BLT: Business Leadership and Technology

Signs of weak analysis and advice

2011-10-04T12:00:00.000-07:00

If information is power, then information is more equal than others. It can be difficult to separate the strong from the weak, particularly in todays modern media world where everyone is an expert and every media outlook is looking for a talking head.

What follows are some examples of concepts, responses and way of thinking that I have heard that more often than not reflect weak analysis or advice. These phrases and frameworks should indicate the need to scrutinize the information and the people closely.

"Build a better relationship"

"Its a journey"

"It works, only if you do it right or do it better"

"You cannot do it with executive support"

"You need the right people"

"It is not you, it is someone else"

"You need a new solution, our solution because its a perfect fit for the situation"

"Everything you know is wrong"

"Integration is the answer"

"It depends"

These are just some of the analysis frameworks and patters of advice that are indicators of weak analysis or advice. We all recognize these arguments when they are put into a list, but that does not keep us from failing to recognize specific applications of these models to the advice and analysis we consume in our jobs. Periodically the blog will take a look at each of these frameworks highlighting examples and the reasons why they weaken the value of the information they contain.

Information gains its power based on how we use it to make decisions and create results. That process starts with the way information is packaged, the frameworks and models that are the basis and bias for what they contain. Knowing the signs of weak analysis and advice is a foundational element that separates those that are equal from those that are more equal than others.

What frameworks or models or examples would you like to add to the list?

The Upside of Turbulence by Donald Sull. Recommended management reading placing new ideas and old ones in an actionable framework. A book review.

2009-10-06T03:55:00.000-07:00

The Upside of Turbulence by Donald Sull seeks to shake up manager and the way they are thinking about leading in turbulent times. It achieves this goal and gives managers new ideas and tools to jolt them out of micromanaging the bottom line. Some of the ideas in the book are not new, however Sull’s treatment of them and the supporting tools provided in this book give it 4 stars and make it a recommended read in my opinion.

Perhaps the most profound statement in the book concerns the commonly held idea that companies have a lifecycle where they are born, grow rapidly, mature, stabilize and decline. Sull debunks this idea with the following logic.

• Companies do not have a lifecycle.
• Opportunities have a lifecycle.
• A company takes on a lifecycle when they tie their future to a single set of opportunities.
• A company avoids the lifecycle by being willing to use their core competencies to handle multiple opportunities.

Sull’s argument is that managers need to become prepared to manage in a time of turbulence which is defined as rapid and unpredictable changes in the environment that influence a firms ability to create value. According to Sully, turbulence undermines strategic plans, management ability to see and respond to change, as well as their ability to see situations from the outside in. Sull explains these and other concepts using stories as well as providing pointed arguments that show the limitations of prior management books and thinking.

Sull’s remedy for turbulence is to manage an “agility loop” that recognizes the limitations of linear planning and moves into iterative management. The agility loop is an executive’s view of the PDCA and other similar cycles.

However, rather than just repeating these management approaches, Sull puts them into a broader executive context and pairs agility with the idea that enterprises also have the ability to absorb market turbulence- which is sometimes necessary to achieve long term plans.

The book is peppered with thought provoking observations and key points including:

• Luck and the right circumstances have a greater impact on company success than the well-laid plans of executives or their foresight. However, companies that are prepared are the ones who can take advantage of their luck.

• Companies do not go through a lifecycle – opportunities have a lifecycle, which means that your corporation is only doomed to follow a lifecycle if it sticks to the same set of opportunities without change.

• Surfacing the company’s mental map is an essential element in creating an agile organization as everyone knows their assumptions so they can be tested, debated and adjusted or simply tearing up the map.

• Organizations become rigid building a system of commitments that re-enforce each other and can inhibit agility. Here Sull offers the ideas of five forces that shape these commitments: Frames, Processes, Resources, Values and Relationships.

The best chapters in the book by far are Chapter 8 – the Agility Loop, Chapter 10 – Avoiding a Corporate Mid-life Crisis and Chapter 9 Building an Agile Organization. These chapters lay down the guts of Sull’s argument and contain the tools and tables to help executives understand and apply these principles.

Overall recommended for every executives and particularly business unit executives who can get so caught up in the day to day that they loose their perspective and agility. CIOs and IT professionals will find this book helpful in understanding a business-based view of agility that can help them position IT agility.

Strengths

• Clear line of argument and focus on the issue of managing in turbulent times and how an updated/expanded view of agility can address those issues.

• Great tables and tools that executives can apply to themselves to start the conversation, help reach conclusions and improve their management capability.

• Good use of multiple case studies and stories from Carnival Cruise Lines, Mittal Steel, Korean War Jet Combat, Zara, etc.

• The core chapters that explain Sull’s argument are clearly written and focused.

Challenges

• You have to read all the way to chapter 7 before you get the answer and the meat of the book. This is a challenge, so you may want to read chapters 1,2,7,8,9, 10,4,11,5,6,3.

• Several chapters focus on the intellectual and academic underpinnings of Sull’s argument that may cause business readers to put the book down. The third chapter is pretty much a full chapter dedicated to Karl Popper which is fine, but this chapter and the next take the long road to the conclusion.

• There is an over reliance on the Carnival Cruise Lines as an example as it only goes up to the point that Carnival sold itself to P&O so while you know what Carnival did, you do not know how they would have done in the current environment. Other cases suffer from this to a lesser degree, as there are few contemporary examples.

Overall highly recommended for business and IT executives who have to find a way to find success in the tough economic environment we find ourselves in.

Link to the review in Amazon

Overproduction: Muda matters for IT

2009-10-05T05:45:00.000-07:00

Overproduction is a source of waste or muda as defined in lean thinking. In manufacturing overproduction is defined as making things before they are needed. Reducing overproduction in lean manufacturing involves concentrating on changes that reduce finished goods and WIP inventories. In IT overproduction waste comes from IT solutions or services that are in excess of required business performance.

Over delivering is over production in IT. Over delivering creates waste measured by the opportunity cost of applying excessive resources. It is waste because over delivering steals resources away from other valuable business priorities. One could see how overproduction could account for 5 – 10% waste in the IT infrastructure and 10 – 20% waste in the IT investment portfolio.

In IT there are three sources of overproduction each with their own specific remedies.

• Overproduction in infrastructure and operations revolves around the resources and redundancies required to provide service levels that go beyond business requirements. This is the realm of 100% up time, platinum help desk support, unlimited storage, etc. Service management that sets business relevant service levels and risk management capabilities that provide for fault tolerant and ready recoverability help manage this form of waste.

• Overproduction in solution development occurs when IT builds a solution that does more than is required, or takes on scope beyond the project charter. “Gold Platting” or “Scope Creep” are other names for this type of waste. While these things might delight the customer and give them more than what they asked for, they also steal resources away from their stated needs. Cost and schedule driven program and project management are a remedy to this type of waste.

• Overproduction in IT planning and initiatives occurs when IT creates solutions or commits to initiatives that have or will lose their business relevance or value. This is the realm of “sunk cost” where IT continues work to complete a solution that is no longer relevant just to complete it. “Resource allocation” waste occurs when the CIO has to prove to the CFO that all IT resources are fully loaded for the year. Recognize that at least 10 to 20% of initiatives approved at the start of a year lose their business relevance before they are completed. Shortening the IT planning and project horizon is the remedy for this type of waste as it keeps IT delivering first things first.

The idea that overproduction is waste can be tough to understand particularly when you see value as doing more or going beyond the call. That view assumes that the volume of IT produced is the measure of IT’s business value. In reality, the business does not want more IT for the sake of more IT, no they want more IT in the right places. That means taking back resources wasted on over production and putting them where they matter.

Free is worth the expense, a book review

2009-07-26T02:51:00.001-07:00

Free: the future of a radical price (Free) is a book by Chris Andersen, the editor of Wired and author of the book, The Long Tail: Why the Future of Business is Selling Less of More.

Free and profit form an apparent contradiction that is reshaping industries and who we think of commerce. Chris Andersen unpacks the contradictions in Free creating one of the better business books I have read so far this year.

I paid for the book and read it on a flight from Chicago to Europe. I was ok paying for the book as I like to write/highlight different parts for future reference.
People in the US can read the book online for ‘free’ at : www.scribd.com/doc/17135767/FREE-full-book-by-Chris-Anderson

The book is a quick and breezy read, which may give people the idea that the concept is a little ‘lite.’ It is important to recommend that Andersen is a journalist rather than a business academic or consultant.

In many ways, the book and Andersen’s popularity are a function of the ideas in Free. Andersen acquired this knowledge through interacting with others and this book is the work of a ‘maven’ who wants to share that knowledge with others. This puts the book in the same category as Crowdsourcing or Outliers rather than the work of Clayton Christensen, Gary Hamel or Jim Collins. Once you understand the context, its possible to appreciate the book for what it is.

I recommend this book for several reasons. First it is a book that discusses the concept of ‘free’ in our economy, society, personal and professional lives. In taking this approach, Andersen is able to take a surprising complex idea and explain it fully. Second, the book presents these ideas in a clear fashion with ideas building upon one another.

Free is one of the few business books that seeks to build understanding rather than just explaining an idea. I think that many will see “free” as an idea of selling things for no price, which seems like a fairly simple construct. However, if you think about the concept and the examples in the book you can apply them to our own situation.

The first eight chapters of this book are strong and well worth the read. That is about ½ of the book. After that the quality of the writing and the clarity of the ideas falters somewhat – still valuable, but it would have been great if the back half of the book got into more detail and more examples rather than largely rehashing the earlier concepts.

Recommended for business leaders and executives who want to understand more about the notion of offering things for “free.” Marketing personnel and those working in companies with a strong information component to their products and services should find this book helpful in crystallizing their ideas.

Strengths

Well-written and easy to read as the concepts are illustrated by case examples outside Internet companies.

Good graphics particularly at the beginning of the book that illustrate the flow of information and value.

The concept of ‘free’ is treated from different perspectives including a historical and social point of view.

The book discusses treats “free” as a concept which enable the reader to concentrate on understanding the issues rather than having to listen to a diatribe advancing one point of view, which is a weakness in other consulting based books.

Challenges

Andersen is a journalist and maven, therefore much of these ideas are not his own. This is ok once you know that is book is an exposition of an idea rather than a scholarly work. You will recognize some of these ides from other authors – it would have been good to provide some attribution.

The book does concentrate heavily on Google almost to the exclusion of other companies who are pursuing “free” as a strategy. Like other books about Google – the treatment is high level and partial.

Free is the place where Marketing meets Operations, yet Andersen does not provide insight into the operational considerations of free – other than the observation that the cost of everything goes to zero and therefore can be ‘wasted.’

As an experiment in the “free” world, if you found this review helpful I would appreciate your spending a moment of your time to go to the same posting on amazon.com and expressing your opinion by voting for the review. http://tinyurl.com/mh3dpl

Morgan Stanley vs Goldman Sachs – Wall Street rebuilds its culture

2009-07-24T09:16:00.000-07:00

Wall Street is rebuilding its culture a brick at a time. It has been a little more than a year since the global financial crisis, the markets retreading and the economic recession and the street is starting a return to normal.

Aarron Lucchetti wrote an article that appears on the front page of the Money & Investing section of the Wall Street Journal on July 22, 2009. The article reports on Morgan Stanley’s second quarter loss of $159 million and contrasts that with Goldman Sach’s record second quarter profits. The article attributes the difference to one cause – Goldman’s willingness to take on more risk. Luchhetti quotes Morgan’s competitors as saying that the company has let opportunities ‘slip by.’

It is easy to see the rebuke of Morgan Stanley and its decision to manage risk throughout the article. Given the competitive nature of traders and their customers, the message is clear – traders need to capture more opportunities through taking on more risk.

There is nothing wrong with prudent risk taking and the article discusses the various parts of Morgan’s business – among the more traditional investment banking lines. There is little discussion of the use of derivatives or other synthetic assets as the means to greater earnings.

The fact that Wall Street is getting back its confidence and willingness to take risk is a sign of economic recovery and unfreezing the credit markets. That is a good thing.

The thing that makes me wonder is, how the Wall Street Journal would cover the opposite situation. What would be the message if Goldman was on its back, seeking federal bailout because its risks turned sour and Morgan was hailed for its prudent risk management.

As we come out of the recession and opporunities increase, keeping a level head will be even more important.

Heard it on the grape vine – a sign of weak management

2009-07-24T09:15:00.000-07:00

Information is the currency of management.

In rich companies information flows across the company funding collaboration and fact based decisions. Managers make decisions with a clear understanding of reality and a way of measuring performance. In these companies information is a resource for the

Poor companies hoard information. Managers hold information and ‘spend’ it to get something in return. Adages such as ‘its not what you know, its who you know’ reflect this information as an asset view.

However, rich or poor information does flow through a company. In an environment of weak management, information flows through informal relationships unevenly across the company and with unexpected consequences.

That is the grapevine.

The grapevine is inefficient. Managers spend time combating false or misleading information. If you have to tell them what your going to tell them, tell them and then tell them what you told them you will be less efficient. People make decisions based on what they know. In the vacuum of clear flowing information, they will use the information they have from the grapevine and in a vacuum of reality and data. This leads to work, errors and re-work.

The grapevine is ineffective. An active grapevine undermines official communications channels and builds cynicism across the enterprise. In a perverse way, the need for clear and reliable information feeds the grapevine. Managers feel the compulsion to wait until ever “i and t” are dotted and crossed before releasing information. The result is official communications that read like a G8 resolution in that they either don’t say much or they are so late in coming out that they are irrelevant.

Weak managers fight the grapevine. Weak managers see any flow of information that they do not control as a threat. They turn up the volume on their own communications, the remove authority from their teams.

Effective managers recognize the grapevine, but they strip its power through information clarity and transparency.

• That starts with having a single version of the truth based on a reporting system.

• It strengthens through frequent communication and application of information and data in meetings and decisions.

• It is complete with the use of measurements and metrics that demonstrate value and results created by their actions.

Without good information, a grapevine weakens management and restricts enterprise performance. People will talk. They will share information. Grapevines are a fact of life in every company.

Weak managers seek to control the grapevine and in the process become controlled by it.

Strong managers leverage the energy in the grapevine through increasing the flow of good information across the enterprise.

Strategic constipation – a sign of weak management

2009-07-22T13:59:00.001-07:00

Everyone knows that the company is facing a number of challenges. Just ask people what is wrong and you will get an earful of reasons why things are not what they are supposed to be. There are many reasons. There are even more answers regarding what the company should do. When you ask, so what are you doing – the reply is “not much.”

This describes strategic constipation. The term is a little graphic but it captures the situation where everyone knows what has to be done, they feel the pressure but for whatever reason no one is willing to go first. This is a sign of weak management as management, particularly at the most senior levels – executive management and strategic management.

There are multiple causes of this type of management weakness. Understanding the cause in your particular enterprise is critical to move the enterprise off its back foot and into the market. These causes include the following sources:

Inaction often starts with poor information as business metrics and targets that do not readily connect with customer and operational performance drivers. This bogs the enterprise down through endless discussions about what is really going on, debates about what the ‘real’ causes are or the actions required taking action.

Fragmented leadership teams create competition in the executive suite that goes beyond normal debate about different approaches to move forward. Visible disagreement on how to move forward freezes lower levels of management and transmits the conflict down executive levels.

Enterprise attention deficit disorder (EADD) occurs where the company cannot seem to focus on the vital few priorities that will drive performance. When each group, business unit, etc has their own improvement plan and views on company strategy EADD is present.

Moving forward from inaction to action can happen either top-down or bottom-up

Enterprise leadership can take a top-down approach by concentrating the executive team on one or two initiatives to raise performance. Executive debate happens within the executive team but it is not transmitted down the organization.

Top down approaches live or die by with executives being on the same page. Building support for top down initiatives requires strong performance data that connects business performance with business drivers. Test the strength of this connection by looking at a performance level and asking, what needs to change to sustain an improvement in that area. The simple answer will be to change either the math on how the field is calculated or change either the numerator of denominator. That is weak data. Strong data allows you to understand the root cause of the performance issue, the actions to take, and the new targets to measure benefits realization.

Individual managers can remove strategic blockages using a bottom up approach that creates incremental improvements – particularly improvements touching the customer or core drivers of profitability. Many will downplay bottom up approaches as being too little. However in reality, top down continuous improvement is a hallmark of many high performing companies.

Relevance and relationships are the weak points of bottom-up approaches. Managers must support improvements that are relevant for performance; else people will see the improvement as a fad and lose heart. Make improvements tangible by answering the question “what will be different about the customer, our work, our performance when we are done?” The answer will tell you if the improvement is worth doing.

Bottom up approaches can also create a cycle of ‘pass the trash’ where one group solves its issues by creating issues for other related groups. This frequently happens in ‘chained’ process activities where one group’s output is the direct input of another group. In these cases, expand the bottom up approach to solve the issue across the chain rather than at an individual link.

Strategic constipation is a sign of weak management as the need to change is clear, but the will to change is weak. This creates a backlog of changes and initiatives that need to be done. Weak management will let these changes fester until they create a need for ‘transformation’ – the private sector term or ‘reform’ – the public sector term. Often by this time it may be too late. Avoid that through having relevant data, an executive team that works as a team, and the willingness to act and improve rather than admire the problem and weaken.

Blame storming – one of the signs of weak management

2009-07-19T15:30:00.000-07:00

Weak management manifests itself when companies find themselves under pressure. Blame storming is one of those signs. Defined as meeting where people admire the problem, describe how things got that way and were to place blame and responsibility. I first heard the term watching a commercial for Comcast, a U.S. based communications company.

Blame storming is an obvious tongue-in-cheek version of brainstorming. However instead of an open-ended discussion to generate new ideas a blame storm is a closed-ended focus on figuring out how to make them selves look good by making others look bad.

Weak managers flock to blame storming. It provides them with a way to retain responsibility while shifting accountability to others. That is the essence of weak management, perpetuation of their own position in the face of challenging economic times. You know that blame storming is active when you find managers defending themselves by taking the following actions:

• Calling performance review meetings that have the tone of inquisition
• Sending their teams off to gather information to justify their operations,
• Redefining the scope of their work to focus on their successes, even redefined success
• Shifting lower performing responsibilities out of their organization

Weak managers separate their own circumstances from those of the company, the customers and the stakeholders. Blame storming fills that gap and gives energy to weak managers as they keep the debate internally focused rather than figuring out how to create value in the marketplace.

Combating blame storming can seem difficult. Weak managers want to keep their focus on what happened and who should be responsible. This happens at a time when the company needs to keep their energy concentrated on the marketplace, what needs to happen and how you will work together to make it happen.

Strong managers will overcome blame storming through a combination of transparency, focus on performance and an eye on the customers and the future. Using this combination, strong managers need to push past weaker peers, and in some cases superiors to give the enterprise the thing that it needs most – results in the marketplace.

“We are where we are.” This simple statement is perhaps the most powerful statement against a blame storm. In one phrase it tells your people to move forward

Signs of weak management

2009-07-17T08:00:00.000-07:00

Stress brings out the best and worst of people and organizations enabling you to see either the cracks beneath the veneer or a core strength. The strength of your management team is one of the things that show up best in this stress.

How do you know that you have a weak management team?

Here are some observations presented a little tongue – n - cheek:

Blame storming – as meetings admire the problem groups as the sit around describing how things got this way and who should be responsible. (Note: borrowing from a Comcast TV ad)

Little Red Hen – “not I said the executive” exists where there are high levels of responsibility with little to no accountability

Strategic constipation – where everyone knows what has to be done, they feel the pressure but no one is willing to go first

Working your way stupid - where the more the company does the less intelligence and knowledge they create either through an unwillingness to learn or a dogged determination to do the same thing and expect a different result.

Heard it on the grapevine -- the rumor mill is most accurate source of information as either official communications read like a G8 resolution (don’t say much) or they are so late in coming out that they are irrelevant.

Management by McCarthyism – the pursuit and branding of people based on their past relationships or involvements in projects.

Sophie’s list metrics – “the truth what is the truth” the definition of what is good changes to the point that it loses connection with reality.

I am sure that there are others and I will try update the post as more come to mind. I have been advised to think about writing shorter blog entries, which is a good idea so I will try to take at least one of these on in detail in future posts.

What are the signs you see of weak management? How would you describe them? And what can you do about them?

Thanks

How personal is your technology?

2009-07-08T13:00:00.000-07:00

The integration of technology into our daily lives is not news per se, but it is interesting to remind us of the degree to which the two have come together.

Here are a few questions about technologies that have become part of our everyday lives. These technologies have earned our trust to the degree that we have abandoned their analog counterparts or our personal engagement in these activities. This post provides these as something to think about.

Do you have a global positioning system (GPS)? and does your GPS have a name?

GPS systems provide voice based directions often expressed in a female voice. A voice interface does not seem like technology to use, so it is easy for users to anthropomorphize the technology – hence giving the GPS system a name. The family down the road calls their GPS “Betty,” ours goes by the name “Gwen Garmin.”

An extension of this question is – when was the last time you asked for directions? With Google maps, MapQuest, GPS and other location based services. Think about the degree to which you trust those directions ahead of published maps and your friends. Do you turn left, when the GPS says turn left even if you are not sure it's the right thing to do?

What is your kid sister’s telephone number?

It's a simple question and one that 10 years ago you could almost answer by rote memory because that was the only way to reach her. She had one phone number and you had no easy way to store those numbers. Now we all have multiple telephone numbers, often with different area codes making knowing the number that much harder.

Technology to the rescue in terms of phone books that manage the multiple numbers – all you have to do is call people and places. Managing this complexity is something that technology does well and the telephone number has moved from being the primary to a secondary/alternate index. Lose the index and the only way to get back their numbers is either to wait for them to call you or grab your last cellular telephone bill and start calling numbers.

Do you keep a register of your checks? Do you check your credit card statement against your receipts?

Few things are as personal or as important as your personal finances. Electronic money is data and therefore readily supported by technologies such as online banking, personal financial management software like Quicken or other online financial services. These tools aggregate and manage information that we used to manage ourselves, tactically in terms of physically handling checks and checking off credit card statements.

The convenience afforded by personal financial products begs the issue of why you would personally reconcile analog statements when all of the information is readily provided digitally. The answer is simple, because mistakes and fraud are not eliminated by digital integration. In fact people who scan the statement and trust the figures might be surprised if they would periodically balance their statements on paper.

How technical are your personally?

This is the other side of the question raised in this blog. And to be honest, the question is largely irrelevant when we trust technology implicitly and completely. Having a reasonable skepticism of technology and recognizing the personal skills that technology atrophies are signs of people with true technical savvy.

For me, sure I have a GPS and I use mapping web sites, but I also still ask for directions when I get lost. I have a paper telephone directory as a back up. And we always balance our finances manually, often finding just enough errors to more than make up for the effort.

How about you?

Activities vs Results the difference matters

2009-07-01T06:31:00.000-07:00

Managers face a constant challenge as they are asked to deliver results through working with others. Conventional wisdom holds that managing others requires managing what people do – their activities – and the connection between what you do and the results you create. This is not a challenge with small workgroups and enterprises as they are able to see the fruit of the labor.

Modern management is activity management

However, as enterprises scale and an individual becomes a group of teams, management concerns shift towards managing activities as enterprise systems become too complex making no one group clearly accountable for realizing results. IT provides an example as it has grown into a complexity, interrelated discipline producing complex solutions and results.

The result is that management attention and resources are directed more to the work being done rather than the results the work creates. Disciplines such as project management, program management, portfolio management, financial management and the like all focus on managing the work rather than results.

Management of tasks and activities is more than 300 years old. In modern times, activity management started with Adam Smith and his division of labor. It gained ground in the industrial age through the time and motion studies of Frederick Taylor and business process re-engineering. It is one of the things at the root of the ideas behind Kaplan and Norton’s balanced scorecard/strategy maps.

The quasi-mathematical basis behind activity management

The logic behind activity management rests on the assumption of a quasi-mathematical relationship that involves adding up individual tasks until they equal something that becomes a business result. This calculus goes hand-in-hand with the development of mechanized manufacturing and industrial processes where processes are engineered and re-engineered to enable their automated or robotic like execution.

This form of management mathematics involves decomposing complex processes into smaller tasks and activities to make them more ‘manageable.’ However decomposition destroys information as executives organize like things and lose sight of the interactions required to create results.

Financial management systems, budgets and accounting hide the information lost in decomposition by giving executives a degree of mathematical certainty and a false sense of security. Its true that a $100 budget divided evenly across five teams will give each a budget of $20, but it is not necessarily true that the activities of these five teams will add up to value in excess of the $100 budget. That is part of the reason why finance sees the business so differently from line executives.

The factors eroding the value of activity management

Activity management and decomposition form the basis for the modern corporation. This system worked well as long as customer demand exceeded the productive capacity of the economy, or customers faced limited choices. However, executives need to recognize the need to switch emphasis as soon as that relationship inverts either because of new entrants into the marketplace, or decreased demand due to industry transformation.

That transformation has happened in industries ranging from automotive to music/entertainment to supply chain and logistics. In each of these cases executives need to transform their management approach from an almost exclusive focus on activities to one that balances activity management with managing for results.

Activity management for the back office
Activity management works well in stable environment where low levels of volatility and uncertainty raise the power of flawless execution. While that predictability remains for back office staff functions – which sometimes include IT – this is not the case for the front office capabilities that generate and fulfill demand.

Activity management in front office capabilities face real limitations as business focus on establishing working relationships with customers, suppliers and other trading partners. While these capabilities require flawless back office execution, not making mistakes is insufficient to create sustainable value.

Results are the basis for front office relationships and value
Relationships are based on results not activities. What you achieve together matters; it builds the context and trust that generates repeat business, innovation and collaboration. Think of social interactions like dating and you get the idea – your significant personal relationships are based on shared experience (results) rather than execution of a prescribed plan.

The difference between two is can be summed up in a phrase I picked up from Richard Suttner when I was working with him on the adoption of quality management techniques in software.

“Just because there is nothing wrong, it does not mean that anything is right.”

Activity management ensures that nothing will go wrong. Results management concentrates on making sure that something right is happening.

Suggestions for moving to results management

Moving from managing activities to managing results requires managers and executives to give up control in favor of collaboration, coaching and consulting behaviors. Here are a few suggestions:

• Stop hiding information regarding the end objectives or what success looks like, revealing things only as you need to know about them. People can only do a good job when they know what “good” is. People will collaborate when they can see what the objective is and how they play a role in creating that result.

• Start discussing the issue from the perspective of the result- what you want to happen, then you can talk about causes that are making the result difficult, finally stay away from discussion what happened as hindsight is 20/20 and not helpful.

• Stop obsessing on what you did to get here, it's a blame assigning game that robs creativity, commitment and obscures the truth. As a friend told me once “we are where we are” the more important issue is where do we go from here. Moving forward is the essence of effective coaching.

• Stop managing what people do and start asking them how what they are doing will create the results you all agree to. Give them greater responsibility for the means and they will be more accountable for the results. They are open to new ideas when they know what they are responsible for a result but may not know exactly how to achieve that result.

• Start measuring results; keep them visible, front and center. Measure processes to, but use these as diagnostics not definitions of effectiveness or value. This is the essence of “I did my job, but the company went bankrupt” argument – process is important but results are critical.

• Start defining people’s jobs/value/performance in terms of results rather than responsibilities. Consider evaluating people on a ‘piece work’ basis in terms of what they produce. That sounds like a return to the sweatshop, but its really tying people’s work to the results that create value for both.

• Start paying more for performance and less for responsibility. Organizational pay scales are often inverted – give more money to people who are far away from the value creation process. Its fine to pay executives well – particularly those who lead teams to create results, but don't forget that your front line producers are just that producers.

Results are the essence of small workgroups where everyone can see the end and people pitch in to create the result. That does not mean that results are exclusive to small companies. In fact, every team, division or organization can manage for results once they give up their addition to activities.

#12 IT effectiveness and enterprise effectiveness are linked -- twelve things every business leader should know about IT

2009-06-17T02:23:00.001-07:00

The real reason that business leaders need to know about IT is that IT is an important part of any effective business. While that sounds like a claim that is more often opinion than observation, it is something that we have been studying at Gartner Executive Programs for some time. The good news is that the two are related. The better news is that we can quantify the difference between high and low effectiveness performers. The best news is that IT effectiveness matters, it is linked to enterprise effectiveness and this makes all the other 11 things meaningful.

First off, Gartner Executive programs has assessed the link between enterprise and IT effectiveness for more than three years as part of our annual CIO survey. The 2009 CIO survey show that effective enterprises outperform their peers by achieving better results. An analysis of enterprise effectiveness conducted for this survey by the MIT Sloan School Center for Information Systems Research found that top performers have greater financial effectiveness.

Financial performance measures reflect the ability of enterprises to change their fundamentals in the face of economic and strategic challenges. In the areas of return on equity (ROE), return on assets (ROA) and return on invested capital (ROIC), top effectiveness performers have outpaced the field in six of the last eight years.

In 2007, the most effective enterprises (as identified by surveyed CIOs) outperformed their peer groups by the following margins:

A mean return on equity (ROE) of 18.2%, which was more than 40% greater than the peer average and more than 200% greater than bottom performers
A mean return on assets (ROA) of 8.8%, which was 90% higher than the peer group mean; bottom performers had an ROA of -0.26%
A mean return on invested capital (ROIC) of 10.6%, which compares to a negative mean for the peer group
Enterprise and IT effectiveness are linked according to this study with more than 80% of companies having similar levels of both. In addition, the more effective the enterprise, the more confident the CIO and IT team are in their ability to achieve results.

So What???

Effectiveness matters and that is the reason why the other 11 things every business leader should know about IT are so important. Reviewing those 11 things in the context of effectiveness builds the case for why executives who work in both IT and other parts of the organization need to know more.

#1 - IT is horizontal. This item points to the particular or peculiar position (depending on your point of view) that IT holds in an enterprise. Effective enterprises take advantage of that horizontal nature to drive proven practices and integration across the enterprise. Less effective organizations struggle with IT's lateral nature, which often arises, at budgeting and funding times as everyone benefits from IT but no one wants to pay for it.

#2 - IT is a hybrid organization. This item, compounding with the first, makes IT a mystery to many executives. The hybrid nature of IT is its role in both current operations and future transformation projects. Effective enterprises recognize both roles and manage these roles differently. Other organizations are frustrated by these roles either seesawing between cycles of development and operations, or by separating the two functions into entirely different organizations.

#3 - IT is part of a capability. Technology has been an end to itself for more than 30 years and effective organizations understand the fallacy of that belief. They look to change technology in coordination with information, business process and human capital. The old adage of ‘people, process and technology' is well worn and sometimes trite, but effective organizations understand its meaning while others only hear rhetoric.

#4 - IT applies information to replace cash, capital and operations. Effective organizations recognize that they manage assets that go beyond their balance sheet. They target information as a tool for cycle time, quality and operational performance improvements. Others view information as a resource to be hoarded, often in data ‘warehouses'. Effective organizations see information as a resource to be applied to raise business performance.

#5 - IT is complex because the business is complex. This notion is lost on many executives both in IT and the rest of the enterprise. They see complexity as an intrinsic quality, one that cannot be readily controlled. Effective organizations work to make themselves complex where it matters and simple everywhere else. This means that they leverage IT as part of a capability and look to change more than just systems when they transform their enterprises.

#6 - Executives can easily misapply IT. Take the first five items together and it is easy to see how executives and IT professionals can get IT that is costly, inflexible and delivers a mixed level of services. Effective organizations have a clear Information strategy, understand customer and market expectations and most importantly communicate those expectations clearly across the enterprise.

#7 - Executives misunderstand IT in strategy. The elements of corporate strategy involve decisions regarding the competitive nature of the enterprise, its products and markets. Given that view, it's easy for executives to think of something that is operational in nature - like IT - to be something that is supportive but not necessarily strategic. Effective enterprises understand the connections that translate strategic intent into operational performance and build upon traditional classic strategies to derive approaches that leverage all elements of a capability.

#8 - IT can evolve faster than management thinking. The truth of this statement is behind the ‘lag' that many report between the adoption of new technologies and the benefits realized from those investments. That lag has been the excuse for poor results in ERP, CRM, SCM and other technology investments. Effective enterprises apply IT in coordination with changes in the way they manage and work across the enterprise. They invest in management capability at the same time as technology capability.

#9 - IT plays different roles in different companies and industries. True enough but too often the cost, uncertain value, and complexity of IT driven by the other items on this list have led executives to adopt ‘industry standard solutions." Effective enterprises follow that same path, but they leverage item #3 and change the other aspects of a capability to create competitive advantage.

#10 - IT financials require improvement. Effective enterprises right now are looking for better alternatives to funding IT given its horizontal #1 and hybrid #2 nature. Allocating IT budgets, chargeback, project Roy's are all methods that are nearing the end of their useful life. Check this space for future innovations.

#11 - IT requires ongoing investment in its core, like other operations, just faster. Effective enterprises recognize the power behind Moore's law and the need to invest in IT as an operational resource, the same as their supply chain, sales force etc. Effective enterprises invest more in IT because they see the results of IT.

Executives, both those working in IT and other areas of the enterprise, face a future of challenge, competition and creation. They need to understand how all of their resources work to contribute to the enterprise's current performance and future potential. IT has been one of those resources for more than thirty years and during those 30 years the desire to teach the business IT has never gone away.

These 12 points seek to address this challenge by building understanding that begins with the basics, framed in a language that is acceptable to the audience rather than the teacher. Using the language that executives and managers use provides a common ground for moving forward. A ground based on the most important thing - the business. I hope that these twelve things that every business leader needs to know about IT can help your organization strengthen that common ground for your mutual success.

#11 IT requires ongoing investment in its core, like other operations, just faster -- twelve things every business leader should know about IT

2009-06-17T02:22:00.000-07:00

Technologists are quick to point out that if automobiles improved as much or as fast as computers they would run a million miles on the gallon of fuel, have more features than a driver could ever use, be able to carry an unlimited number of passengers - you get the picture.

About this time, a business executive will chime in that the IT/Car would only carry about 10 - 30% of its passenger capacity, would take forever to start up, and go about a thousand miles before it a better model comes along that the company just has to buy in order to stay relevant. Finally as you sign the papers for the car another dealer is telling of a new model that will render the one you just purchased irrelevant.

This is the tension behind item number 11 - IT requires ongoing investment in its core. The technologist sees investment as progress, adopting new technologies with new levels of performance and value. The business thinks of IT as an asset that once purchased operates, depreciates and needs to be replaced when it has ended its useful life. The point is that for most capital equipment the useful life ends when the equipment breaks down or the cost of operations and maintenance becomes prohibitive. This is easy to see for most capital equipment, it is a challenge to see it in IT capital equipment. Here are two reasons why.

First IT capital equipment is not really maintained or repaired as much as it's replaced. Second IT capital equipment has about the fastest level of planned obsolescence in the economy. Business executives need to be aware of both of these factors to recognize the need for consistent investment in IT capital assets.

IT capital equipment is replaced more often than it is repaired.

Pick up a wireless router feel how light it is. Now turn your laptop computer, your cell phone, the technology at your fingertips is fairly lightweight. Yet you use these assets constantly. When they break its actually easier to replace the equipment rather than repair it.

The reason I am brining this up is recently a company President asked why the company was paying to buy new routers in the factories less than a year after the plant went wireless. When the CIO mentioned that a forklift truck ran into a support, bringing down a section of the ceiling and breaking the routers - his answer was "they are just a year old, you should be able to fix them, after all we have equipment that is in there working for more than 30 years. That's the problem with you IT people, always want to replace stuff, never want to fix anything." When the CIO brought in one of the smashed routers, a soldering iron and a motherboard from an old PC, the CFO understood.

IT capital assets are consumed more than they are depreciated or depleted. The need to replace IT hardware is constant because IT does not run on shifts, it runs all the time without going down minutes a week for backup and minor maintenance. The pace of modern business requires IT to operate at all times particularly for companies with global suppliers and customers. Routers, storage, servers run 24x7 supporting thousands upon thousands of transactions generated by people working systems and increasingly from systems and devices transacting on their own. You pick up a laptop take it home, to a customer, on the road, in a plane. You drop it, others spill things on the keyboard, the person in the airplane seat in front of you reclines quickly catching the screen - you get the picture.

Time erodes the value of IT equipment.

CFO's and other business executives remind IT professionals of Moore's Law and interpret that if computing power is doubling that means that the cost of IT must be declining all the time. They are only partially right. Yes the cost of computing declines more or less according to Moore's law, but that lay only applies to hardware and the company has to purchase the new equipment to take advantage of the lower cost of computing.

Now consider how long that technology remains state of the art? One year, two, most firms have a policy of replacing the laptop every three years. Think of the last time you were at the end of the replacement cycle and it became time to turn in your ‘old' PC. What branch of the dinosaur family did you think it belonged to? My bet was you saw it as a brontosaurus compared to your new computer - big, heavy, old and slow. The technology at your fingertips also becomes obsolete at rates that are a heartbeat compared to your company's other capital assets.

So what?

How do you value a car that can go a million miles on a gallon of gas, last forever, but you only keep for two years and use less than 30% of its capacity? Probably not the same way as a piece of capital equipment on the production line. However, business executives and finance views these two things the same. Personally I am waiting for people to subscribe to IT capital asset capability beyond outsourcing ITO that merely shifts assets across balance sheets. I am sure that is part of the promise of the "cloud" but that carries other interesting aspects to IT and its future, subject for a different post.

Executives should be aware of the realities of technology capital equipment and how they are different from other capital assets. These differences need to be incorporated into capital planning processes and decisions. Perhaps for some it may make more sense to expense IT equipment or at least a significant part of it to reflect the realities of IT capital asset consumption and depreciation.

What are your approaches?

How do you explain the differences between IT and other capital assets with executives?

Do you allocate IT capex the same as other capex? If so why if they have such different realities?

#10 IT financials require improvement -- twelve things every business leader should know about IT

2009-06-17T02:21:00.000-07:00

"Everything I need to know about a company I can tell from its financials." This statement is foundational to modern management. While we can debate the efficacy of financials as a way of knowing what is really going on in a company, financial is the language most people use to understand the business, its contribution and its performance. Executives applying a financial view to IT need to recognize that the current state of IT financials requires improvement.

For more than 30 years the fundamentals of IT finance have been about spending money. IT financials have been based on making decisions about investment expenditures and operating budgets. This expenditure-based view permeates executive impressions of IT "it costs too much, what are we getting for our money, how much should we spend on IT?" These are all questions asked repeatedly in the last 12 -24 months as executives seek to understand IT.

These questions ask half a question - the cost and spending little to no time on the other half - the return or value generated. The observation that executives look at IT finances from one perspective indicates that IT financials require improvement.

Expenditure dominates IT management thinking. CIOs admit that they look to fully fund their internal resources as they are creating their IT budget. They can think of generating value once they know their current resource base is secure.

IT project management is expenditure driven based on a concern for managing ‘on time, on budget, with quality." Going over budget is seen as a sign of bad management regardless of the value created.

IT portfolio management that categorizes IT spends as either strategic, managerial, transaction or infrastructure. The stability of the spend per category illustrates the limitations of expenditure based finance. Because while these ratios remain remarkably stable over the past 10 years, IT has transformed the business through the Internet, Y2K, Monetary unification, ERP, etc.

CIOs implement various ‘chargeback' mechanisms in an attempt to manage demand for IT services and solutions by making the cost of IT more visible to business executives. The track record of chargeback is mixed at best, with executives responding predictably when they see IT costs - "what am I paying for? How can I pay less?"

CIOs and IT executives bemoan the fact that the average IT budget spends 2/3rd of its resource on current operations. They believe that the IT budget should spend more on transformation when their counterparts in the business have 90+% of their budgets dedicated to operations.

Look at the terms used in these cases; they are expenditure based with little to say regarding the return the CIO is expected to gain from these investments.

Now before we take the CIO to task, its important to remember executives responsible for other business groups are not immune to this view. They too, tend to separate the budgets they manage from the revenues they generate. The only difference with IT is that it does not have a revenue side making it expenditure dominated making it a cost center that is minimized rather than a resource that is leveraged.

I am not suggesting that we return to the idea that "IT is a revenue center," or "Running IT as a business." These approaches have had even less success than ‘chargeback' in most circumstances. But its clear that executives need to know that judging IT by its finances tells only part of the story and often the least interesting part.

So What?

Rather than giving IT a dubious revenue stream, executives should know that IT financials tell only half the story - the expenditure half. Executives, including the CIO will need to work to re-formulate IT finance as current models and obsessions place an unbalanced emphasis on expenditure that limits both the enterprise and the IT organization.

CIOs are fond of saying that "There are not IT projects, only business projects." That is true, but when it comes to a financial view of those projects too often it looks like IT is spending the money rather than being jointly responsible to achieve the business results.

Executives should take a broader view of IT than what can be communicated via IT financials. Such a view extends IT's contribution to the results, outcomes and impact of the expenditures rather than the expenditures themselves. For example do your executives or yourselves know the answers to the following questions:

What is the total business value of IT investment projects for the current year? What are the major balance sheet and performance measures that are expected to change in the year based on these investments?

What is the net present value of these benefits streams? How will that value come online by month, by quarter? How does this year's value stream match to last year's value stream?

What are the operational, management and other structural changes required to achieve that value stream, beyond IT?
How is IT investing in its own operations to lower the cost of computing, storage and communications while raising its capacity, quality and reach?

Executives need ways of thinking about IT's contribution in leveraging operational resources and enterprise performance. Operational leverage can be measured in many ways including the number of accounts, products, customers, revenues etc. These are good places to start because IT creates leverage in these areas.

IT leverage is best illustrated over time and in response to changes in business volumes. So the answers to the questions below are often expressed in per unit measures with a trend line over time. In that way, executives can see how enterprise performance changes over time and ratios improve. Executives can better understand those sources of leverage by asking the following questions:

What is the ratio of personnel to revenue over the last five years? How has that ratio changed? What about the ratio of customers to personnel?

How much working capital is required to support a million dollars of sales growth? or how much capital is locked up in the balance sheet when sales drop by a million dollars?

How many products are you supporting in the marketplace and what is their revenue trend? What systems are required to support those products?

How many channels do we use to market, sell and serve customers? What is the sales volume in these channels, the average cost to serve and how are these figures trending?

What is the relationship of IT spend to transaction volumes?

IT financials require improvement as they only tell half the story. While CIOs have demonstrated the ability to manage cost, they are doing so at the expense of business innovation, transformation and making deep changes in the way the enterprise works. Executives who often want more from IT can get that ‘more' in part by changing the way they think of IT finances and measure IT success and performance.

#9 IT plays different roles in different companies and industries - twelve things every business leader should know about IT

2009-06-17T02:20:00.000-07:00

Overhearing executives talk about IT and it quickly becomes apparent that they believe that all IT is pretty much the same. Your IT is the same as my IT, should be funded the same, managed the same, thought of as the same. With one exception - the IT that they use or the IT that immediately touches their scope of responsibility. That IT is either an important part of their business, or it's the reason why they are underperforming.

The IT that is outside of their immediate world is generic to them -- its all the same.

Executives intellectually understand that IT plays different roles in different industries, but emotionally and financially they behave as if IT were an ‘it' - generic non-descript think, devoid of personality or gender. They express this sentiment when they ask the following types of questions about IT:

What is IT spend as a percentage of company revenue and w in the company and how does that compare with others in the industry?

Who else in my industry is using a particular solution and what results are they getting?
What do I actually get from IT?

How does IT contribute to competitive advantage, how is it strategic?

When executives reduce IT down to a set of budget figure, expenditure, a basis for comparison with others, those are signals that they are applying a generic framework to looking at IT and that is a warning sign.

CIOs need to clearly connect the enterprise's IT with the core of its operations, economic model, business model and financial structure. These connections are not the normal "alignment" discussions, no these connections demonstrate two important things:

One, that modern business in its scope, scale, pace of change is impossible without IT and,

Two that the way your enterprise creates value - the way it makes money would be dramatically different with different types of IT.

The essence of these points is simple, IT is not the same company to company or even within an industry, rather that if the enterprise is unique, then its IT must also be unique, unique in some way that actually matters.

If IT is generic, if its used the same way as other companies, then its not IT that is the commodity, the company is the commodity. Consider the dire warnings about how the implementation of the same ERP system across the major players in an industry was going to eliminate competition. It did not happen, sure they gained benefits from standardization, greater collaboration, etc. but they did not surrender the competitive nature because they had the same IT.

So What?

IT being different in different companies and industries is critical for IT to delivering strategic value. When CIOs and IT executives talk about standard solutions, how they are following proven practice, trying to do what others have done in their industry, they are undercutting IT's strategic relevance.

This is not a sermon, but rather it is a recognition that executives need to reposition information and technology needs to be repositioned in the enterprise. CIOs and IT executives can do this through:

Connect information and technology with the operations. Start with a top-level view of your applications - the major ones that drive your budget. Then walk through the major business processes in your company. You can do this using PowerPoint. Highlight how each of these major systems ‘light up' across the major business processes. The goal is to connect show how IT is integral to operations.
Executives who understand the connection between business flows and technology flows are better able to see opportunities to do both differently. Thanks to Ellen Berry at the Metropolitan Pier and Exposition Authority in Chicago for sharing this approach as a way to brief new executives.

Ground technology in the economic model of the company by answering the question - how do we make money? What are the decisions, actions and operations that determine your company's margins? What are the technologies behind those aspects of the company? What would be possible if you applied information differently - how would it change your economic model?
An enterprise's economic model arises from more than just product pricing and target margins. Information flows, automation, complexity all supported by IT are significant factors in the way to you make money. Applying IT the same as your industry peers unnecessarily levels the playing field for you and your competitors.

Lead IT from the business model, as that is the context for positioning strategic resources. We discussed IT in strategic planning in item #7 Executives misunderstand IT in strategy. This is different, as the business model identifies the critical resources and the relationship between those resources required to deliver value. How does IT contribute to the value proposition, target customer segments, communications and distribution channels, customer relationships, core capacities, the organization of processes, partners, cost and values and culture?
If your business model is unique, then that uniqueness should come through how you apply IT. Tying IT to the business model is essential for getting the right IT as this relationship highlights that connection as well as the opportunity for extending the business model in the marketplace.

The subject of Getting the Right IT Using Business Models is the topic of a Gartner Executive Programs report by Richard Hunter.

Financial structure refers to the amount of resources required to produce revenue and profits. CIOs and IT executives discuss the financial model in order to connect capital and information flows. This builds on item #4 IT applies information to replace cash, capital and operations. Look at the business from the perspective of the amount of cash and capital required for operations. Chances are those are areas where information, collaboration and the like can create a unique financial advantage for the enterprise.
IT has largely been driven based on its ability to change the Income Statement (the P&L) as projects concentrate on reducing costs, generating demand etc. Information and communications have the potential to restructure a company's balance sheet and free cash flow generation through unique combinations rather than commodity applications.

IT plays different roles in different industries and different companies when executives and IT professionals lose sight of this, then both the company and the technology are commodities.

#8 - IT can evolve faster than management thinking -- twelve things every business leader should know about IT

2009-06-17T02:18:00.000-07:00

Executives often do not consider the differing evolutionary pace of technology and management thinking. Executives over invest in technology and more importantly under invest in management capability because of this gap. The result is the incomplete business cases and benefits realization rates that are endemic in IT.

Executives need to recognize that IT evolves faster than management thinking in order to invest properly to realize and sustain benefits.

The pace of technical innovation is legendary. Consider the PC that has more computing power than two-ton mainframes of just three decades ago. That computing power, coupled with the Internet has transformed business operations creating new processes, products, companies and industries. During all of that technical change, management practices at many companies have barely budged beyond using the web for back office processes.

The pace of management innovation is measured. Gary Hamel, the author of the book The Future of Management, points out that the next wave of breakthrough performance will likely come from management innovation. At the Gartner 2008 Symposium, Dr. Hamel spoke to more than 800 CIOs about the topic pointing out that management innovation is the next frontier for technology.

How do you address the different rates of change between IT and management innovation?

Addressing this issue starts by recognizing that management, technology, process, etc are not separate and distinct parts of a company. They are all part of the capabilities that executives lead to create value. (See #3 - IT is part of a capability) They all have to work together, so a change in one needs to be accompanied by an appropriate change in the other components. Those changes reflect a balance in the different ways we think, model, manage and work in our organizations.

The balance between these different ways, shown in the figure below, is natural and will happen whether we like it or not. You see it in the ‘resistance to change' associated with a major IT project, the changes in behavior and collaboration when new management metrics are created of the disruption of a management or organizational shake-up. Companies are complex systems and they will an equilibrium - however its not always the equilibrium you wanted.

Management connects the way we work with the results we create.

The way of working describes how the company uses its capabilities and the elements within those capabilities to create results. Executives often think of this as the exclusive domain of IT. They invest in new systems, processes, technologies all the time to change what people do and how they do it.

Executives often ignore changes to the way they manage. This is in the believe that the ways of managing are stable and do not change how we organize, engage, monitor and direct the performance of the various ways the company works. "Workers get new tools, managers get new targets" was the way it was explained to me once.

Technology changes both ways of managing and ways of working. This is the rub.

Technology advances that change the way we work can and often do move faster than the ways of management or even the way the company thinks about itself and its roles. This creates tension between the technologist who sees the operational potential of new technologies and the executive operating with rules of management and finance. That tension has led to technology adoption in waves from data processing, to online systems, client/server and the web. These technology waves are often accompanied by a ‘management revolution' that seeks to take advantage of them. For example, client/server coupled with business process re-engineering.

Studies by Erik Brynjolfsson and others indicate that it may take management more than a decade to understand and take advantage of new technologies. While many attribute that rate of adoption to generational changes in management, clearly executives need to break through and change both the way we work and the way we manage.

So what?

Executives raise performance by changing both the way they work and the way they manage. This means giving managers new capabilities, information, skills and guidance to match the new tools, techniques and processes provided to their teams. Here are some ideas for how you know:

Look for changes in management tools as part of the scope of an IT change

Require the business case to define the new metrics, targets, and information managers will use to achieve and sustain performance

Push back when someone says that there is ‘no change in management' because all we are doing is giving them new tools
Require managers be a target of deployment processes and transformation efforts. They can be coaches, but they also need to change as well.

Technologies must ponder the same questions and ask what changes about the way we work and the way we manage. If you are not changing management capability, metrics, targets or the priorities for managers, then the business value potential of your solution is limited to incremental improvement.

Executives recognize that new tools require upgrading management capability will be better prepared to manage for results. Managers who are ignorant of this connection will continue to see operational improvement as independent of manager ability to manage and suffer the consequences.

The connection between managing/working and technology are critical as the new waves of technology innovation such as web 2.0 and the technologies we cannot even imagine will test us all.

#7 Executives misunderstand IT in strategy -- twelve things every business leader should know about IT

2009-06-17T02:15:00.002-07:00

Strategy drives executive thinking and forms the context for executive decision-making. Over the last ten years new strategy tools and techniques have come into the market based to clarify and increase the executability of corporate strategy. The strategy maps and balanced scorecards authored by Kaplan and Norton are examples.

Strategists are concerned with issues of gaining and holding advantage over your competitors in your market. Models like, Porter's Four Forces, revolve around making decisions about what is the company's advantage, where we choose to compete, how we use that advantage and why the company will grow. These issues are important to making sound decisions.

Strategists can easily view IT as not strategic. They view strategic resources as those that supply competitive advantage. Strategists require a source of advantage to be unique, not easy to duplicate, and not readily substitutable by customers or competitors. Strategists apply these three conditions in determining sorting out strategic vs. tactical resources. Applying these conditions strategists find IT to be a tactical resource because there are market available solutions, those solutions are readily repeatable by others and customers or competitors can substitute their technology for yours.

Strategists take a narrow view of IT in strategic deliberations. Information technology for many strategists is the network, datacenter, personal computers and package applications such as ERP. Taking this view its easy to see that people can believe "IT Does Not Matter" as the definition of IT concentrates on the generic stuff and there is little generic solutions can do on their one to contribute to competitive advantage which is the only thing that matters to a strategies.

That view is reflected in the sample strategy map shown in the figure below. Here IT, HR and the organization are seen as remove from customer value. They are part of the company to be sure, but they are low-level building blocks. The issue is how can executives take advantage of the strategic potential of IT?

IT will be tactical as long as executives think of it as the individual parts, the projects they fund, the assets that IT manages. Executives need an approach for connecting IT as an integral part of the company strategy and resources that contribute to competitive advantage. CIOs facing this challenge report that this comes through connecting IT to customer and financial performance -- most often through IT's relationship with Business processes.

Recognizing that IT is part of a capability helps. It also helps to connect IT to enterprise business processes that define the way the enterprise works. This connection makes IT integral to the activities that support competitive advantage and value delivery. Managing IT assets is a tactical endeavor concentrating on enabling the business. Managing value creation process is strategic and properly recognizes IT's strategy contribution.

Another approach is to view information and technology as one of the critical resources available to the enterprise. This Resource Based View of the Firm, then focuses strategy on how best to apply these resources to win in the marketplace. The figure below represents such a model developed by Tom Coleman at Sloan Valve Company. While the model is generic, the implications are clear in terms of strategy's role as the direction and glue that connects enterprise resources.

So What?

A narrow definition of what is strategic produces a narrow strategy creating unnecessary execution and market vulnerabilities. These can be seen in companies that chase multiple and potentially conflicting initiatives all in the name of strategy. Remember if everything is strategic than nothing is strategic. That pitfall is possible when you do not have a good definition and filter on the things that are really important -- defining how you win in the marketplace and separate those things from what you need to play the game well.

IT is strategic because it delivers the deep changes and operational capabilities needed to win every day and in multiple ways. Sure much of IT is concentrated on current operations and seems to be less strategic, but that does not mean that all of IT should be relegated to the 'tactical' pile. That is what executives and industry pundits do when they say that IT does not Matter, or that you do not need to consider information, automation, technology in determining how you compete and win.

CIOs and IT executives need to recognize that not everything, nor everything that takes a lot of time or costs a lot of money in IT is strategic. The parts of IT that directly connect, create or open the door for new ways to win -- new sources of advantage are the strategic parts. The rest is more than important enough in terms of delivering operations, cost savings and customer service. Recognize those things for what they are and the strategic aspects as being a part, but something slightly different.

Executives misunderstand IT in strategy when they either negate the role of information and technology in competitive advantage or they tune-out IT executives who insist that everything is strategic. Executives how look at the enterprise and how their execution capabilities define and deliver their sources of competitive advantage know the criticality of information, insight, technology and automation. Taking that view removes a blind spot for IT and for enterprise strategy.

#6 Executives can easily misapply IT - Twelve things every business leader should know about IT

2009-06-17T02:15:00.001-07:00

Executives misapply IT when they use technology to address problems not caused by technology. It's easy to see how this is possible as the IT industry grew up with a value proposition that promised technology's ability to just about every problem in the enterprise. This message driven IT investment and executive expectations for more than 30 years.

As information systems have spread across the enterprise, technology becomes a readily available option for improvement. A CIO who is also responsible for HR and Operations explains it this way, "IT is the easiest thing to change for executives all you have to do is write a check! " You may have seen it in your own company, when a major operational issue takes on the name of the software package rather than the business process or operation being changed.

The potential for IT being misapplied is increasing as IT systems now cover the majority of business operations. Service oriented approaches increase the flexibility of these systems and their ability to support incremental change rather than redevelopment.

Increasingly executives will face the need to change the business processes, organization structure or reorient jobs to achieve their goals rather than redeveloping systems.

How do you know?

Simply trace the performance issue back to its root cause. When people say, our problem is poor systems, probe further and ask why the systems are poor. Do they support poor processes? Do they support complex products? Are they complex because the organization structure is complex?

Answering these questions honestly will drive to the root cause of business performance will ensure that you do not misapply IT.

The response may include IT investment, but it must include addressing the other changes needed to raise performance of the business capability (see Item #3- IT is part of a capability)

Investing in IT to treat a symptom, rather than addressing the root cause of the problem only perpetuates the myth that IT does not deliver value, that you do not understand the business, and that IT has passed its prime.

#5 IT is complex because the business is complex - Twelve things every business leader needs to know about IT

2009-06-17T02:14:00.000-07:00

IT professionals generally like complexity; they are impressed with how intricate technology can become to support business operations. Where IT professionals see elegance, business professionals see cost, core rigidity and all the reasons why IT does not work. Both sides have to recognize that IT is complex because the business is complex.

Executives think of IT in terms that they know – their personal life and personal computer. They see software for email, calendaring, personal finance, publishing and the like and think – it cannot be much different for me as it is for the entire enterprise. They are right, to some extent at the functional level, what they are leaving out is the multi-multi-multi differences that separate the individual and their PC from the enterprise and its IT.

Enterprise are multi-person, multi-product, multi-location, multi-channel … the list can go on and on. That multiplicity, show in the figure below which is a model of a cellular telephone company, requires systems to support them. Take that multiplicity away and sure you could run the company on a single computer hooked to the Internet, but it would be a one-person show.

Time compounds the structural complexity discussed above as not all processes, products and teams require or receive the same technology. Time changes the set of available technologies as new technology and solutions come on the market. Time erodes the effectiveness of current solutions as competition and customers evolve their thinking and needs. That is why even after going through a massive IT consolidation – for example to an ERP – executives are soon asking for new solutions.

Complexity is fundamental to the definition of the modern corporate. Every since Adam Smith talked about the division of labor in the manufacture of straight pins, work has become decomposed into smaller units and with each wave of decomposition there came a need for more controls, management, oversight – in other words complexity.

The complexity engine perpetuates itself as the constituent groups look to extend or perpetuate its existence. Some see this as a form of Darwinism where only the fittest survives. If that were true in human beings, then the stomach would be in competition with the brain, the legs and other parts of the body. Wait I know that there is a joke in there somewhere, but lets not digress.

IT complexity comes from two of the earlier things business leaders need to know, namely that IT is horizontal (#1) and a hybrid (#2) organization. CIOs and IT executives need to make sure that this complexity is managed and earns a proper rate of return.

If the world stood still, if competitors did not change, if we ran simple business models, if regulations were stable and clear, then IT would be simple because the business would be simple.

So what?

Executives across the entire organization need to recognize that implicitly many choose complexity over simplicity and that they cannot lay all the blame for complexity on IT. There is more than enough culpability to go around for multiple applications, heavy customizations, standalone systems and aspects of IT complexity.

Executives choose complexity often in the name of flexibility, getting close to the customer and being responsive. The result of these choices are duplicate and near proximate operations, organizations, products and business rules. Think about your business and ask how much difference is there really between how you work across geographies, divisions or product lines. The answer is too often no enough to warrant the near duplicate or highly similar operations in the company. Use the following questions as a way to assess this situation.

First ask yourself is what you are trying to do this really need to be fundamentally different
Could you borrow/copy a process, tool, asset etc from someone else to accomplish the same task?
If the answer is no, then ask your self if being different will generate a premium in terms of market opportunity, financial return, return on investment that is significantly above your company’s cost of invested capital?

If it does, then fine your are earning a rate of return exceeds the cost of capital plus your company’s complexity premium.
If it is not, then perhaps the need for being different is coming from another source and needs to have a second look.
The IT industrial complex is also responsible for this complexity as they seek to decompose the technology marketplace with waves of similar but not fully comparable products, required upgrades, etc. Sure the move to open standards and interoperability has made a significant dent in the problem. Just think of the duplicate proprietary networks avoided with the 801.X class of standards.

While there are perfectly legitimate technical reasons for this, but CIOs and IT executives need to recognize that their decisions are also a complexity driver. CIOs and IT executives should have an actively managed plan for leveraging the existing asset base as well as managing the end-of-life for technologies in order to reduce complexity.

IT is complex, because the business is complex. It does not have to be so as both complexities can be managed and mitigated with some forethought and a willingness to make tough decisions.

#4 IT applies information to replace cash, capital and operations -- Twelve things every business leader needs to know about IT

2009-06-17T02:13:00.001-07:00

Think about your operations. Think about the manufacturing lines, the offices and cubicles, the fleet of service vehicles that people operate but information coordinates. Companies have to invest cash, capital and operations not only to deliver value to customers, but also to handle inefficiencies in communications, coordination and management.

Inventory is an example of this. Companies build inventory in anticipation of future sales. Production scheduling and economic order amounts also cause inventory to build up and consume cash. Improving information flows across customers, production planning, manufacturing and logistics can reduce the inventory required to support customers and free up cash.

You can identify opportunities where information can replace cash, capital and operations by looking at internal versus external growth rates. Wherever working capital requirements, equipment or operational personnel are growing at a rate faster than revenues - then there is the opportunity to use information to replace those assets.

So What?

The answer seems obvious as companies are looking to increase free cash flow and preserve capital in the midst of the financial collapse and tight credit markets. Traditionally changes in cash and capital were thought to be the domain of the Chief Financial Officer (CFO) who would raise cash and keep capital by administering draconian spending and investment policies. Those policies work when the economic challenges are short term in nature - generally 6 to 18 months. They work because the keep cash inside the company for a relatively short period of time without significantly damaging company capabilities or performance.

However, in an extended economic downturn, CFO policies for hording cash and capital begin to break down as time amplifies the stress of ‘doing more with less' on your people, processes, facilities and assets. This is where IT comes in as part of a sustainable solution. See earlier entry in this blog on this subject.

CFOs and CEOs need to change the cash and capital structure of the company in order to sustain performance in a new economic reality. Running a cash efficient and capital lean operation requires using information in new ways - ways that replace cash and capital.

This is new ground for CIOs as well. Most IT business cases talk about the impact to the Income Statement or P&L. They talk about cost reduction, operational efficiency, etc. Rarely do CIOs engage in projects that change the structure of the balance sheet, requirements for working capital or the capital required for investment and operations.

However as economic times continue, there is increased pressure on balance sheet and cash flow statement improvements. This should lead executives to take advantage of IT's ability to use information to transform the structure of operations from a cash, capital and other resource perspective.

#3 IT is part of a capability -- Twelve things every business leader needs to know about IT

2009-06-17T02:09:00.000-07:00

If only the business understood IT, then the company would get move value out of IT." This statement is a common belief among IT professionals. Understanding begins with the basics, framed in a language that is acceptable to the audience rather than the teacher.

Talking about IT using the language of organization, its role, what it does, position, etc provides a starting point for teaching the business about IT. Using this staring point here are a twelve things that every business leader needs to know about IT.

#1 - IT is horizontal

#2 - IT is a hybrid organization

#3 - IT is part of a capability (this post)

#4 - IT applies information to replace cash, capital and operations (next post)

3. IT is part of a capability

It's easy to see IT systems and technology as apart of your business. Being ‘apart' can readily become ‘a part' that is separate from the rest of the way the enterprise works. Business leaders get this view when IT is separated from the rest of the enterprise in terms of being a separate organization, separate projects, separate operations, etc.

When business leaders recognize that IT is horizontal (#1) they see the potential to use IT to connect the enterprise. When they see IT as a hybrid organization (#2) they recognize that IT plays a role in running, growing and transforming the enterprise. Using this third view -- the capability -- business leaders see how the parts of IT mix and are integral to the way they work.

IT is part of the resources a company uses to create its outcomes - that is a definition of an enterprise capability.

Traditional notions of Information Technology (IT) break down when you think of IT in this way. IT breaks out into Information, Applications and Technology to create tighter connections between business processes, business rules, human capital and outcomes. Breaking IT out into these constituent components facilitates leaders seeing these connections clearly, rather than thinking of them bundled into something called I.T.

The capability works and performs based on integration of all of its components shown in the figure below

Being part of a capability means that IT needs to fit with the People or Human Capital aspects of your enterprise - the organization, jobs/roles, skills, competencies. IT also needs to fit with the design of the Processes in terms of processes, rules & metrics. IT operates in the context of Facilities and Equipment people use to execute the processes.

Build capabilities that reflect the way the company works, rather than building components that employees need to fit together on the fly in front of customers.

So What?

Being part of a capability gives executives more options in terms of what to change in order to raise performance. Too often, companies have pulled only one level - often the technology lever to create change. This covers over performance issues in a silicon wrapper reducing benefits realization potential as the changes address symptoms rather than the root cause of performance issues.

In an enviroment where enterprise performance is at risk, executives need multiple approaches to change. Changing business processes, job descriptions, facilities layouts (Kaizan) all provide a way to change the way you work without the time and cycle time of an IT project. CIOs and IT executives should encourage taking a broader perspective and looking to raise performance through a combination of means rather than just technology.

IT benefits from managing technology as part of a capability in two ways.

First a coordinated change approach reduces benefits realization risk as the company builds a comprehensive approach to addressing business performance. Coordinating changes across the elements of a capability mitigates technical complexity, cost and delays.
Second, the CIO gains a value based approach for managing IT demand by encouraging the enterprise to make changes to processes, jobs, etc before changing technology. Following this approach concentrates IT on addressing that cannot be resolved through changing other elements of a capability this concentrates IT where it is needed most and where it can do the most.

IT is part of a capability. IT is neither solely responsible for business performance issues, nor is it the sole source of a solution. Business leaders who learn to manage the capability as a whole, using each element where it is most appropriate will get more out of the business and IT.

#2 - IT is a hybrid organization

2009-04-06T05:08:00.000-07:00

If only the business understood IT, then the company would get move value out of IT." This statement is a common belief among IT professionals. Understanding begins with the basics, framed in a language that is acceptable to the audience rather than the teacher. Talking about IT using the language of organization, its role, what it does, position, etc provides a starting point for teaching the business about IT. Using this staring point here are a twelve things that every business leader needs to know about IT.

#1 - IT is horizontal

#2 - IT is a hybrid organization - this post

#3 - IT is part of a capability - next post

2. IT is a hybrid organization

A hybrid inherits the characteristics of its parents, often through a process of cross breeding. IT is a hybrid organization as it has enterprise wide responsibilities like other corporate functions such as HR and Legal. IT resources are shared across the enterprise, but they do not do the same type of work (establishing and administering policies) as these other groups.

IT is an operating unit, unlike HR, Legal or Finance, which concentrate on establishing and administering policies. IT does things, they deliver services, they have operational responsibilities that if not executed well will harm the business.

At the same time, IT contains processes related to transformation, development, support and operations. This means that IT not only delivers current operational services, but also delivers the new solutions and innovation required for your future. Think about it this way, the average business unit is able to allocate about 3-5% of its budget to future transformation. This is in contrast to the average of about 30% IT organizations have to build solutions for the future.

Recognize that your business will continue to operate if temporarily loses its HR or Finance capabilities. The enterprise will not operate if it loses IT operations. Don't believe me, then how are you reading these words? You are using information technology.

So what?

As a hybrid organization, IT can take on things that other organizations cannot. Most often this involves working on initiatives and changes that cross business unit or operational lines. Recognize that in these circumstances IT is working ‘without a net' and that sponsorship needs to come from the top where the business units and operations meet. Otherwise, IT is in the position of advocating for the enterprise and the performance of the whole which is an uphill battle against business unit leaders who are responsible for the performance of the pieces.

IT as an enterprise wide operating unit has the experience housing scarce skills, such as business process improvement as well as incubating centers of excellence (COE's) for new ideas. The hybrid organization benefits the enterprise in two ways. First these resources are in a position where they can be readily shared across operating groups. Second, these resources are close enough to the technology to be better able to effect changes in systems that often accompany improvement projects.

Finally, as a hybrid organization, the IT unit can drive changes and improvements that streamline operating costs well in excess of the specific IT budget. This often happens where the IT budget is small, but IT solutions create leverage saving the organization 10 - 30X in expenses versus the IT budget.

12 Things every business leader should to know about IT -- #1 IT is Horizontal

2009-04-06T05:05:00.000-07:00

"If only the business understood IT, then the company would get move value out of IT." This statement is a common belief among IT professionals. Understanding begins with the basics, framed in a language that is acceptable to the audience rather than the teacher.

A company has difficulty understanding IT in the language that IT speaks: applications, databases, technologies, etc. But, what language do executives and managers use to understand something and its role in the company. The answer is straightforward, think back to the last time you were at a party and someone asked you/or you asked someone "What do you do?" Chances you talked about your job title, role and position in the organization.

Talking about IT using the language of organization, its role, what it does, position, etc provides a starting point for teaching the business about IT. Using this staring point here are a twelve things that every business leader needs to know about IT.

1. IT is horizontal

Look at any organization chart and you will see vertical oriented vertical organizational teams each with a specific focus and revenue stream. IT may appear as a separate vertical group on the organization chart, but works horizontally across multiple business units.

Legal, finance and human resources are other horizontal organizations, often bundled together in a ‘corporate services group." IT can be organized into such a group, but IT is different because is a hybrid organization which is the next thing.

So What?

Recognize the unique organizational capabilities within IT and its role as the only corporate wide function with direct operational responsibilities. Take advantage of ITs ability to recognize and work across the business units to raise performance - for example moving proven best practices between operating units. Invest in IT management capability and business skills to take full advantage of its unique role. Demand that IT raise its business impact and deliver enterprise level performance.

CIOs and IT executives need to stop harping that "IT is different" because every organizational unit within the enterprise is different. If there were no differences between units then the organization chart would be a single blob - everyone reporting to the CEO.

Instead of highlighting the differences CIOs must explain how those differences create unique value and contribution to the company and its ability to execute its strategy. Engage the business across business units because you can and show the enterprise that the sum is more than its parts.

What is the second thing that every business leader needs to know about IT?

IT is a hybrid organization -- that is the focus on the next post.

When centralizing avoid the “same mess for less” approach

2009-03-16T12:38:00.000-07:00

Centralizing the IT organization and operations is a common action as enterprises look to cut IT costs. Moving disparate IT groups, data centers and applications together increases ITs critical mass and potentially opens the door to scale and consolidation efficiencies.

Centralization initiatives can easily become internal versions of outsourcing contracts with the corporate CIO in the position of the outsourcer and making the promise that I can deliver the same service to the business units for less cost. This ‘your mess for less’ proposition has not worked for external outsourcers and chances are it will not work for the CIO as internal service provider.

CIOs at the receiving end of an IT centralization initiative need to take a fresh view on what they are receiving. John Johnson, the former CIO at Intel who completed a major IT transformation in 2008 put it this way. “You need a fresh perspective, you need to look at this in a new way. Our team decided to walk out of the building and stand in the parking lot for a few minutes, then walk through the door with the mindset that we had never worked for the company before.” Adopting a fresh perspective give the CIO and the team an opportunity to do things differently rather than aggregating current activities into a single management structure.

Centralization is an opportunity to restructure the IT organization and establish new cost drivers, organizational structures, processes and results. This means that centralization is more than redrawing the organizational chart. Centralization is more than meeting with the BU heads to let them know that everything will be ok and that you promise the same service levels as before. Centralization means more than putting the majority of IT spend in a single cost center for the CFO to stare at and manage.

Sure putting everything into a single organization will cut some costs. If the gains from centralization of contracts, purchase decision and investments are sufficient to achieve your company’s goals then congratulations success is managing the ‘mess for less.’ However, if the goals go beyond managing an aggregated spend then this requires restructuring IT through the context of centralization.

Centralization is a unique style of transformation that changes the operation without making significant capital and operational expenditure. That entails an approach organized around the following principles and steps:

• Keep the company running. This is the primary objective during the transition period. Notice the idea of keeping the company running by concentrating on current operations and services. Notice it says nothing about executing current investment projects or road maps. Those may change, but the business cannot go ‘down’ during the transformation process.

• Put the right people in the right roles. The first step in centralization is organizational. Do not be shy or overly respectful for tradition, you have a new pool of talent and new opportunities to get people in the right positions.

• Centralize and reform IT governance. I know that sounds like a broken record, but the context for IT and the IT behaviors across the enterprise have changed. You need new, more senior IT governance as you will soon find yourself arbitraging requirements across business units as you have demand from multiple places and a single set of centralized resources. (See an earlier blog entry on this)

• Centralized IT means consolidated IT governance bodies into a single group that provides a unified list of IT demand grounded in principles that outline ITs role and decisions regarding the level of shared versus BU-specific infrastructure.

• Avoid establishing overlay roles and processes meant to coordinate across disparate IT groups. They are indicative that you do not have the right governance or that you simply consolidated IT teams into a common reporting structure rather than recognized them to achieve new performance levels. Besides these process and roles add non-productive cost to your operation without an apparent offsetting increase in productivity or throughput.

• Getting the right organization and governance is a start, but cost management requires addressing IT cost structure and that means consolidating data centers, servers and applications. Tools like virtualization and new hardware will help in the effort, but it’s important to manage a consolidated IT footprint.

• Have an active ‘end-of-life’ program for retiring duplicative applications and operations. Set a goal for retiring applications and make the goal public. Remember each application retired not only reduces your cost structure, but also increases the consistency and value of information across all systems.

• Improve IT processes. With the resources in place and properly focused, the goal shifts to getting the work done and that involves process improvement. IT is in essence a process across operations, services, infrastructure, maintenance and delivery.

• Manage for throughput. What you accomplish is the primary concern customers have when centralizing IT. Often expressed as ‘how will you deliver me the solutions I need?’ The business units are asking for throughput – defined as the number of completed projects performed with the same resources. Manage IT for throughput by eliminating bottlenecks in IT processes, concentrating IT resources on doing fewer projects faster.

Centralizing IT is a common response to tough economic times. Gathering IT resources and budget into a single entity gives the CIO and CFO greater visibility and focus. It also increases the size of the IT target. CIOs on the receiving end of centralization face a choice, they can run the current operations for less, or they can restructure the IT organization and its costs. The option to do more than run the ‘same mess for less’ offers the CIO an opportunity to reposition IT’s value and role in the enterprise.

Cramer vs. Stewart the world turned upside down

2009-03-13T12:34:00.000-07:00

On March 12, 2009 may be the day that Main Street has said enough to Wall Street and it happened in the most unlikely place –The Daily Show with Jon Stewart on the cable channel Comedy Central. The world has turned upside down when a self-professed parody comedy show of the day’s news is the conscious of Main Street.

For all of the past week, there has been a media ‘event’ of a feud between Jon Steward and Jim Cramer the host of Mad Money on CNBC – one of the most watched business programs on cable TV.

Well the interview came on March 12th and the tables were turned – the comedy show became more effective than TV investigative journalists like 60 minutes or Nightline and the investment professional was on the other end of the stick.

What seemed like a move to drive ratings by generating tension between two popular shows suddenly became a very serious exchange and Wall Street did not have great answers.

Watch the interview on http://www.hulu.com/watch/62203/the-daily-show-with-jon-stewart-thu-mar-12-2009 or http://www.thedailyshow.com/ and you will see.

Now realize that when the Daily Show broadcasts a weekly summary in Europe its prefaced by a screen at the beginning and end that reminds Europeans that this show is a parody and not actually the news. The analogy in the UK would be a puppet from Splitting Image interviewing Mervin King ala Hard Talk.

The world has turned upside down not only in terms of the serious issue being addressed by a comedy program, but that they are the protagonists for getting the straight answers out of the market when everyone else was getting corporate double talk.

This turned out not to be a stunt to get earnings. It reflects a real desire for the public who is suffering from the economic downturn to understand what is going on. After all we are the ones who will ultimately have to sacrifice in order to move the economy forward.

Kindle meets iPhone – what were they thinking

2009-03-11T18:40:00.000-07:00

This week Amazon announced the availability of a version of its Kindle eBook software as a free download for the iPhone. What was Amazon thinking? After all its Kindle is the market leader for eBook readers and the company had just released a new version of the product a few weeks before.

Classic strategists and product managers must have rolled their eyes when they heard that Amazon was providing the same functionality for free on one of the most popular mobile phones as it was charging $325.00 for the Kindle reader. This move violates the rules of classic strategy as the company creates a substitute for its own product. Surely the free product will drive out the expensive one.

I doubt it; Amazon is a pretty smart company so there must be a good reason for this surprising move. I can think of a few. First, releasing a free reader immediately expands the number of potential Kindle readers by a few million. Everyone who has an iPhone 3G or an upgrade to the system is now a potential reader. If everyone bought just one book to try it out, then this is tens of millions in revenue to the company. It also associates Amazon with the Apple brand enhancing the value of both.

Personally I downloaded the software and bought Dan Simmons book “Drood” a two and a half pound novel of more than 770 pages about Charles Dickens. I figured that if I could enjoy this on the iPhone reader, then I could read just about anything. So far so good.

I am sure that others will not find reading a novel a Post-it note at a time as enjoyable, but they like the idea of not having to haul around physical book. This is the second audience for the iPhone reader. They are going after people who like the experience but not the form factor, in hopes that they will become Kindle buyers. The ability to view purchases on both systems insulates the buyer so there is no dead end.

Finally, I have to believe that people were working on cracking the DRM for the Kindle, or that Sony was making its own software available for the iPhone. In either case, this move pre-empts those attempts.

Amazon had already plumbed the traditional marketing strategy for the Kindle enlisting the endorsement of Oprah and her book club. With Jeff Bezos on the show, offering a discount all right before thanksgiving, Amazon was able to clear out its stock of Kindle v1 before Christmas and the release of the new product. So with that marketing effort done, they needed a different approach.

Amazon violated traditional strategy rules by releasing a ready substitute for its product at a price point that is hard to be. However, the value of the Kindle is not in the reader – that is an expensive razor. The real value for Amazon is in the books, magazines and newspapers – these are the razorblades.

The move not only gets Amazon free publicity and increases its addressable market; but also creates a low buy in for people to learn how to read eBooks. Is a small price to pay for giving customers that experience and educating the market on its offer. These are lessons for any company looking to introduce new technology and platforms into their offerings.

Another good move, one that illustrates the basis for competing based on a conversation and engaging the customer and market. It will be interesting to see how this plays out.

Do you have a Kindle? What is your experience

Have you tried the iPhone reader?

Interested in your thoughts?

Let me know if you are interested in my experience when I finish the book.

The Myth of the CIO -- Page 2 What's Different

2009-03-11T14:55:00.001-07:00

In the first part of the ‘myth’ series we discussed the old myths related to the CIO and IT. The next step of the process is to identify what has changed since the old myth was formed more than 10 years ago. Understanding these changes establishes the context for the new myth.

Based on a discussion with a dozen CIOs at the recent Gartner CIO Leadership Forum, a lot has changed for CIOs and IT in the past 10 years. That is good news, as change requires adjustment and updating the CIOs view of themselves and they stories or myths others hold about them. Here are a few of the items CIOs mentioned have changed over the past decade:

Business expectations for IT have changed as management generations have changed. Ten years ago senior leaders cut their management teeth in the 1970’s era of data processing. Today, senior leaders grew up in an age of re-engineering, the advent of client-server/PC and they led through the introduction of the Internet. They know more, so they expect more from CIOs and IT.

Organizations are flatter with layers of middle management removed through re-engineering. In the past, a hierarchical organization actually helped the CIO control demand for IT services, building individual projects up into significant capital expenditure projects. Today, request come from multiple sources, with shorter time to market requiring CIOs to manage a broader scope of change and a numerous set of smaller projects all of which are mission critical to the organization.

The volume of information 10 years ago bears no resemblance to the information demands of today. 10 years ago information was though of as reports that you got on weekly or monthly basis. Today information is REAL TIME, constant, and growing all the time. This puts the “I” in Chief Information Officer back into play.

IT has become horizontal as it works across business units, products, geographies and functions. This is a change from the departmental applications and islands of automation that predated the advent of the Internet.

IT has become more business process focused over the past 10 years. This is true as six out of ten (60%) of CIOs say that improving business process is a top business expectation of IT. Why the change over the past 10 years? Simple, the change is because as IT applications covered more business processes changing those business processes requires involving IT.

Complexity has increased dramatically. The islands of automation from 10 years ago or more have all been filled in, integrated and interconnected. There are more pieces to the puzzle and more complexity to boot.

While systems have become more integrated and complex, technologies have disintegrated from the mainframe – single point of operation – to the networked device (PC, Server, etc). Where the CIO of the past could reach out and touch 90% of their processing capacity in a single box, today much of that capacity is out in the network or virtual data center.

Security has moved from an issue of controlling access to the DP room to protecting the IP for the entire company. Security has also grown asymmetric in nature where the enterprise cost of protection dwarfs the intruder’s cost to create a security breach.

Globalization was non-existent in IT 10 years ago, not enterprises and CIOs face a global marketplace for customers, suppliers and partners. This means that the CIO cannot remain focused on a narrow field of view – domestic technology – but needs to take a broader view and has more choice in provisioning technology and services.

The Myth of the CIO -- Page 1 the old myth

2009-03-11T14:54:00.001-07:00

The role of IT has changed considerably over the past twenty years, yet if you ask people to describe an IT person the description includes references to pocket protectors, glasses, social awkwardness and other less flattering terms. Such characterizations include the CIO who is often seen as being somewhat separate from the rest of the leadership team — remember the term “business and IT” well the “and” is a way to keep the two apart.

At the Gartner CIO Leadership Forum we held a workshop around creating a new myth for the CIO. The first part of creating something new is to acknowledge the existing myth its inaccuracies and opportunities for improvement. In this first activity CIOs highlighted the old myth of the CIO by pointing out that there were actually two old myths.

The first from 1970’s through to the mid 1990’s was that of technical master, the CIO and IT as the wizards who could do magic with technology. This myth is predicated on technology being complex, costly, risky and better left to scientists. This myth sits behind much of the social underpinnings for IT and its management.

However this myth began to fade as we moved through Y2K, the Euro, the arrival of the internet, widespead use of the PC and more technology savvy consumers and personnel. Those factors changed the myth as what was once seen as a cloister of technical wizards became something else.

“RSP’s, thats what they called me when I joined the company,” commented one of the CIOs in the session. RSP by the way stands for Revenue Sucking Pigs. The latest myth of the CIO and IT centers around the cost of IT, its inability to respond quickly, and quesions around its business value. These questions and challenges were unheard of in the 1970s 80s and early 90s as technology was hard, necessary and valuable work. It seems that once people could do their own word processing and spreadsheets on PC’s the technology did not seem so hard. That is true, to a point, but you cannot run a multi-million dollar company on a PC. So with the wizard’s hat removed, the myth changed and its one that many of us are living with now.
That myth is not true either and its time to get a new one.

But before we start with the future, its good to recognize the past. What is the myth you are working with, the expectations others have. This is not a request to whinge or complain but to recognize the reality of where we stand to start to reconstruct the ideas and symbols of where we want to go.

What this blog is all about

2009-03-11T14:44:00.000-07:00

Welcome

This blog looks to capture thoughts about business, leadership, and technology. Some of the entries here will also be cross posted on my work blogs. However some of them, particularly ones related to politics and current events will appear only here -- since they are expressions of personal opinion.

I hope you enjoy reading this and please let me know if I am doing this right, missing something etc.

Thanks

Mark McDonald