Wal-Mart did something no competitor had ever dreamed was feasible and that was highly innovative.

Mr Hammer, who was once a professor of computer science at MIT, believes that the best qualification for innovation is a basic training in engineering. Crucially, he says, engineers are taught that design matters; that most things are part of a system in which everything interacts; that their job is to worry about trade-offs; and that they must continually be measuring the robustness of the systems they set up. Such a frame of mind, he believes, fosters innovation. It may be no coincidence that many of the greatest corporate leaders in America, Europe and Japan, past and present, trained first as engineers.

Companies are being encouraged to embrace other forms of innovation too. In a recent issue of the MIT Sloan Management Review, Christopher Trimble and Vijay Govindarajan, two academics from Dartmouth College's Tuck School of Business, recommend that they try a little "strategic innovation". The authors point to examples such as Southwest Airlines, a low-cost American regional carrier, and Tetra Pak, a Swedish company whose packaging products are handled at least once a day by most citizens of the western world. Such companies succeed, they say, "through innovative strategies alone, without much innovation in either the underlying technologies or the products and services sold to customers."

Tetra Pak's strategic innovation involved moving from the production of packages for its customers to the design of packaging solutions for them. Instead of delivering ready-made containers, the company increasingly provides the machinery for its customers to make their own packages: the fishing rod, not the fish.

But customers can then use only Tetra Pak's own aseptic materials to make their containers. This strips out all sorts of transport and inventory costs from the production process, for both Tetra Pak and its customer. It also makes it very difficult for the customer to switch suppliers.

Southwest's innovative strategies include its bold decision to increase capacity in the immediate aftermath of September 11th 2001, and its carefully timed rolling out this May of competitively priced routes focused on Philadelphia, an important hub for the ailing US Airways, an airline lumbered with an expensive legacy (such as highly paid crews). The low-cost carrier "is coming to kill us," said US Airways chief executive David Siegel shortly before his recent resignation. And he was not exaggerating.

In his recent book, "How to Grow When Markets Don't" (Warner Books, 2003), Mr Slywotzky and his co-author Richard Wise recommended another form of innovation. "A handful of far-sighted companies", they claim, have shifted their focus from product innovation to what they call "demand innovation". They cite examples such as Air Liquide and Johnson Controls, which have earned profits not by meeting existing demand in a new way but "by discovering new forms of demand" and adapting to meet them.

The French company Air Liquide, for example, was a market leader in the supply of industrial gases. But by the early 1990s gas had become a commodity, with only price differentiating one supplier from another. As its operating income plunged, Air Liquide tried to behave like a far-sighted company: it almost doubled its R&D expenditure. However, it reaped few fruits. An ozone-based alternative to the company's environmentally unfriendly bleach for paper and pulp, for example, required customers to undertake prohibitively expensive redesigns of their mills.

The company's saviour came serendipitously in the form of a new system for manufacturing gases at small plants erected on its customers' sites. This brought it into closer contact with its customers, and led it to realise that it could sell them skills it had gained over years — in handling hazardous materials and maximising energy efficiency, for example.

After exclusively selling gas for decades, Air Liquide became a provider of chemical- and gas-management services as well. In 1991, services accounted for 7% of its revenues; today they are close to 30%. And because service margins are higher, they account for an even bigger share of profits. An ozone-based bleach could never have done half so well.

The Dilemma Solved?
In his latest book, "The Innovator's Solution", published late last year, Mr Christensen argued that established companies should try to become disruptive innovators themselves. He cites, for example, Charles Schwab, which turned itself from a traditional stockbroker into a leading online broker, and Intel, which reclaimed the low end of the semiconductor market with the launch of its Celeron chip.

There are, says Mr Christensen, things that managers can do to make such innovations more likely to happen within their organisations. For example, projects with potential should be rapidly hived off into independent business units, away from the smothering influence of the status quo. The ultimate outcome of any one disruptive innovation may still be unpredictable; the process from which it emerges is not.

In the end, though, "no single innovation conveys lasting advantage," says Mr Hammer. In the toys and games business today, up to 40% of all products on the market are less than one year old. Other sectors are only a little less pressured. Innovation and, yes, invention too, have to take place continually and systematically.

Why Quality Managers are an unneccesary overhead

2005-06-14T12:38:00.001+01:00

Changing face of Business Process Analysis

2005-04-23T10:02:00.000+01:00

The Business Process Analysis (BPA) market is evolving. There are strong market forces are work. And this change is being recognised by Gartner who comment on and rate software vendors.

Over the last 5 years BPA tools have been used by Business Analyst (BAs). BAs are all about building systems or configuring systems and they used to be the final word on how the business should run. They were the experts on analysing the business. So the BPA tools have been developed to support the requirements of BAs; data modelling, entity relationship diagrams, flowcharting, metadata, object modelling, and strong analytical tools.

But the BPA market is changing for a number of reasons. End-users are developing far more power, and they want to take ownership of the process design and analysis as they will have the on-going task of maintenance and continuous improvement.

These ar real people out in the trenches dealing with customers, producing products, paying the bills etc. Their requirements are all about associated with widescale adoption of changes in working practices; change management.

As there is currently no recognised market for change management applications, the BPA market is the closest to satisfying the requirements, and is where we should look to try and predict the future winners. But just as IBM PC was wrong footed by the more nimble Dell who has gone one to dominate the market, this “discontinuous change” in requirements could bring other vendors to the forefront which are better suited to meeting the requirements.

So why “discontinuous change”? Because it requires a different type of thinking, as illustrated by the table below, and many of the requirements for the BAs cannot co-exist with the end-user requirements. It is a functionality compromise.

Functionality BA perspective End-user
Process mapping Capable of being “executed” by a workflow engine Capable of being understood by my mother
Data modelling Support for BPN / BPEL / etc notation Export capability at lowest levels
Access Key BA’s with powerful PCs Dynamic to anybody with a browser-enabled device
Ease of use Once trained, easily used Intuitive, just like their favourite website
Appealing to use Not necessary as power users Critical to encourage adoption
Personalisation Not required Critical to eliminate information overload
Performance Fast PC 24X7 100% availability
Multi-language English is business language Personalised multi-lingual support
Authorisation Version control Full ISO/FDA/FSA compliance and audit trail

The analysts that cover the markets (Butler, Gartner, Forrester and Ventana Research) often have very different views. However, they have managed to agree on one thing. That is, that control-ES (www.control-ES.com) has upset the happy established BPA status quo and is currently setting the standard for the change management marketplace.

Day in the life of a CEO - 2007

2005-04-23T09:47:00.000+01:00

As her latest CEO webinar closed and she looked around the room, Anne knew that she’d pushed her company forward again.

No matter how good the technology, at the end of the day it was about people – so she had insisted that every significant transformation project was launched properly. And for bigger projects like this one, that meant her hosting the launch and showing her commitment to continuous improvement.

Since she took over as CEO at Pharma Dynamics back in 2004, she had embedded continuous improvement into the company’s culture. The mechanics of change were almost automatic by now – managing change well had become business as usual.

This latest project, to improve the way that the company’s manufacturing units in East Asia integrated with new a component supplier in Hungary, was typical. From the original idea through to her own authorisation, she had tracked its progress through the company’s Lifecycle change environment.

Likely most projects these days, it wasn’t going to deliver a dramatic ROI - maybe it would make the supply chain just one or two percent more efficient in this case – but it was yet another in a continual and relentless stream of business improvement projects.

The ability of Pharma Dynamics to generate projects like this, and execute them well, was what competitors envied and analysts valued.

It hadn’t always been this straightforward. Like most major corporations, Pharma Dynamics had spent the 90’s going through dramatic interventions to re-engineer the business and implement ever bigger software packages. There was a lot of smoke and noise, and things changed - but when the last consultant’s BMW pulled away it wasn’t necessarily obvious that different was better, or that the pain had been worth the cost.

Lurching companies forward through Big Bangs went out of style – it came to be seen as a shallow easy option next to positively transforming people, processes and culture. Improving any company’s game now was organic - about incremental change, and everyone being involved. Workforce engagement had become recognised as critical in managing change well.

Anne had sensed this change in her previous role as CIO at Pharma Dynamics, and it was a pivotal moment in her career. Like most of her executive colleagues, Anne had experimented with Six Sigma and other process improvement methods. They’d delivered but not convincingly – the initial energy behind each project was often dissipated early on, and it wasn’t clear that costs weren’t simply being shunted around the business rather than truly taken out. And frequently the enthusiasm for change, and people’s involvement, was limited to a small band pressing on against the odds. Anne knew from the ‘change fatigue’ she’d seen on her improvement projects that continuous change demanded new thinking.

Coming at it from the data end, the CFO had initiated projects using dashboards and scorecards to drive performance improvement. But their value was fundamentally constrained because the metrics were disconnected from the business processes: the traffic light was blinking red – but the causes and the potential remedies were not usually obvious.

Human capital development was moving up the Board’s agenda. The definition of leadership was being re-focussed on workforce engagement and motivation as a critical capability in a world where outsourcing was becoming ubiquitous.

The pressure for active compliance had also driven her to search for enabling technologies that could create a new environment. “Keep me out of jail!” had become the mantra of every CEO.

When she took the Lifecycle concept to the Board, they loved it. Leveraging the capabilities of the emerging PPM (process and performance management) software applications, it promised an organisation better integrated and more agile. Lifecycle would deliver an environment where performance improvement and compliance would go hand-in-hand – all threaded together around the end-to-end processes that ultimately delivered value to Pharma Dynamics customers.

Appointed CEO to deliver it, implementing Lifecycle hadn’t been easy. There was initial resistance to yet more change - but as she travelled around the company selling people on Lifecycle, she noticed the climate changing. People felt increasingly empowered by being more involved, and while tough business decisions had still to be made, and could blow things off course, the correction was quicker. Lifecycle had helped create a business that embraced change.

“Ready to go with the award?”- her PA burst into Anne’s thoughts.

“Sure” she said. One of the things she’d cemented into the Lifecycle culture was rewards. It was time to recognise the contribution made by the manager in Brazil who had kicked off this latest project. He had no line responsibility for the East Asia manufacturing units – but, like everyone in Pharma Dynamics, Lifecycle had given him visibility of their processes. By applying lessons from his supply chain work in South America, he had spotted the potential for improvement and posted the original idea on Lifecycle, which had sparked off this latest successful project. That’s how best practices usually now spread across the company - collaboratively and from the grass-roots.

As she turned to the plasma wallscreen for the videocall, Anne wondered whether some awards didn’t merit a personal visit from the CEO – to Rio, for instance…

Contributed by Mike Gammage (mike.gammage@nimbuspartners.com)

Better second time around? Getting the benefits from CRM and ERP

2005-04-23T09:38:00.000+01:00

The whole of the western business world has been blighted with CRM and ERP projects which have delivered limited or no business benefits. There even some that have killed companies. Nucleus Research has built a business around looking at the ROI (Return on Investment) delivered by software packages. Sounds like a great job, but it must be soul-destroying because most of the stories they hear are of failed projects and squandered benefits.

I was with a Research Director from Gartner last week who specialises in CRM. He was saying that when clients ask for advice they are looking for ways of getting the cost savings and productivity gains from their existing implementations which they were promised but never materialised.

When I started to talk about how many of our clients had used a process-focused approach for implementing software applications with incredible results - such as halving the implementation time - he became very animated. This is not only because the software is configured dramatically faster, but because the business transformation of the workforce was achieved far more quickly and effectively.

We got to the end and he sat back and said, "Very interesting, you should write a book about what you've told me." Every author waits a lifetime to hear that line. I proudly reached into my briefcase and produced my recent book "Common Approach, Uncommon Results" that devotes a chapter to the successful implementation of software packages.

That approach is echoed in a very compelling White Paper by the Accenture Institute for High Performance Business called "The Return of Enterprise Solutions - The Director's Cut". The argument of the paper was that most films are better second time around once the Director has had a chance to recut them with complete artistic control and no time pressures. The authors argue, supported by research, that is very similar to many organisations are now revisiting their enterprise (ERP & CRM) implementations looking for the benefits they never received first time around. Their Director's Cut will give them the results.

This work focuses on the business transformation (business change) work that the original implementation didn't deliver. Why? Normally because the last thing in the plan was business transformation, and project ran out of time or budget. Now we can all only stand back, open mouthed at this stupidity. Wasn't business transformation the whole point of the original project? But what happened was the enormity of the task configuring and integrating the software overshadowed everything else.

The approach discussed in the book, "Common Approach, Uncommon results", ensures that business transformation is woven into every phase of the project. And it is not theory, it is proven in clients in a wide range of industries. Clients are getting staggering results - a 10,000 person utility implementing SAP in 4 months, a multi-national implementing SAP & Siebel across 40 countries in 18 months, when the original estimate from the SI partner was 36 months.

Accenture White Paper is compelling reading and the PDF can be downloaded at The Return of Enterprise Solutions:

To go back to the main website http://www.ideas-warehouse.com/

What is Corporate Performance Management (CPM)

2005-04-23T09:36:00.000+01:00

The companies, who want to adapt themselves to the changing competition conditions in a short time, support their improvement activities with various management types, information technologies and accumulation management activities. One of the management approaches is CPM. Could you please provide brief information about CPM?

CPM (Corporate Performance Management) draws together a number of existing, proven management approaches and combined they will allow the company to understand its current level of performance, and therefore take actions to improve.

The approaches or disciplines are Strategic Planning, Budgeting & Planning, Process Management, Scorecarding & Metrics, Compliance Management. i.e. the metrics, processes, roles and responsibilities all presented in a consistent coherent picture which everyone in the business can understand, with an auditable history of all changes.

It is expected that the demand for CPM will be increasing in 2005. Do you think there is an inclination to CPM solutions in today's environment? Could you give some numbers as an example to this increase?

Firstly you should consider Performance Management rather than CPM, as this term is more general. Various analysts and software vendors seem to each have their own version and acronym: BPM (Business P.. M.. ), CPM (Corporate P.. M..), EPM (Enterprise P.. M.. ) SEM (Strategic Enterprise Management) and so on.

We are seeing that there is significantly greater interest at the Executive Team to consider Performance Management overall, rather than as individual initiative or projects being delivered in isolation down in a business unit or department.

Another measure is the number of well-attended conferences. I now speak at 2-3 events per month on the subject of Performance Management.

There are niche analysts covering purely Performance Management, and all the major IT analysts, such as Gartner, Butler and AMR Research have dedicated analysts covering the area.

One final point, is that for some Business Intelligence software vendors CPM is seen as simply Planning and Budgeting for the Finance Department. This is far too narrow a definition.

Do you think the companies started to apply CPM in an efficient way?

Every company has a different driver (or catalyst) for starting to get a better understanding of the metrics, processes, roles and responsibilities in their business. Only once the basics are in place can a company consider CPM.

We are already seeing companies with fantastic benefits from applying CPM, and these projects have been delivered in less than 12 months. For example Lockheed Martin, the defence contractor, in the UK has reduced costs by $8m this year and expect year on year savings of $6m, and have identified process improvement savings of $21m. This has resulted in their contract win rate going from 30% to 100%.

The greater level of awareness, plus the improvement of the economy combined with strong competitive pressures is forcing every company to consider how it can improve its operational performance. And that is what CPM is focused on.

Time, cost and efficiency-based directing and monitoring are essential to achieve success of the projects that have been started by the companies, who want to adapt themselves to the competitive environment. What could be the difficulties that a company faces with during the realization of the strategies? How can a company overcome these difficulties?

With any initiative / project the challenge is getting the changes in working practices or improvements, which were identified by the project team, adopted or accepted by the rest of the company.

In the book we have a formula R = I x A2 where R is the result for the company, I is the initiative / project and A is Adoption of the changes suggested by the Initiative. Some people have said it should not be A2 (squared) but An where n=14. It is FAR more important to get adoption for a few key initiatives than no adoption on a huge range of disconnected initiatives.

For the success of the organisations, the ability to realize the strategies is as important as determining them. The research shows that only 10% of the companies realise strategies successfully. What is the most important reason for this?

I think that there is a real problem with company's ability to translate the strategy into a series of activities which are clearly communicated and can be understood at the lowest levels in the organisation. The strategies stay in senior management's heads, and the workers carry on as normal.

When the CEO says "We will be more Customer Focused", what does that mean for the Call Centre operator? Should they pick the phone up and smile, or give a bigger discount. The critical part is – "How to you want me to act differently based on the corporate strategy, and how am I going to be mesured".

The approach of hierarchically breaking down the top level picture of the business (the strategy) which is described in terms of metrics (outcomes) and activities to deliver those outcomes (processes) is THE way to communicate the strategy and turn it into reality.

Two of the reasons of project failure are not to spread the project deliverables amongst employees and not to connect the strategy to the people's daily operations. What must the companies do for the possession of the strategies by the employees? What are the benefits of the adoption of the project outputs and the strategy?

I think that I've covered the first part in the answer to the previous question.

The benefits of adoption are
- better staff morale (people know what is expected of them)
- more efficient/effective operation (people are doing the right things)
- the business is more agile (change to react to markets can be faster)
- can expand more easily (you have a blueprint of how the business works)
- alignment of strategy with day to day activities

If a company applies the CPM in an effective way would there be an increase on its profit?

Of course – that is what we are seeing from our clients in profit making industries. In non-profit making industries (Government) we are seeing reduced cost, or additional capacity.

Do you have any advice for small and medium sized companies? What do they have to do in order to increase their profitability? How must they use CPM?

The principles of CPM is relevant to large as well as small companies. It is is more difficult for an organisation with less than 75-100 employees, because they cannot necessarily afford to dedicate a full time project manager and part time project team to really make the project deliver. However, when we were only 40 people Nimbus adopted the principles and it has enabled us to respond to a huge demand from the market.

My advice is to start to apply the principles, no matter what size of company you have. It is is critical to appoint a Project Champion who is part of the Executive Team and who has the energy, vision and rive to ensure that the work is completed.

Eliminating unproductive IT

2005-04-20T05:40:00.000+01:00

Mobile technology, flexible business processes, seamless networks – all of these concepts have been heralded as fundamental to the advance of business efficiency, delivering considerable improvements in employee productivity and greater business freedom.

According to a new report from analyst group Gartner, however, in many cases the reverse is true. A lack of integration and coordination between IT systems, tools, procedures and policies, it says, is starting to impede – not assist – people in their work. Moreover, it says, the failure of companies to help people absorb new applications, technologies and information flow is undercutting by half the business value of their IT investments.

At the root of the problem is the massive rise in digital information. Worldwide information production increased 30% annually between 1999 and 2002, according to the University of California at Berkeley's School of Information Management and Systems. And much of this data is now being conveyed instantaneously across the globe via email, mobile phones, PDAs and instant messaging, leading to widespread information overload.

Gartner vice president and research director Diane Morello says that a professor at a respected US university once posed a question: Why do teachers continue to use blackboards while the rest of the world goes electronic and digital? The answer: because the pace of writing on the blackboard matches students' capacity to absorb the ideas and thoughts being presented. One can understand, therefore, says Morello, why human beings feel so overwhelmed by the flow of email, instant messages, voice mail, cell phone calls and personal digital assistant (PDA) messages. “Simply put, as human beings, we lack the capacity to absorb information, news or ideas as quickly as they come at us. The result is a feeling of paralysis and exhaustion.”

Companies, says Gartner, need to take responsibility for the co-ordination of these digitised data flows in order to free up employee time and improve communications efficiency. And, with more and more employees spending time out of the office, they also need to take a new approach to application design and development, designing services, tools and information more deliberately for remote and distributed use.

“With virtual work becoming an organisational norm, systems and applications must be designed to be place-independent; and that demands a different perspective for business analysis, application design, infrastructure and supporting services in human resources (HR) and the workplace,” says Gartner. The ultimate aim, it says, is to simplify access to basic services and systems to such an extent that dispersed staff can collaborate with colleagues instantly rather than wasting time navigating the technical underpinnings of tools, networks, passwords and log-in details.

The crux of the problem is, while IT has been a powerful tool for machine-to-machine communication, making processes and systems more effective, it is not so good at making people effective.

So how do companies overcome this challenge. First, says Gartner, they must understand and orchestrate changes. Poor management of innumerable small changes coming from IT, HR and business management will undermine success and credibility.

Second, IT needs to make more effort to cloak technical complexity. No company can justify the amount of time that knowledge workers waste trying to navigate the technical underpinnings of operating systems, browsers or intranets, says Gartner. “Usability and service bundling will shrink the time wasted and go a long way toward reducing total cost of ownership.”

The next leap in business performance is not going to come from mobile technology, service-oriented architectures or from web services. It is going to come from improved understanding, analysis and management of the human impact of IT.

Reported in Information Age 31 Jan 2005

Wikis or blogs - technology looking for a problem?

2005-04-15T22:00:00.000+01:00

Wiki is a Hawaiian word for "quick," and some say it has the potential to change how the Web is used. A wiki is a type of Web site that has the ability to turn the company intranet into a giant corkboard on the wall of the office canteen to which employees can pin photos, articles, comments and other things.

A wiki can gather, in one place, the data, knowledge, insight and customer input that's floating around a company or other organization. And it's a living document, since workers who are given access to it can make changes constantly as no programming skills are required.

Is this Knowledge Management reinvented?

The failing with typical KM projects was that they were simply a huge hopper into which every bit of content was shoveled. Then clever software analysed the documents and categroised them so that they can be access later.

So is the wiki a freeform version of this? Or is it a way to make the intranet rather like the magnetic board in our kitchen crowded with lots of out of date papers, unread recipes from magazines, fast-food brochures and tide tables. A great idea, but someone needs to have the responsibility to keep it tidy every month or so and throw away things that are out of date and are never used.

But wikis are gathering some advocates. Despite its speedy name, the wiki is not a new idea and dates back to the mid-1990s. A programmer named Ward Cunningham, who wanted to create a platform for freewheeling collaboration in software development launched WikiWikiWeb. Techies used it to collectively work on software engineering projects. The aim is now to see if it can enable employees collaborate and communicate better electronically.

But there are plenty of product out there. E-Room which was recently sold to Documentum, and Lotus Notes from IBM. But these are heavy-duty expensive applications bought by the business for the business. The key difference is that a wiki seems to be a self-help, self-regulating approach on the intranet or internet – software used by the employees for the employees.

Some have described this as a collective-blog. As the Wall Street Journal eloquently put it “But if the blog is a soloist, a wiki is an orchestra. Not surprisingly, its sound can also be cacophonous if managed incorrectly and can be open to those whose changes are unwelcome or even damaging. That's why features such as access control, saving of revisions, stressing accountability and encouraging peer review of postings come into play. In addition, most users say an effective wiki must be pruned and weeded regularly to remain manageable.”

Until now, most wiki software has been open-source efforts such as TWiki. Their free software has been downloaded by tens of thousands of people, who then typically unleash it within companies on their own. This strikes fear into every IT department and operational manager. There is a danger this could be another distraction, another source of information, and could fall into the category of "occupational spam" -- endless, time-consuming and often pointless.

"People have tried very hard to take fragmented knowledge within corporations and put it somewhere that it can be used, but it's been an uphill effort," says Ross Mayfield, founder and chief executive of Socialtext, a Silicon Valley startup that has been leading the drive to sell wiki technology to companies since late 2002 by developing more sophisticated software and services for it. "Our focus is literally to get everyone on the same page."

But is this the right way for organizations to be managing critical information? A wiki may be valid for non-work situations, such as the well-known Wikipedia. This free online encyclopedia, compiled since early 2001 by volunteer writers, now has hundreds of thousands of entries, making it bigger than any other encyclopedia.

For information where the intended audience is known, where there is a need to maintain compliance and where there is little need for widespread collaboration - for example, the process and related documents for drug approvals - then it is probably better to use products from the established enterprise software vendors. But these vendors could probably learn from some of the presentation techniques which are making wikis so appealing.

Where our taxes get wasted - Government IT projects and its official

2005-04-14T07:36:00.000+01:00

It is not the first, not the last…. But this heart-warming story of £390 million needlessly thrown away on a case management computer system for the UK courts identifies in important change in attitude by the Government.

Big scary monsters, out of control

Government projects are big, high risk and high profile – and have a high price tag. Over the last 10-15 years the Government has tried various ways of controlling cost and mitigating risk – by engaging the big System Integrators with proven expertise, by PFI (Private Finance Initiative) where the system is not paid for upfront, but charges are based on some usage metric, and more recently by employing a high profile CIO to drive a hard-bargain throughout the bidding process.

All these rather miss the point – and at last the Government seems to be recognising that.

Focus on the delivery of the software

All the to date effort has been on making sure that a 3rd party, lets call them the System Integrator (SI)) delivers a system to the specification it has been given. But the real business benefits come from 2 areas which are outside the control of the SI:

- the ability to transform the operation – the system is being put in place to drive up productivity and drive down costs. Therefore it is critical that the end-users create a new streamlined business model which will define the system that the SI is required to deliver. Only the business users, the end users, can define this. It needs to be an end-to-end view of the business – not a list of requirements which can be misinterpreted. The SI is contracted to deliver a system to support this business model. If it is ambiguous, wrong, or fluid then the SI will inevitably make a killing out of change requests… especially if they have been beaten down on cost in the up-front procurement exercise and are desperate to make the project profitable.

- the workforce adopts the new ways of working – the benefits are based on the entire workforce understanding how their behaviour and day to day activities will be different – and better. And that these new ways of working will be supported by the new system. This is NEVER part of the SI’s brief and is fundamental to make the most of system that they are being paid to deliver. It is NOT just running some training courses.

Is it only the Government who get this wrong. Of course not. It is just the projects are such high profile and the job of the National Audit Office is to expose them. The track record however is not good – a recent survey found that of the £10 billion worth of UK Government IT projects only 13% were on time, on budget and to specification. So what percentage actually delivered any value?

In the commercial world that are major failures. Fox-Meyer Corp. A bungled ERP forced the drug distributor into bankruptcy. Hershey spent $112m on a system roll-out and had a $100m drop in sales in the quarter after go-live. And the list goes on.

So the basic issue is engaging the end-users in upfront business design and in the roll-out. That is the responsibility of the Government department. You cannot delegate that, or outsource it.

Libra - £390m thrown away to date: the post mortem

Now I said that the Government is realising the implications of this. The recant NAO post mortem for Libra, the failed (failing?) £390million case management system was analysed by ComputerWeekly, the first key lesson was:

standardised computer systems need standardised business processes…. The Department for Constitutional Affairs (the client) “sought automation as a priority before questioning the existing processes”, therefore it was “difficult to obtain a single view of IT requirements across the various committees”, and not “did not have the power to impose the business process change on the independent Magistrates’ Court Committees”.

Bear in mind… THEY HAVEN’T DELIVERED THE SOFTWARE YET – so they haven’t struggled with the business change / adoption issues yet. The full 12 years of history, and the 3 previous attempts makes painful reading.

So what is changing?

These conclusions in the post-mortem are far more realistic – identifying the real cause of the project – which mostly lay at the feet of the Government Department. The problems of previous project foul-ups have always made the SI the culprit.

Ian Watmore has joined as the new IT tsar for Government, leaving a high profile job as UK Managing Partner of Accenture. He is to form a super-group of top information officers across the public sector to help streamline central departments, improve take-up of online services and reduce IT-related failures.

"Simplified business processes and new IT will be required to make possible savings recommended in the Gershon efficiency review, published in July. The review will force departments to effect important reforms", said Watmore.

As a taxpayer, I hope he can make it work.

Software driven change.... it must have been a software salesman told you that!!

2005-04-09T09:25:00.000+01:00

How does that work? When the MBAs fresh out of business school proudly draw the 5-Forces model they put on it things like Customers, Market, Competition, Regulation as drivers for change.

But at a meeting with a major multi-national today they described “software driven change”. Whilst this is counter-intuitive - surely change drives software not the reverse -
it sounds horribly familiar.

The client decided to outsource its SAP applications management and the global processes that it supports, because it was hopelessly inefficient. They had every flavour and version of SAP, and lots of heavy and expensive customisations to meet local requirements. The way they were managing SAP had become hugely expensive and a significant barrier to business transformation.

They outsourced to a major consulting/outsourcing firm on the premise that their project management methodology and SAP expertise would allow them to upgrade to a common SAP platform supporting common global processes, thereby reducing costs and making the business more agile. So far, so good...

But the change process has been technology-driven. The client is using the re-implementation of SAP as a battering ram for change and the adoption of global processes.

Six months into the project, the teams from the consulting/outsourcing firm are meeting stiff resistance from local business units who are rejecting software-driven change and insisting that their local requirements give them an opt-out and the right to a customised implementation.

So is the client on the way to repeating the mistakes of its earlier SAP implementation with heavy local customisation and associated costs (as well as a transformation programme that will slow to snail's pace)?

How could they have done it differently using a process-focused approach?

They could be using live high-level workshops as a means to stimulate fresh thinking, new ideas and to create the required consensus on the core global processes.

They could be talking with the business unit people about their business processes in an easy-to-understand way, instead of asking them to approve SAP system diagrams and technospeak.

They could be engaging business people in change instead of confronting them.

They could seamlessly reconcile the tension between maximising the use of global processes while at the same time allowing for essential local variations.

They could be integrating process with documents - they are significantly out of step, which makes process seem even more airy-fairy and time-wasting to their business unit customers.

The bottom line is:

Without the user engagement that this approach can create - and without its efficient integration of business process with documents, metrics, roles and competences – the client is going to spend zillions and years moving only very slightly forward from where it was, missing a huge opportunity to embrace sustainable transformation.

The trick with delivering major projects ($100million- $10billion) is managing the interfaces

2005-04-05T09:58:00.000+01:00

I was lucky to have spent some time this week with the Director of Engineering and Production of an oil company. An American who has had 40 years working in every corner of the planet managing the major construction projects – mostly oil platforms, but he has also built a railway and a couple of bridges.

We were discussing the book that he has in his head, but has not found the time to write. He has the Chapter headings already written and it is all about how you run the vast army of staff and contractors required to assemble an enormous drilling rig, or build an oil pipeline across a desert.

He has a unique view of the problem which he described as “the risks are all in the interfaces”. What an earth does that mean?

Let me try and paint a picture of life within the programme…..

A major programme will have a client (quite often the government) who appoints a prime contractor to build something (a railway, a bridge, ship, an drilling rig). Normally the prime contractor will take the risk on the delivery of the programme. They will appoint a number of sub-contractors who will in turn appoint their own sub-contractors to deliver elements of the work. Each is trying the pass the risk down onto their sub-contractors (called back-to-back contracts).

To give you some idea of scale. For a major construction project the prime contractor can easily have over 100 staff (procurement, legal, design authority, reporting, accounting), and there could be up to 5000 companies who are sub-contracting, each with their own staff.

It is difficult enough getting a large organisation to work consistently when 100% of their time is devoted to one company. But in the programme the sub-contractors are working for a number of companies on different contracts, and the programme is only one part of their business, and the organisations may be spread across the globe.

Added to this, the mechanism for communicating what is required is a legal contract supported by specification documents, and each organisation is forced to compete (normally on price) for the work.

Back to the statement “the risks are all in the interfaces”. With some many people, companies, conflicting priorities and motivations across the programme it is critical that a consistent message is communicated down the structure. The risk is at every interface between contractors, or between departments in the prime or sub-contractors. This is the point at which the priority, the understanding of the design specification, the consistency of reporting can breakdown.

There is huge value for the prime contractor to communicate the common aim down the organisation (sub-contractors and their subcontractors). This is then reinforced by mandate common process, procedures, documentation standards, reporting and measures. This starts to make the programme operate as a single organisation working off a single set of information (single source of truth), rather than islands of information landlocked within each sub-contractor.

Clearly this is only one of the techniques for getting a programme to deliver. There are others, but we’ll have to wait for his book to be written.

Don't underestimate the power of live workshops

2005-03-23T09:49:00.000Z

When I was with a group of Gartner analysts we were discussing how to build momentum into process-focused projects. Firstly you need to use live workshops so people see results happening quickly. Secondly you get consensus at the end of the workshop which allows you to get one with the next level workshops.

When taking about using live workshops to map out the business definition with the end users they were shocked. At first they didn’t believe that you could use this technique with a bolshy management team. How could you hold their attention for half a day or a whole day? Part of that is the skill of the facilitator, but most of it is they quickly see how valuable the results are.

To be able to see the operational strategy of the entire company on a single page is fundamental to getting alignment of the team – but I’ve never see it in companies. Not quite true – I’ve seen it after the first week of the engagement with our clients. Other remarkable things happen. You can then identify the priorities of the project. Often when the scope of the project is the supply chain which crosses functional boundaries – i.e. Quote-to-Cash or Ideas-to-Product, the real cause of the problems is masked. Mapping it out with the management team quickly identifies the priority areas within the supply chain to be tackled first. And what is interesting, more often than not, it is not the place everyone first though when they were looking at each area in splendid isolation.

I’ve written a whole paper on Running Senior Level Workshops and why it is like being a stand-up comedian. You know the lines, you know what works, you know what you are trying to achieve….. but you have no idea on the audience and how they will react.

It can be found at www.nimbuspartners.com in the downloads section.

Getting adoption for Siebel....

2005-03-20T09:13:00.000Z

It all started 18 months ago when one of our largest clients “got the religion”. They understood the power of the approach that we were suggesting and decided to use our software application to improve the speed and quality of their SAP and Siebel implementation.

That was not the brave bit – we have a number of clients who have made this move. The critical part was that they were prepared to challenge IBM Global Services, their Systems Implementors, who REPEATEDLY tried to force them to use MSOffice as the core implementation and change management tool.

For more information on why the approach we are suggesting for software package implementation is different you need to read Chapter 12 of my recent book Common Approach, Uncommon results.

But in summary, the client used a process focused approach using an application which allowed them to develop a single model with input form a multi-functional team who are spread across 3 continents. This hierarchical end-to-end process model defined how the business would work, specified how SAP & Siebel would be configured, tested that the configuration would support the business end-to-end.

They held their nerve and this week they have the final proof, beyond doubt, that they made the right decision. So what happened this week. 3,500 salespeople around the world were trained on how to use Siebel – but not by being sent on a Siebel training course, not by being led through a series of Siebel screens. Instead they were being trained by following “Playbooks”. These are structured flows that step through the live processes and allows the salespeople to understand why they are doing things, how they do them…..and only then which Siebel screens need to be completed.

Some of the comments back from the most senior people in the client say it all….."The Playbooks on our intranet are fantastic!! I think our Client Exectivess will love this. Make sure you give it hype as I think it will help with overall navigational differences in Siebel 7"

What made this possible was the vision of the Programme Manager. He understood how much they could leverage the original process definition work at the back end of the project. He understood the value of adoption – and at last he is seeing the benefits and getting the recognition within the company.

We all love a happy ending.

Training 3,500 salesmen to do the right things – not just how to fill out Siebel screens

2005-03-18T09:53:00.000Z

It all started 18 months ago when one of our largest clients “got the religion”. They understood the power of the approach that we were suggesting and decided to use our software application to improve the speed and quality of their SAP and Siebel implementation.

That was not the brave bit – we have a number of clients who have made this move. The critical part was that they were prepared to challenge IBM Global Services, their Systems Implementors, who REPEATEDLY tried to force them to use MSOffice as the core implementation and change management tool.

For more information on why the approach we are suggesting for software package implementation is different you need to read Chapter 12 of my recent book Common Approach, Uncommon results.

But in summary, the client used a process focused approach using an application which allowed them to develop a single model with input from a multi-functional team who are spread across 3 continents. This hierarchical end-to-end process model defined how the business would work, specified how SAP & Siebel would be configured, tested that the configuration would support the business end-to-end.

They held their nerve and this week they have the final proof, beyond doubt, that they made the right decision. So what happened this week. 3,500 salespeople around the world were trained on how to use Siebel – but not by being sent on a Siebel training course, not by being led through a series of Siebel screens. Instead they were being trained by following “Playbooks”. These are structured flows that step through the live processes and allows the salespeople to understand why they are doing things, how they do them…..and only then which Siebel screens need to be completed.

Some of the comments back from the most senior people in the client say it all….."The Playbooks on our intranet are fantastic!! I think our Client Exectives will love this. Make sure you give it hype as I think it will help with overall navigational differences in Siebel 7"

What made this possible was the vision of the Programme Manager. He understood how much they could leverage the original process definition work at the back end of the project. He understood the value of adoption – and at last he is seeing the benefits and getting the recognition within the company.

We all love a happy ending.

To go back to the main website http://www.ideas-warehouse.com/

IT's latest windfall... IT directors are using regulatory compliance to justify a new wave of technology investments.

2005-02-01T12:51:00.000Z

By Tim Bradshaw - Infoconomy

It is being called the 'compliance dividend'. The unprecedented raft of new business regulations either recently brought in or looming into view is spurring a fresh wave of technology investment on at least a par with the last two great IT 'dividends' - Y2K and the Internet.

One head of IT at a financial institution, who prefers to remain anonymous (for obvious reasons), tells Information Age that he has been successfully pushing through business plans for IT projects that had lain fallow for months, if not years.

The thing to do is to liberally spread the word 'compliance' around the plan, apparently. Do that, he says, and the chances are, CEOs and chief financial officers - particularly those who have to personally sign their company's financial statements under the so-called 'Sarbanes-Oxley' Act, and who thus face personal fines (or worse) for non-compliance - will enthusiastically back the proposal.

Feeding off paranoia is a good start for any business plan. One sign that things, especially since Enron, have got a little out of control is the fact that there were no fewer than 323 financial restatements in the US last year - up by one-fifth since 2001. Companies have become extremely cautious about filing the wrong numbers. Many would prefer to face a short-term PR disaster than risk the prospect of being found to have fallen foul of a particular regulation.

Happily for IT directors, the need to comply covers a lot of potential areas of investment. Not that this need matter much to decision-makers, but none of it comes cheap. IT sector analysts at the Meta Group think that banks complying with the Basel II risk-management accord will each spend between £15 million and £25 million on relevant IT projects. (The overall cost, including IT spending, is likely to be around £130 million for the biggest institutions.) Add a few more zeroes to the IT bills of companies that must comply with Sarbanes-Oxley, not to mention Turnbull, Higgs and International Accounting Standards, and you are getting closer to the true cost of compliance.

A poll of 166 senior executives around the world, commissioned by Changepoint and conducted by the Economist Intelligence Unit (EIU), found that compliance is spurring 59% of companies to invest "heavily" in existing IT equipment, while 34% are buying whole new systems.

There is evidence that bigger budgets for compliance are pushing up salaries, especially in the financial services sector - in a possible repeat of the Y2K pay hike. One survey found that salaries for IT vacancies in the City of London were 15% higher in March 2004 than six months earlier. Recruitment experts describe "desperation" within senior management seeking the right IT skills.

It is good news for vendors, too. "It's the greatest thing in the world," says Phillip Strand, a global strategist for business intelligence software company SAS Institute. Dave DeWalt, CEO of Documentum, EMC's content management division, says: "We're seeing a highly accelerated business model for compliance, which is perhaps as big if not bigger than the justifications of the Internet were."

Buying habits are also changing. "The decision is coming from much higher in the organisation, which makes a world of difference in terms of spending on technology," says DeWalt.

That is creating a golden opportunity for career development. "This is the situation that will get the CIO on the board," says Mike Davis, an analyst with the Butler Group. "The CIO is the only person who has the breadth of understanding and can put together the strategy that can help an organisation be compliant."

Only the CIO, Davis argues, is in a position to judge which tools will keep the management team free from unwanted attention from regulators. Reporting, records management and business processing software, for example, might not have been deemed sufficiently critical to warrant investment before, but post-Sarbanes-Oxley, they can suddenly seem vital. And as such software can only operate effectively on secure foundations, the CIO has the perfect excuse to invest in that data centre that had failed to get funding before.

The scale of the new regulations' boost to IT investment is being compared to the Y2K panic, when whole systems were overhauled just to make sure they could read the correct date. But unlike Y2K, regulatory compliance has no end point, no midnight deadline. "Compliance is bigger [than Y2K]," says Anita Bradshaw, a senior industry analyst at CSC. And the regulations just keep coming: a tough new auditing directive from the European Commission, for example, was announced as recently as March 2004.

Analysts say that even small, young companies might need to show good governance, say, to qualify for venture capital funding. Although in theory it only applies in the US, so many European companies have partners or subsidiaries there that the Sarbanes-Oxley standards have become international. Such culture of honesty and transparency gives the right impression to customers as well as auditors. "There is a gen-eral shift in the world outlook," says Peter Thomas, VP of IT management for Chubb Insurance.

David Weymouth, CIO of Barclays Bank, has heard a lot of sales pitches on the subject. "All the vendors are saying, 'Upgrade to our latest system and that will be as close as you can get to complying'," he says.

Weymouth acknowledges that rules on direct marketing, for example, have enabled Barclays to "completely clean up" its postcoding system: "Over the last three months we've sorted out 80,000 data issues that were around integrity of data and matching data." This initiative, he says, along with data warehousing and customer management projects, may not have occurred without a need to address new regulations.

Some argue that the benefits to IT from such regulations go further than just being a handy hook for a difficult business case. CSC's Bradshaw says it ushers in a new interdependency that could bridge the traditional gap between the business and IT. "It's alignment with the business and getting that link more and more self evident in everything that you do. Now there is a logical business reason for everyone talking to each other," she says. "The most exciting thing is that it is bringing technology higher up in the organisation."

The EIU/Changepoint survey, which found that in 63% of organisations senior IT personnel were not involved at a strategic level when planning the company's compliance programme, may suggest that this is overstating the case. And SAS's Strand gives an example of one customer which told him that, out of a total expenditure of $32 million to comply with Sarbanes-Oxley, less than $1 million was spent on software.

Even if a substantial sum of money is granted to IT, Bradshaw warns that too radical an overhaul of IT systems might "throw the baby out with the bathwater. Integrating new systems is inherently risky. If you can adapt what you've already got, you're way ahead."

Companies should shift their attention from cost-cutting to business-building

2005-01-23T11:03:00.000Z

Bosses seem to have lost their nerve. After the over-exuberance of the dotcom boom they wisely focused on cutting costs. And they have been very successful at it. Switching their manufacturing to low-cost developing countries (to China in particular) and outsourcing their business processes to specialists with higher skills and economies of scale have brought about dramatic savings. So has simply making fewer costly if adventurous mistakes. The evidence is visible on firms' balance sheets and bank statements.

And yet many companies seem to have become so hooked on cost-cutting that a sort of anorexia has set in. That cannot be healthy in the longer term. Cost-cutting is an effective way to increase earnings, but it has its limits. In a recent article, consultants at Booz Allen Hamilton warn that “sourcing in China can become a source of woe”. A consultant at Hewitt Associates, a human-resources consultancy, says, “If you think China is a cheap place for labour, think again.” Shortages of skilled workers there are rapidly pushing up prices.

In any case, cheap labour is not always as cheap as it seems. There is a price to being Scrooge. Costco, a big American retailer, pays its staff over 50% more than the industry average. Not only does it get a chance to employ higher-quality staff—there were 5,000 applicants for 160 jobs available when it opened a store recently in Michigan—but its staff turnover rate is a mere 6% compared with the industry's average of 59%.

Many companies, realising that their biggest cost item is purchased materials, have been regularly switching suppliers in an elusive search for the cheapest. Not only are the transaction costs of this high, but it also destroys any longer-term trust with suppliers. A recent study of the aerospace industry found that the assumption of the industry's giant manufacturers that they could indefinitely force their suppliers to lower prices led those suppliers to sell some replacement parts directly to the airlines, bypassing the aerospace firms.

A bigger reason to worry is that many firms have not yet found good uses for the cash raised through cost-cutting. In America and Europe, some are beginning to dabble in mergers and acquisitions. But M&A has such a bad track record that it will be a lucky (and skilful) minority who can create and sustain value from their deals. A recent McKinsey study found that 70% of mergers fail to produce expected gains in revenues.

It would be much better in most cases to redistribute the money to shareholders, which fortunately is what many firms are doing. In America and Europe, companies are buying back their shares like never before, one of the most convenient ways to distribute cash. Last year the S&P 500 companies repurchased a record $197 billion-worth; this year the figure is expected to be even higher.

This is much wiser, but it is also a kind of admission that the firms' managers cannot find something to do with their assets, skills and cash that they believe will earn their shareholders a return greater than that to be gained from squirrelling the cash away in a bank (which, let's face it, is no great hurdle these days). Shareholders might rightly take a dim view of the long-term prospects of a firm which went too far down this route. Some firms may already be wondering whether they have done so. Intel and Yahoo!, two companies which recently announced share buybacks, reported surprisingly big increases in first-quarter profits and revenues this week. Yahoo! found the online advertising market unexpectedly buoyant, and Intel found (to its surprise) that it can sell premium-priced chips—which persuaded it to announce a 10% increase in its investment on plant and equipment this year.

Innovate and differentiate

With so much stress on cutting costs, there is reason to fear that too few companies are investing in innovative new ideas that might generate organic growth. The paucity is not due to a shortage of advice. Books and articles on innovation and how to generate new businesses are as plentiful as ever. The cover story of next month's issue of the Harvard Business Review is entitled “Building Breakthrough Businesses Within Established Organisations”, and describes how Corning, a glass manufacturer, and the New York Times Company recently made bold strategic experiments work. Michael Porter, a leading theorist on competitive strategy, has long argued that firms gain advantage either through lower costs or through a differentiation of their products that can command a premium price. With so many firms stressing cost-cutting, it might be clever to try, like Intel, to stand out from the crowd.

Printed in the Economist 23 April 2005

Disturbing the System

2004-12-01T12:54:00.000Z

By Peter Cheese, Accenture

Is your company about to embark on a major change program? Before you take the plunge, consider the following: Although the ability to manage change successfully is a characteristic of high-performance business, recent research indicates that as few as one in four major change programs succeeds.

High performance involves maintaining excellence, not just this quarter or the next, but over time—through business cycles, industry disruptions and leadership eras. So it is important to understand why so few change programs are sustained. In a recent survey conducted by the Accenture Institute for High Performance Business, senior executives in 14 industries reported that the benefits of major change initiatives in their organizations had been delayed substantially or even negated because management misread the need for change, paid too little attention to implementation, underestimated the need for leadership or was too easily distracted by other concerns.

Diagnosis and prescription in this area is tricky, however. Successful change programs involve a careful balance of “left brain” skills—the logical and analytical—and “right brain” skills—the intuitive and synthetic. Persistence is essential if organizations are to sustain the change journey and not become distracted and lose interest; but they must also be able to adapt and learn along the way. Leaders must define the context, set objectives, measure progress, and put in place the right processes and tools to support and enable the change.

Yet even more important to successful change programs are the human skills of listening, inspiring and leading, coaching and mentoring. In other words, both sides of the organizational “brain” must be engaged if major change programs are to succeed.

Drawing on lessons from the natural world, organizations should be viewed less as fixed structures and more as complex adaptive systems—like ecosystems. Organizational change actually occurs through the interaction of a number of different agents. It is a process of ongoing adjustment at all levels of the organization; it requires the continual replenishment of energy and a structure that allows for self-organization, distributed intelligence and continual learning.

If executives can look at an organization this way, they will be inclined to consider their own roles differently—not only as managers or directors but as “disturbers of the system,” whose primary role is to establish context, provide the energy, and then challenge and encourage innovation and risk taking.

The Context of Change
At the same time, however, managing change, like managing any complex system, is not about practicing some esoteric art form, with ill-defined boundaries and approaches. There are, in fact, some proven ways of understanding change, as well as proven tools, technologies and approaches to help enable and manage it. Together these add up to new ways not only to develop and encourage change management as a key leadership capability but also to master a competency critical to creating a high-performance business.

Just as leaders must learn to see their organizations in different ways, they must also understand how context defines any particular change program. What is driving the change, and what are the most appropriate ways to effect that change? When British Prime Minister Harold Macmillan was asked what made his job most difficult, he famously replied, “Events, dear boy, events.” Half a century later, the pace of events is rapidly altering the context in which organizations operate, making it ever more challenging for business leaders to respond appropriately.

For example, the economic events of the past few years have been the context for many short-term cost-cutting initiatives. In such a context, management sees a proverbial burning platform, reacts quickly, then drives a programmatic change process requiring strong program management skills, strict accountability and firm leadership. Management of these change programs proceeds along hierarchical, command-and-control lines, with little empowerment or engagement beyond a core team or on a need-to-know basis.

However, as Macmillan clearly understood, life is uncertain, and we can’t control all the events that affect us. Successful organizations are adept at anticipating and sensing the need for change. They are able to exist with uncertainty and contradiction yet still can act and execute effectively. Perhaps most important, these change leaders are also able to bring the organization and their people along on the journey of transformation—no mean feat when one considers that people generally are not comfortable with change and uncertainty.

Transformational change is characterized by a significant shift in strategy and capabilities to align with new realities. It must be more open than programmatic change, and it requires the engagement and empowerment of the wider organization. The objectives of a transformational change may be well defined, but the destination can be less certain and predictable. The course of change may well need to be replotted many times along the way in response to shifting circumstances.

A successful transformational change management program has a number of key characteristics.

1. Innovation from the Bottom Up

Transformational change, by definition, embraces new thinking, new ways of working or new solutions, new products and services, and new ways to serve customers. Therefore, innovation is an absolute requirement for any successful change journey. Innovation flourishes in environments and cultures that value diverse perspectives and recognize that intelligence is distributed throughout an organization. To tap into that intelligence and to ensure that everyone is working together toward common goals, leaders must encourage and support communication—cultural as well as technological—across traditional boundaries, and provide ready access to people and key resources at all levels.

Tools and technologies are available to facilitate collaboration and sharing, knowledge capture and communications in support of those goals. These tools include e-learning, collaboration technologies, content management techniques, expert searches and portals. Their use is being accelerated, in part, because they enable transformational change programs.

Take, for example, the case of BP, one of the world’s largest petroleum and petrochemicals companies. A few years ago, to support a new growth strategy, the company’s US-based Mid Continent business unit set aggressive goals for increased production across its assets. BP’s leadership understood that programmatic change with a focus on project management would not produce the necessary results. Instead, what the company needed was a way to engage the entire organization in the change challenge, and tap the innovation and wisdom available across operational and functional boundaries, and on all organizational levels.

Over time, BP has seen a discernible change in its culture as a result of this innovation and change initia-tive. Says Iain Conn, group chief executive of petrochemicals for BP, “Innovation is now embraced by the employees and leadership teams, and is considered a primary driver for future business growth. The results have been increased production and reduced production costs, both of which have had a direct impact on BP’s bottom line” .

2. Ubiquitous Leadership

While programmatic change requires focused, top-down leadership to drive the necessary improvements in operations, transformational change requires effective leadership at all levels. In Accenture’s experience, employees on the front lines are often the ones who first sense the need for change and want to be engaged in helping to drive it.

Resistance to change often comes at the very levels where it most needs to take effect: with middle management. There are a number of reasons for this. Middle managers may not understand the change program, they may be ambivalent about it, at times they may not even trust it. To overcome this resistance, leaders at all levels must be willing and able to articulate the new strategy and the context for change, and must be able to inspire employees, rallying them to the cause.

This kind of leadership is something that is done with people, not to people, and it can be developed. The employee commitment and engagement that it creates also pays off—something of real importance at a time when both external and internal surveys are showing low employee engagement at many companies.

The difficulty of developing this new style of management and leadership should not be underestimated. Many executives and managers got where they are today through successfully applying a top-down, programmatic style of leadership. Learning to listen for wisdom throughout the entire organization—and then actually using it—is harder than it sounds. Still, it can be done.

Consider the Bank of Ireland, where a team approach to leadership development was a key aspect of a transformational change program. To accelerate and sustain the behavioral change necessary for the bank’s IT solutions department to function in new ways, a team of senior executives worked on so-called leadership group support programs—a collective approach to building leadership skills both individually and as a team.

The program combined leadership skills analysis, general leadership development sessions, and individual leadership coaching and mentoring. At retreats and other off-site events, participants were asked to focus on dialogue and on listening, rather than on simply devising strategies or developing particular tools or methods.

3. Engaging the Organization

Most executives know that communication is essential to successfully navigating major change programs. But communicate what? In what style, at what times? And through which media and channels?

Communicating during major change is primarily a matter of engaging people. Making them aware—giving them an understanding of the context, and ultimately persuading them to support and sustain the change—requires both consistent communication and a tailoring of the content and method of communication to different audiences at different points on the change curve. Communication is not just something that comes from the change sponsors; it also comes from local action teams, change networks and pulse groups, and from the project teams themselves. What’s more, only deep and sustained engagement can counter the distractions and disturbances that can transform enthusiasm into disillusionment and disengagement.

Face-to-face dialogue must be part of the mix of communication and engagement. However, communicating more widely and quickly is also essential to global companies. Today, we have the opportunity to communicate using many different channels, engaging people through multimedia formats, intranet portals and online learning programs.

With all of these communication options, leaders can respond rapidly to critical change challenges, including post-merger integration. Following the merger of Hewlett-Packard Company and Compaq Computer Corporation, for example, HP quickly and effectively had to integrate the two organizations at all of its locations around the world. At Hewlett-Packard Norway, executives focused on understanding current employee behaviors and identifying where changes were needed to achieve the vision of a unified HP. These leaders further recognized that the real challenge of integration would come when HP Norway formally merged its people and resources into one new, shared facility.

Executives used several tools to facilitate communications and support the overall change program. To help broaden awareness of the cultural implications of the change, HP Norway created an e-survey. This tailored, web-based survey was distributed to all employees to identify cultural similarities and differences between the pre-merger HP and Compaq workforces, attitudes toward the integration, and areas of poten-tial risk. The e-survey helped executives understand workers’ expectations, assess their awareness of HP core values and develop programs to guide a smoother transition.

HP Norway also developed a communications and knowledge-sharing portal to support the change program. This portal, integrated with the company’s existing website, provided practical information (for example, “Where will my workspace be located in the new facility?”), as well as updated messages from HP leaders that addressed workers’ expectations and kept everyone focused. The portal was widely used, logging 10,000 hits in the month prior to the move. The company estimates that the successful integration—thanks, in part, to the effective change program—reduced the amount of time spent on internal processes by 20 hours per employee. The successful communications effort—primarily via the integration portal—reduced the amount of time spent on internal communications and information searches by 15 hours per employee.

4. Developing New Skills and Behaviors

Essential to the successful implementation of change are training programs that develop in employees the skills and behaviors they will need to perform in the new business program. Changing behaviors is not just about giving them new goals and roles. New technology-based learning tools enable workers to master new skills faster, and help them more quickly become comfortable in the new ways of working.

E-learning has been a key part of the transformational change program under way at a major European resources company, where a multiyear, multirelease plan is introducing a comprehensive CRM system across the business’s several locations. Company leadership has been visionary in its determination to ensure that the new solution is not just effectively deployed but also realizes its full value potential.

Taking a holistic approach to training and supporting the workforce, this company implemented a suite of support processes, including business engagement and communication, to help people understand how the transformation affects them personally and to prepare them for training; training and learning opportunities so that people are proficient at using the new processes and applications; and performance support to reinforce the new ways of working after the training is over. The majority of new training for the company was developed as e-learning modules, using a scenario-based approach to instructional design within each module.

5. Metrics to Track Progress on the Journey

Along with the “right brain” skills of leadership, engagement and encouraging bottom-up innovation, transformational change also requires some “left brain” techniques, like measuring the progress of change. Any change entails a variety of different dimensions, and successful change leaders measure and understand these dimensions while taking action to manage the journey effectively.

Such organizations use traditional program management techniques to track the progress of each element of their various change initiatives and budgets. They understand the value drivers and business case, and they track achievement against these objectives carefully. They also embrace the use of new tools that allow them to gauge their organization’s readiness and willingness to accept upcoming change, and they use performance management techniques to align the organization to the right goals and objectives.

Senior executives at pharmaceutical group Wyeth, for example, recognized that the company’s new strategic and business goals would create different pressures on its research and development unit. Initial analysis of the R&D organization underscored the need for Wyeth’s four research sites, which had previously operated independently, to coordinate their efforts so leaders could prioritize initiatives. Wyeth set out to create a new way of working—one that would empower teams, offer better guidance in the use of emerging technologies and improve governance.

The company also knew it needed to create a new culture of accountability, which meant establishing the right metrics and baseline so that it could assess progress on the change journey. A performance management team first identified what behaviors and processes could be measured, and then set performance goals. What emerged after two months was a well-crafted list of organizational objectives—objectives that managers three levels down could use to help reinforce the new organizational goals.

The team then defined the performance metrics that both groups and individuals would use to measure progress. A scorecard clearly laid out goals and provided a quantitative method of assessing how well individuals and groups were performing. Evaluations now occur on a quarterly basis. “There’s no mystery about it. Keeping people’s eyes on the ball will help improve performance,” says Bruce Schneider, Wyeth’s senior vice president of research operations and planning.

Someone once defined insanity as doing the same thing over and over, expecting different results. As leaders survey their own organizations, the marketplace and the competition, they must now apply different techniques to cope with the accelerated pace of change and the growing competitiveness of the marketplace. Methods that worked during steadier, more stable times will fall short when it comes to transformational change.

Accenture research into the characteristics of high-performance organizations shows that sustainable success is achievable, even during times of extraordinarily rapid change. Such success, however, requires developing change management capabilities within the organization, developing a culture of ubiquitous leadership and innovation, and creating an organization that learns and adapts.

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About the Author

Peter Cheese is the global managing partner of the Accenture Human Performance service line. With more than 20 years’ experience in consulting, Mr. Cheese, who is based in London, has led and supported large programs of change across a number of organizations and industries. He is responsible for developing Accenture's practice across all the areas that support human performance, including HR transformation programs, learning, knowledge management and performance management to drive workforce productivity, and top-down analytical approaches to understand human capital strategy, value and returns on investment.

Enterprise Performance Management (EPM): Why It's The Next Big Thing...

2004-10-12T12:35:00.000+01:00

John Hagerty - CEO - AMR Research

The Issue:

After years of effort and billions of dollars spent on Enterprise Resource Planning (ERP), Customer Relationship (CRM), and Supply Chain (SCM), corporations finally have the data and components of the infrastructure in place to dynamically manage enterprise performance.

Senior managers at enterprises worldwide have always had a vision of an all-encompassing business information system that manages day-to-day business processes while providing the analytic insight necessary to make timely, informed, proactive business decisions. Many implemented ERP applications to achieve that goal, but these applications had little, if any, decision support capability. As their functional footprint expanded to accommodate supply chain and customer management needs, users had more data than ever. Yet, they could not manage company performance any better.

That vision of a single, unified environment is still intact and finally in sight. Yet, there is still more work to be done. Data must be distilled to the performance indicators that truly matter to each business, presented through scorecards or dashboards to all levels of management, and then acted upon. For managers, this means getting the best information to evaluate the health of the corporation and make the right decisions to guide it through these turbulent times.

The $10,000 question

Whenever I speak to a company charting its course to Enterprise Performance (EPM), I ask, "Is it worth $10K per seat for each of your managers to be fully engaged with the key metrics that you've determined drive optimal performance?" No one disagrees. In fact, many suggest it is worth a lot more to them to have everyone aligned to the same performance goals. So, decision makers are clearly on board with empowering managers with the information they need to do their jobs, like EPM.

Now, let's do some math. Fortune 1000 North American-based companies employ more than 29 million workers. Roughly one in ten is a manager, making 2.9 million managers. If companies think EPM is worth, conservatively, $10K per manager, that's $29B. Factoring in the rest of the world and companies beyond the Fortune 1000, and adding in a healthy dose of conservatism, I estimate that EPM is worth at least $50B today.

EPM is a journey, not just a final destination

Is there an EPM spending spree just waiting to bust loose? Not $50B worth. EPM is evolutionary, building on the foundation of technology and applications a firm has already implemented. It includes Business Intelligence (BI) products, reporting tools, planning and budgeting applications, analytic applications, incentive management systems, portals, and scorecards, along with data warehouse technology, data models, and integration software. If you scan your technology inventory, you'll surely find some EPM components already in use, and active performance measurement programs underway in pockets of your business.

Obviously, some of that EPM money has already been spent. But, much of it has been for discrete databases and/or business processes that rely on large chunks of data being shuttled back and forth between applications; it's not optimal, but it's pragmatic for solving pressing business or business performance issues. Many users already understand that it's virtually impossible to separate analytics and reporting from budgeting and planning or incentive management from the Key Performance Indicators (KPIs) on which they're based. Products that architecturally and/or conceptually reinforce this separation are becoming harder for strategists to rationalize.

EPM frameworks are being planned and put in place, a piece at a time. Users have a wide array of options available to them, from analytics and BI sources to enterprise application vendors and systems integrators, all offering their unique perspectives on how to frame EPM in each firm. Knowing what's most important for the business must guide any decisions you make.

Ever since the first Information Systems (MIS) department was created, corporations have been striving to provide better information to managers. So why is now the time for EPM? Several important technology trends are coming together to support EPM on the scale necessary to sift through terabytes of data to make decisions:

Advances in storage technology has made it possible to collect enormous amounts of data. Advances in servers help process this data with sophisticated algorithms that can interpret the data in near real time. Internet-based software tools make it possible to access data anywhere in the world without having to solve complex integration issues. Many corporations now have an application infrastructure that captures all of the data supporting and created by key business processes. Further out, look for wireless technology to push EPM indicators and alerts to cell phones and hand-held devices. Before corporations can take advantage of any of these advances in technology, they must first embark on the EPM journey. Proceed with your eyes (and mind) wide open. Poll your own managers and gauge their priorities. Use that information to decide what hot spots you tackle first. Match that against what you hear from technology and application providers to uncover those products and services that fit best. Because of the vast number of EPM market participants, you'll find many options, some of which may challenge long-held beliefs.

Leverage, leverage, leverage. Make sure to take advantage of all the work you've already done and paid for. At the same time, don't be dogmatic and automatically give the nod to an incumbent vendor if its products and plans don't match up well to your requirements.

EPM is not just a financial management exercise. Although money is the common language throughout the enterprise, supply chain, customer management, and production-based performance management are fundamental parts of the EPM model and must not be neglected.

Operational Performance Management

2004-09-01T13:00:00.000+01:00

Mark Smith – CEO – Ventana Research

Summary
For companies to improve profitability, A new business imperative called Operational Performance Management is critical to increase effectiveness by improving business activities and processes.

By strategically integrating software, hardware and business process, companies can exponentially increase value. Ventana Research’s recent Operational Performance Management Study shows that this imperative is considered extremely important by companies and reveals that business intelligence and business process management are more important to measure and monitor business activities than ERP or building systems through application servers or EAI. Companies must use a strategic, methodical process for Operational Performance Management initiatives like the Ventana Research PerformanceCycle that can drive higher levels of efficiency in making effective business decisions.

View
Operational Performance Management enables businesses to increase effectiveness (leading to increased profitability) by understanding, optimizing and aligning business activities and processes to maximize output. Ventana Research defines Operational Performance Management as:

The practice of understanding, optimizing and aligning the operational business activities and processes to a common set of goals and objectives to improve effectiveness.

Operational Performance Management can be achieved through the supporting technology of business process management, business intelligence, application server technology, integration technologies and enterprise application software. These technologies can stand alone to help organizations improve operational performance, but when strategically integrated for a common goal these components can exponentially deliver more value to your organization. Aligning these technologies will help companies in areas such as product and service performance management, supply chain performance management, supplier intelligence, demand chain performance management, customer intelligence and IT performance management.

More and more companies see the value in Operational Performance Management. Our recent study, Operational Performance Management examined the importance companies place on measuring and monitoring business processes and what drives the importance. A significantly high level of respondents, 62%, identified measuring business processes as very important. The priorities driving this level of importance included improving efficiency at 30%, managing or reducing costs at 29% and increasing focus on revenue at 29%. The specific pain points that organizations are addressing with this new focus include providing operational information at 24%, improving responsiveness to events or activities at 23% followed by monitoring business activities at 23%.

Historically speaking, Business Intelligence and Enterprise Applications like ERP have been used by organizations to improve operational performance. Enterprise applications delivered the transactional capabilities and operational tasks while BI was used to analyze the results. The Operational Performance Management Study confirmed Business Intelligence as the most utilized software approach today at 32%, Enterprise Applications at 31% followed by Business Process Management at 22%. Application Server and EAI were last at 15%. This provides the basic foundation for most organizations but does not provide for a process context.

Results from the study highlighted a surprising change in the direction corporations are taking as enterprise applications become less a priority than business intelligence, and business process management becomes a higher priority. Business process management provides the capability to define and visualize a business process and automate the control across functional areas unlike traditional ERP systems, which operate in functional silos. When asked which software category companies plan to use to measure and monitor business activities and processes respondents indicated Business Intelligence at 35%, followed by Business Process Management at 26%, Enterprise Applications at 25% and Application Server and EAI at 14%. The study indicated companies over $50 billion in revenue are shifting rapidly away from ERP and that executives and line-of-business managers are moving towards business process management.

Ventana Research believes as organizations become more informed about enterprise-wide operational performance management initiatives they will make a concerted effort to bring business intelligence and business process management closer together. This will help organization develop a comprehensive framework to link the effectiveness of employees with the results of operational processes.

We advise companies that want to improve operational performance management to use a methodical process like the Ventana Research PerformanceCycle. This is a strategic, methodical process for understanding, optimizing and aligning business activities and processes to deploy effective operational performance management initiatives. You can read more about the PerformanceCycle at: http://www.ventanaresearch.com/methodology/methodology.php?id=465

Assessment
It is critical for companies to improve the performance of people and operational processes to increase business effectiveness. Operational Performance Management will require new methods and techniques for monitoring and measuring so companies can fully understand, optimize and align business processes. Ventana Research advises that organizations look beyond the results from Business Intelligence and begin to understand the business process itself.

Ventana Research’s Operational Performance Management Study shows that this imperative is critical to companies and that they are using multiple software approaches to meet the requirements for managing operational performance. While primarily looking towards Business Intelligence and Business Process Management to improve operational performance management, organizations currently continue to use Enterprise Applications. Application Server and EAI are very low on the priority list. Your company must find a consistent approach to measuring and monitoring operational performance throughout the organization and determine which software approach can best fit your requirements.

Ten Ways to Use Enterprise Solutions to Achieve Higher Performance Levels

2004-07-19T12:45:00.000+01:00

By Mark R. Willford, Accenture

In many organizations, enterprise systems have an impact on the performance of practically every single employee--whether in the front office, the back office, the warehouse or dealing with customers. So it is no wonder that enterprise systems can have a significant impact on an organization’s ability to achieve higher levels of performance.

Initial Accenture research has identified key characteristics that differentiate high-performance organizations. These include focusing on core competencies and using information technology as a tool to innovate, creating more effective business models, while simultaneously increasing productivity. In addition, high-performance businesses and governments take a pragmatic approach to technology adoption and integration. They also consolidate and standardize information technology to manage the total cost of ownership.

Enterprise solutions can play a key role in helping organizations develop these traits. Indeed, while enterprise solutions that enable a common source of data, integrated systems, timely information and standardized processes all contribute to achieving higher performance, they are not valuable in and of themselves. That conclusion is validated by an Accenture survey of 163 organizations worldwide that showed that only 41 percent of organizations have achieved the majority of targeted benefits from their enterprise systems.

To help organizations better use enterprise solutions to achieve higher levels of performance, Accenture has developed the following 10 guidelines:

1. View enterprise systems as an ongoing program to improve performance and drive value.
Accenture views enterprise solutions and the benefits they deliver along an evolutionary continuum Most organizations find themselves stagnating between process integration and collaboration. High-performance businesses aspire to continue to push their enterprise system capabilities. They approach enterprise systems as more than discrete projects with start and stop dates but rather as enablers of value and as part of an evolutionary program that always seeks new ways to add value.

2. Accelerate value creation by targeting tangible business benefits.
Accenture research shows that 34 percent of organizations either do not have a business case that identifies specific benefits when they implement enterprise solutions or they do not actively measure benefits. What is more, the 31 percent of organization that actively track metrics for the majority or all of the expected benefits reported that they achieved benefits significantly earlier than those that did not actively measure benefits.

3. Optimize your enterprise architecture to deliver value.
The three components of enterprise architecture--process, technology and data--must work together to deliver value. Accenture’s experience demonstrates that those organizations with the best enterprise solution performance deliver the all-important enabling technology solutions such as application servers, portals and integration brokers, on a common platform with common development and operations frameworks. By reducing the number of disparate technology platforms you also reduce related maintenance and skilled resource costs.

4. Customize enterprise system applications to gain competitive advantage--and for no other reason.
Enterprise systems should be customized only when they can be directly linked to a tangible business benefit. Define, early in the process, those business processes that are unique to the business in terms of driving differentiated business capabilities for competitive advantage. For most organizations, only 15 percent to 20 percent of processes qualify for customization. Even then, there should be a structured business case submission and approval process. For routine, non-strategic processes, standardized applications should suffice.

5. Adopt a business readiness program to not only manage change but actively embrace it.
Active ownership and accountability are critical to making sure an organization is ready for the changes that accompany a new enterprise system or functionality. Apart from active participation and sponsorship, a fully integrated stakeholder structure responsible for driving business value and readying the business--and possibly customers and suppliers as well--for change is crucial. This stakeholder network will define the business metrics, help proactively manage business readiness throughout the organization and be accountable to deliver the new system’s benefits as described in the business case.

6. Understand your core competencies and evaluate outsourcing options.
In addition to outsourcing technical infrastructure and platforms, Accenture believes organizations should consider applications management and business process outsourcing. In most cases, when organizations consider business process outsourcing, it is the result of a strategic decision to focus the organization’s resources and management attention on core competencies. For example, when product development is a company’s lifeblood, consider outsourcing the finance and accounting functions. Additionally, outsourcing and the use of global resources can lower the total cost of ownership and reduce risk.

7. Use a real-time snapshot of enterprise performance to make the right decisions.
According to Accenture research, improved decision-making is the number one benefit sought by organizations when they implement enterprise solutions, yet only 63 percent achieve desired levels of improved performance. Our experience shows that accurate, consistent and complete real-time information must be the starting point, not the destination. The good news is that new sources of data--combined with cheaper data storage and faster processing power and more effective data analysis--will enable organizations to gain actionable insights in real time.

8. Maximize the value of your supply chain.
The supply chain is an area of significant opportunity for achieving high performance. Top organizations incorporate the supply chain into their business strategy and devote significant attention to extracting the value. These organizations use mutually beneficial enterprise solutions to collaborate with their suppliers--and customers--to drive innovation.

9. Use customer insight to expand your customer base and secure customer loyalty.
Too often, enterprise solutions are technically sound, but fail to deliver benefits from the customer’s perspective. Be more than a supplier. Use customer insight, for instance, to proactively offer products and services and create a stronger bond with customers.

10. Assess and adopt new technologies that can empower the organization.
Not every organization should be on the “bleeding edge” of new technologies. But every organization interested in achieving higher levels of performance should have a process in place to assess new technologies to become early adopters or fast followers as appropriate.

Examples of newer technologies include radio frequency identification tags for tracking at the individual item level, mobile solutions to provide field teams with immediate access to information and interactive messaging, which can enable natural language interaction and transactions with your enterprise system across interactive channels such as instant messengers, pagers and short messaging service cell phones.

However an organization approaches improving its performance, enterprise solutions will almost certainly be involved--and whatever approach you take with enterprise solutions, you will need to be proactive about managing risk. These 10 guidelines provide a way to review current and future enterprise solutions from the perspective of achieving high performance.

Additional Information:
This Outlook Point of View references results found in the Accenture Institute for High Performance Business’ “The Return of Enterprise Solutions: The Director’s Cut” study by Thomas H. Davenport, Jeanne G. Harris and Susan Cantrell.

Mark R. Willford, partner-Accenture Global Business Solutions.

This article originally appeared as an Outlook Point of View, an Accenture publication. Copyright 2004 Accenture. All rights reserved. Reprinted by permission.