Business-Technology

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Consulting doesn’t work any more. We need to reinvent it.

2010/02/25 in Business-Technology by peg | Comments

What does it mean to be in consulting these days? The consulting model that’s evolved over the last 30 – 50 years seems to be breaking down. The internet and social media have shifted the way business operates, and the consulting industry has failed to move with it. The old tricks that the industry has relied on — the did it, done it stories and the assumption that I know something you don’t — no longer apply. Margins are under pressure and revenue is on the way down (though outsourcing is propping up some) as clients find smarter ways to solve problems, or decide that they can simply do without. The knowledge and resources the consulting industry has been selling are no longer scarce, and we need to sell something else. Rather than seeing this as a problem, I see it as a huge opportunity; an opportunity to establish a more collaborative and productive relationship founded on shared, long term success. Sell outcomes, not scarcity and rationing.

I’m a consultant. I have been for some time too, working in both small and large consultancies. It seems to me that the traditional relationship between consultancy and client is breaking down. This also appears to be true for both flavours of consulting: business and technology. And by consulting I mean everything from the large tier ones down to the brave individuals carving a path for themselves.

Business is down, and the magic number seems to be roughly a 17% decline year-on-year. One possible cause might be that the life blood of the industry — the large multi-year transformation project — has lost a lot of its attraction in recent years. If you dig around in the financials for the large publicly listed consultancies and vendors you’ll find that the revenue from IT estate renewal and transformation (application licenses, application configuration and installation services, change management, and even advisory) is sagging by roughly 17% everywhere around the globe.

SABER @ American Airlines

Large transformation projects have lost much of their attraction. While IBM successfully delivered SABER back in the 60s, providing a heart transplant for American Airlines ticketing processes, more recent stabs at similarly sized projects have met with less than stellar results. Many more projects are quietly swept under the carpet, declared a success so that involved can move on to something else.

The consulting model is a simple one. Consultants work on projects, and the projects translate into billable hours. Consultancies strive to minimise overheads (working on customer premises and minimising support staff), while passing incidental costs through to clients in the form of expenses. Billable hours drive revenue, with lower grades provide higher margins.

This creates a couple of interesting, and predictable, behaviours. First, productivity enhancing tooling is frowned on. It’s better to deploy a graduate with a spreadsheet than a more senior consultant with effective tooling. Second, a small number of large transactions are preferred to a large number of small transactions. A small number of large transactions requires less overhead (sales and back-office infrastructure).

All this drives consultancies to create large, transformational projects. Advisory projects end up developing multi-year (or even multi-decade) roadmaps to consolidate, align and optimise the business. Technology projects deliver large, multi-million dollar, IT assets into the IT estate. These large, business and IT transformation projects provide the growth, revenue and margin targets required to beat the market.

This desire for large projects is packaged up in what is commonly called “best practice”. The consulting industry focuses on did it, done it stories, standard and repeatable projects to minimise risk. The sales pitch is straight-forward: “Do you want this thing we did over here?” This might be the development of a global sourcing strategy, an ERP implementation, …

Spencer Tracy & Katharine Hepburn in The Desk Set

Spencer Tracy & Katharine Hepburn in The Desk Set

This approach has worked for some time, with consultancy and client more-or-less aligned. Back when IBM developed SABER you were forced to build solutions from the tin up, and even small business solutions required significant effort to deliver. In the 1957, when Spencer Tracy played a productivity expert in The Desk Set, new IT solutions required very specific skills sets to develop and deploy. These skills were in short supply, making it hard for an organisation to create and maintain a critical mass of in-house expertise.

Rather than attempt to build an internal capability — forcing the organisation on a long learning journey, a journey involving making mistakes to acquire tacit knowledge — a more pragmatic approach is to rent the capability. Using a consultancy provides access to skills and knowledge you can’t get elsewhere, usually packaged up as a formal methodology. It’s a risk management exercise: you get a consultancy to deliver a solution or develop a strategy as they just did one last week and know where all the potholes are. If we were cheeky, then we would summerize this by stating that consultancies have a simple value proposition: I know something you don’t!

It’s a model defined by scarcity.

A lot has changed in the last few years; business moves a lot faster and a new generation of technology is starting to take hold. The business and technology environment is changing so fast that we’re struggling to keep up. Technology and business have become so interwoven that we now talk of Business-Technology, and a lot of that scarce knowledge is now easily obtainable.

The Diverging Pulse Rates of Business and Technology

The Diverging Pulse Rates of Business and Technology

The scarce tacit knowledge we used to require is now bundled up in methodologies; methodologies which are trainable, learnable, and scaleable. LEAN and Six Sigma are good examples of this, starting as more black art than science, maturing into respected methodologies, to today where certification is widely available and each methodology has a vibrate community of practitioners spread across both clients and consultancies. The growth of MBA programmes also ensures that this knowledge is spread far and wide.

Technology has followed a similar path, with the detailed knowledge required to develop distributed solutions incrementally reified in methodologies and frameworks. When I started my career XDR and sockets were the networking technologies of the day, and teams often grew to close to one hundred engineers. Today the same solution developed on a modern platform (Java, Ruby, Python …) has a team in the single digits, and takes a fraction of the time. Tacit knowledge has be reified in software platforms and frameworks. SaaS (Software as a Service) takes this to a while new level by enabling you to avoid software development entirely.

The did it, done it stories that consulting has thrived on in the past are being chewed up and spat out by the business schools, open source, and the platform and SaaS vendors. A casual survey of the market usually finds that SaaS-based solutions require 10% of the installation effort of a traditional on-premsis solution. (Yes, that’s 90% less effort.) Less effort means less revenue for the consultancies. It also reduces the need for advisory services, as provisioning a SaaS solution with the corporate credit card should not require a $200,000 project to build a cost-benefit analysis. And gone are the days when you could simply read the latest magazines and articles from the business schools, spouting what you’d read back to a client. Many clients have been on the consulting side of the fence, have a similar education in the business schools, and reads all the same articles.

I know and you don’t! no longer works. The world has moved on and the consulting industry needs to adapt. The knowledge and resources the industry has been selling are no longer scarce, and we need to sell something else. I see this is a huge opportunity; an opportunity to establish a more collaborative and productive relationship founded on shared, long term success. As Jeff Jarvis has said: stop selling scarcity, sell outcomes.

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Time for a new covenant between business and IT

2010/01/20 in Business-Technology, Posterous by peg | Comments

Garther have suggested that by 2012, 20% of companies will own no IT assets. At the same time we have Forrester predicting a boom in IT. I think both of them are right, and what we’re seeing is a breaking of the old covenant between business and the IT services industry (which includes internal IT departments). The old relationship was founded on the development and maintenance of IT assets (networks, applications, desktops …). The new one will be founded on something different. The new IT industry is going to be a different beast (i.e. no more strategic transformation or infrastructure projects), and we’ll need to radically reconfigure our organisations if we want to play a part.

Posted via web from PEG @ Posterous

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The changing role of Government

2009/12/11 in Business-Technology by peg | Comments

Is Government 2.0 (whichever definition you choose) the ultimate aim of government? Government for the people and by the people. Or are we missing the point? We’re not a collection of individuals but a society where the whole is greater than the parts. Should government’s ultimate aim to be the trusted arbiter, bringing together society so that we can govern together? Rather than be disinterested and governed on, as seems to be the current fashion. In an age when everything is fragmented and we’re all responsible for our own destiny, government is in a unique position to be the body that binds together the life events that bring our society together.

Government 2.0 started with lofty goals: make government more collaborative. As with all definitions though, it seems that the custodians of definitions are swapping goals for means. Pundits are pushing for technology driven definitions, as Government 2.0 would not be possible without technology (but then, neither would my morning up of coffee).

Unfortunately Government 2.0 seems to be in danger of becoming “government as a platform”: GaaP or even GaaS (as it were). Entrepreneurs are calling on the government to open up government data, allowing start-ups to remix data to create new services. FixMyStreet might be interesting, and might even tick many of the right technology boxes, but it’s only a small fragment of what is possible.

GovHack

This approach has resulted in some interesting and worthwhile experiments like GovHack, but it seems to position much of government as a boat anchor to be yanked up with top-down directives rather than as valued members of society who are trying to do what they think is the right thing. You don’t create peace by starting a war, and nor do you create open and collaborative government through top down directives. We can do better.

The history of government has been a progression from government by and for the big man, through to today’s push for government for and by the people. Kings and Queens practiced stand-over tactics, going bust every four to seven years from running too many wars that they could not afford, and then leaning on the population to refill their coffers. The various socialist revolutions pushed the big man (or woman) out and replaced them with a bureaucracy intended to provide the population with the services they need. Each of us contributing in line with ability, and taking in line with need. The challenge (and possibly the unsolvable problem) was finding a way to do this in an economically sustainable fashion.

The start of the modern era saw government as border security and global conglomerate. The government was responsible for negotiating your relationship with the rest of the world, and service provision was out-sourced (selling power stations and rail lines). Passports went from a convenient way of identifying yourself when overseas, to become the tool of choice for governments to control border movements.

Government 2.0 is just the most recent iteration in this ongoing evolution of government. The initial promise: government for the little man, enabled by Web 2.0.

As with Enterprise 2.0, what we’re getting from the application of Web 2.0 to an organisation is not what we expected. For example, Enterprise 2.0 was seen as a way to empower knowledge workers but instead, seems to be resulting in a generation of hollowed out companies where the C-level and task workers at the coal face remain, but knowledge workers have been eliminated. Government 2.0 seems to have devolved into “government as a platform” for similar reasons, driven by a general distrust of government (or, at least, the current government which the other people elected) and a desire to have more influence on how government operates.

Government, The State, has come to be defined as the enemy of the little man. The giant organisation which we are largely powerless against (even though we elected them). Government 2.0 is seen as the can opener which can be used to cut the lid off government. Open up government data for consumption and remixing by entrepreneurs. Provide APIs to make this easy. Let us solve your citizen’s problems.

We’re already seeing problems with trust in on-line commerce due to this sort of fine-grained approach. The rise of online credit card purchases has pull the credit card fraud rate up with it resulting in a raft of counter-measures, from fraud detection through to providing consumers with access to their credit reports. Credit reports which, in the U.S., some providers are using as the basis for questionable tactics which scam and extort money from the public.

Has the pendulum swung too far? Or is it The Quiet American all over again?

Gone are the days where we can claim that “The State” is something that doesn’t involve the citizens. Someone to blame when things go wrong. We need to accept that now, more than ever, we always elect the government we deserve.

Technology has created a level of transparency and accountablility—exhemplified by Obama’s campaign—that are breeding a new generation of public servants. Rather than government for, by or of the people, we getting government with the people.

This is driving a the next generation of government: government as the arbitrator of life events. Helping citizens collaborate together. Making us take responsibility for our own futures. Supporting us when facing challenges.

Business-technology, a term coined by Forrester, is a trend for companies to exploit the synergies between business and technology and create new solutions to old problems. Technology is also enabling a new approach to government. Rather than deliver IT Government alignment to support an old model of government, the current generation of technologies make available a new model which harks back to the platonic ideals.

We’ve come along way from the medieval days when government was (generally) something to be ignored:

  • Government for the man (the kings and queens)
  • Government by the man (we’ll tell you what you need) (each according to their need, each …)
  • Government as a conglomerate (everything you need)
  • Government as a corporation (everything you can afford)

The big idea behind Government 2.0 is, at its nub, government together. Erasing the barriers between citizens, between citizens and the government, helping us to take responsibility for our future, and work together to make our world a better place.

Government 2.0 should not be a platform for entrepreneurs to exploit, but a shared framework to help us live together. Transparent development of policy. Provision (though not necessirly ownership) of shared infrastructure. Support when you need it (helping you find the services you need). Involvement in line with the Greek/Roman ideal (though more inclusive, without exclusions such as women or slaves).

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The price of regret

2009/11/26 in Business-Technology, IT Strategy, Posterous by peg | Comments

I learnt a new term at lunch the other day: regret cost. Apparently this is the cost incurred to re-platform or replace a tactical solution when it can no longer scale to support current demand. If we’d just built the big one in the first place, then we wouldn’t need to write of the investment in the tactical solution. An investment we now regret, apparently.

This attitude completely misses the point. The art of business is not to take the time to make a perfect decision, but to make a timely decision and make it work. Business opportunities are often only accessible in a narrow time window. If we miss the window then we can’t harvest the opportunity, and we might as well have not bothered.

Building the big, scalable perfect solution in the first place might be more efficient from an engineering point of view.  However, if we make the delivery effort so large that we miss the window of opportunity, then we’ve just killed any chance of helping the business to capitalise on the opportunity. IT has positioned itself as department that says no, which does little to support a productive relationship with the business.

Size the solution to match the business opportunity, and accept that there may need to be some rework in the future. Make the potential need for rework clear to the business so that there are no surprises. Don’t use potential rework in the future as a reason to do nothing. Or to force approval of a strategic infrastructure project which will deliver sometime in the distant future, a future which may never come.

While rework is annoying and, in an ideal world, a cost to be avoided, sometimes the right thing to do is to build tactical solution that will need to be replaced. After all, the driver to replacing it is the value it’s generating for the business. What is there to regret? That we helped the business be successful? Or that we’re about to help the business be even more successful?

Posted via email from PEG @ Posterous

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We can be our own worst enemy

2009/11/23 in Business-Technology, Mailing List by peg | Comments

The only certainties in life are death and taxes, or so we’ve been told on numerous occasions. I’d like to add “change” to the list. Change, be it business change or change in our personal lives, has accelerated to the point that we can expect the environment we inhabit to change significantly in the immediate future, let along over the length of our careers. If we want our business to remain competitive in this ever evolving landscape, then overcoming our (and our team’s) own resistance to change is our biggest challenge.

The rules we have built our careers on, rules forged back in the industrial revolution, are starting to come apart. Most folk—from the Baby Boomers through to Gen Y—expect the skills they acquired in their formative years to support them well through to retirement. How we conduct business might change radically, driven by technological and societal change, but what we did in business could be assumed to change at a slower than generational pace. We might order over the internet rather than via a physical catalogue, or call a person via a mobile rather than call a place via a landline, but skills we learnt in our formative years would still serve us well. For example, project managers manage ever increasingly complex projects over the length of their career, even though how they manage projects has migrated from paper GANTT charts to MS Project, and now onto BaseCamp.

Which is interesting, as it is this what, the doctrine, which most people use to define themselves. A project manager manages projects, and has (most likely) built their career by managing increasingly larger projects and, eventually, programs. Enterprise architects work their way toward managing ever larger transformation programs. Consultants work to become stream leads, team leaders, finally running large teams across entire sectors or geographies. An so on. The length of someones career sees them narrowing their focus to specialise in a particular doctrine, while expanding their management responsibilities. It is this doctrine which most people define themselves by, and their career is an constant investment in doctrine to enhance their skills, increasing their value with respect to the doctrine they chose to focus on.

This is fine in a world when the doctrines a business needs to operate change slower than the duration of a typical career. But what happens if the pace of change accelerates? When the length of the average career becomes significantly longer than the useful life of the doctrines the business requires.

We’ve reached an interesting technological inflection point. Information technology to date could be characterized as the race for automation. The vast bulk of enterprise applications have been focused on automating a previously manual task. This might be data management (general ledger, CRM, et al) or transforming data (SAP APO). The applications we developed were designed as bolt-ons to existing business models. Much like adding an after-market turbo charger to your faithful steed. Most (if not all) of the doctrines in the technology profession have grown to support this model: the development and deployment of large IT assets to support an existing business.

However, the role of technology in business is changing. The market of enterprise applications has matured to the point where a range of vendors can supply you with applications to automate any area of the business you care to name, making these applications ubiquitous and commoditized.The new, emerging, model has us looking beyond business technology alignment, trying and identify new business models which can exploit synergies between the two. A trend Forrester has termed, Business-Technology.

The focus has shifted from asset to outcome, changing the rules we built our careers on. Our tendency to define ourselves by the doctrine we learnt/developed yesterday has become a liability. We focus on how we do something, not why we do it, making it hard to change our habits when the assumptions they are founded on no longer apply. With our old doctrines founded on the development and management of large IT assets, we’re ill-equipped to adapt to the new engagement models Business-Technology requires.

The shift to an outcome focus is part of the acceleration of the pace of business. The winners in this environment are constantly inventing new doctrine as they look for better ways to achieve the same outcome. How we conduct business is changing so rapidly that we can’t expect to be doing the same thing in five years time, let alone for the rest of our career. What we learnt to do in our mid 20’s is no longer (entirely) relevant, and doesn’t deliver the same outcome as it used to. Isn’t the definition of insanity continuing to do something the we know doesn’t work? So why, then, do we continue to launch major transformation programmes when we know they have a low chance of success in the current business and social environment? Doctrine has become dogma.

We need to (re)define ourselves along the lines of “I solve problems”: identifying with the outcomes we deliver, at both personal and departmental levels. This allows us to consider a range of doctrines/options/alternatives and look for the best path forward. If we adopt “I am an TOGAF enterprise architect” (or SixSigma black belt, or Prince2, or …) then they will just crank the handle as the process has become more important than the goal. If we adopt “how can I effectively evolve this IT estate the with tools I have”, then we’ll be more successful.

Rolls-Royce and Craig’s List are good examples of organisations using a focus on outcomes to driver their businesses forward. Bruce Lee might even be the poster child of this problem solving mentality. He studies a wide range of fighting doctrines, and designed some of his own, in an attempt to break his habits and find a better way.

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Balancing our two masters

2009/11/09 in Business-Technology, Mailing List by peg | Comments

We seem to be torn between two masters. On one hand we’re driven to renew our IT estate, consolidating solutions to deliver long term efficiency and cost savings. On the other hand, the business wants us to deliver new, end user functionality (new consumer kiosks, workforce automation and operational excellence solutions …) to support tactical needs. But how do we balance these conflicting demands, when our vertically integrated solutions tightly bind user interaction to the backend business systems and their multi-year life-cycle? We need to decouple the two, breaking the strong connection between business system and user interface. This will enable us to evolve them separately, delivering long term savings while meeting short term needs.

Business software’s proud history is the story of managing the things we know. From the first tabulation systems through enterprise applications to modern SaaS solutions, the majority of our efforts have been focused data: capturing or manufacturing facts, and pumping them around the enterprise.

We’ve become so adept at delivering these IT assets into the business, that most companies’ IT estates a populated with an overabundance of solutions. Many good solutions, some no so good, and many redundant or overlapping. Gardening our IT estate has become a major preoccupation, as we work to simplify and streamline our collection of applications to deliver cost savings and operational improvements. These efforts are often significant undertakings, with numbers like “5 years” and “$50 million” not uncommon.

While we’ve become quite sophisticated at delivering modular business functionality (via methods such as SOA), our approach to supporting users is still dominated by a focus on isolated solutions. Most user interfaces are slapped on as nearly an after thought, providing stakeholders with a means to interact with the vast, data processing monsters we create. Tightly coupled to the business system (or systems) they are deployed with, these user interfaces are restricted to evolving at a similar pace.

Business has changed while we’ve been honing our application development skills. What used to take years, now takes months, if not weeks. What used to make sense now seems confusing. Business is often left waiting while we catch up, working to improve our IT estate to the point that we can support their demands for new consumer kiosks, solutions to support operational excellence, and so on.

What was one problem has now become two. We solved the first order challenge of managing the vast volumes of data an enterprise contains, only to unearth a second challenge: delivering the right information, at the right time, to users so that they can make the best possible decision. Tying user interaction to the back end business systems forces our solutions for these two problems to evolve at a similar pace. If we break this connection, we can evolve users interfaces at a more rapid pace. A pace more in line with business demand.

We’ve been chipping away at this second problem for a quite a while. Our first green screen and client-server solutions were over taken from portals, which promised to solve the problem of swivel-chair integration. However, portals seem to be have been defeated by browser tabs. While these allowed us to bring together the screens from a collection of applications, providing a productivity boost by reducing the number of interfaces a user interacted with, it didn’t break the user interfaces explicit dependancy on the back end business systems.

We need to create a modular approach to composing new, task focused user interfaces, doing to user interfaces what SOA has done for back-end business functionality. The view users see should be focused on supporting the decision they are making. Data and function sourced from multiple back-end systems, broken into reusable modules and mashed together, creating an enterprise mash-up. A mashup spanning multiple screens to fuse both data and process.

Some users will find little need an enterprise mash-up—typically users who spend the vast majority of their time working within a single application. Others, who work between applications, will see a dramatic benefit. These users typically include the knowledge rich workers who drive the majority of value in a modern enterprise. These users are the logistics exception managers, who can make the difference between a “best of breed” supply chain and a category leading one. They are the call centre operators, whose focus should be on solving the caller’s problem, and not worrying about which backend system might have the data they need. Or they could be field personnel (sales, repairs …), working between a range of systems as they engage with you customer’s or repair your infrastructure.

By reducing the number of ancillary decisions required, and thereby reducing the number of mistakes made, enterprise mash-ups make knowledge workers more effective. By reducing the need to manually synchronise applications, copying data between them, we make them more efficient.

But more importantly, enterprise mash-ups enable us to decouple development of user interfaces from the evolution of the backend systems. This enables us to evolve the two at different rates, delivering long term savings while meeting short term need, and mitigating one of the biggest risks confronting IT departments today: the risk of becoming irrelevant to the business.

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Knowledge Worker of the Future & Google Wave

2009/10/21 in Business-Technology, Knowledge Worker of the Future, Posterous by peg | Comments

I’ve written before about the need for an integrated approach to applying Web 2.0 ideas and tools to the enterprise. While navigating the plethora of point solutions and complex interfaces might be fine for the early adopters, most folk just want something that makes their work easier and can’t be bothered with navigating a convoluted technology and solution landscape.

I’ve been playing with Google Wave for a little while now, and initially thought that it fell into the same bucket; it’s an impressive piece of technology, but it’s also to complicated for most people to be bothered with. That was before Daniel Tenner put together a thoughtful post on the pros and cons of Wave, pointing out that Wave is a communication platform rather than a communication channel. It’s a tool for people to work together, rather than a tool to communicate.

Putting one-and-one together, what if we used Wave as a solution platform? Plug transactional data and workflow processes into Wave, rework the UI to be more task or problem centric and less messaging centric, and it would make a nice platform to build the sort of collaboration and knowledge rich solutions we need.

Bruce, a colleague of mine, has taken this a step further and built a little PoC, creating a Wave enabled leave application process. You can find the blog post, Using Google Wave for Workflow Tasks, over at his blog, and he’s put together a nice screen cast of the leave application solution, included below.

Posted via email from PEG

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Change me (Part 2)

2009/10/13 in Business-Technology, Posterous by peg | Comments

In a rapidly changing world, our biggest challenge is getting our companies, and ourselves, to embrace change rather than resist it. We want to create organisational agility, as agility is the key to success in our rapidly changing business environment, and the only thing holding us back is ourselves. As I’ve written before:

Modern IT provides us with a wealth of opportunities that our current asset centric approach to [IT] prevents us from leveraging. We need to get out of our offices and cubes and embed ourselves where the workers are, where the value is created. If we create an environment where we define ourselves in terms of how we will help the organisation evolve, rather than in terms of the assets we manage [and the sunk cost they represent], then we can convert change from an enemy into an advantage. Our team will wake up every morning eager to get into work, just like the team on the shop floor at Toyota.
Change me, Capgemini CTO Blog

Netflix is no different to the rest of us, trying to look forward to what they could (and should) be doing, rather than being hung up on what they’ve done in the past. However, when confronted with the realisation that what they we’re doing wasn’t working, they adapt.

In short, Reed Hastings [CEO of Netflix] is not a man who gets locked in by sunk costs: he’s willing to kill projects (or, in this case, spin them off) even if he’s got years invested in them. A good example for my students when we discusses costs in a few weeks. And just another example of the strengths of Netflix’s culture.
Netflix avoids the sunk cost fallacy, Donald Marron

In many companies this would have been impossible, as too many people would have their careers resting on the success of the project. Success allows them to move onto ever larger projects where they can carry greater responsibility as they work their way up the career ladder. It would be unthinkable to kill a project that people were relying on for the next step in their career.

Agility is a question of culture and willingness to change, even if this means killing our favourite project. A culture that defines itself in terms of the problems it solves and the outcomes delivered, as the organisation works to achieve its goals, rather than the business processes used to maintain business as usual. Netflix seems to have this in spades.

Posted via email from PEG

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Working from the outside in

2009/10/12 in Business-Technology, The Value of Information by peg | Comments

We’re drowning in a sea of data and ideas, with huge volumes of untapped information available both inside and outside our organization. There is so much information at our disposal that it’s hard to discern Arthur from Martha, let alone optimize the data set we’re using. How can we make sense of the chaos around us? How can we find the useful signals which will drive us to the next level of business performance, from amongst all this noise?

I’ve spent some time recently, thinking about how the decisions our knowledge workers make in planning and managing business exceptions can have a greater impact on our business performance than the logic reified in the applications themselves. And how the quality of information we feed into their decision making processes can have an even bigger impact, as the data’s impact is effectively amplified by the decision making process. Not all data is of equal value and, as is often said, if you put rubbish in then you get rubbish out.

Traditional Business Intelligence (BI) tackles this problem by enabling us to mine for correlations in the data tucked away in our data warehouse. These correlations provide us with signals to help drive better decisions. Managing stock levels based on historical trends (Christmas rush, BBQs in summer …) is good, but connecting these trends to local demographic shifts is better.

Unfortunately this approach is inherently limited. Not matter how powerful your analytical tools, you can only find correlations within and between the data sets you have in the data warehouse, and this is only a small subset of the total data available to us. We can load additional data sets into the warehouse (such as demographic data bought from a research firm), but in a world awash with (potentially useful) data, the real challenge is deciding on which data sets to load, and not in finding the correlations once they are loaded.

What we really need is a tool to help scan across all available data sets and find the data which will provide the best signals to drive the outcome we’re looking for. An outside-in approach, working from the outcome we want to the data we need, rather than an inside-out approach, working from the data we have to the outcomes it might support. This will provide us with a repeatable method, a system, for finding the signals needed to drive us to the next level of performance, rather than the creative, hit-and-miss approach we currently use. Or, in geekier terms, a methodology which enables us to proactively manage our information portfolio and derive the greatest value from it.

I was doodling on the tram the other day, playing with the figure I created for the Inside vs. Outside post, when I had a thought. The figure was created as a heat map showing how the value of information is modulated by time (new vs. old) and distance (inside vs. outside). What if we used it the other way around? (Kind of obvious in hindsight, I know, but these things usually are.) We might use the figure to map from the type of outcome we’re trying to achieve back to the signals required to drive us to that outcome.

Time and distance drive the value of information

Time and distance drive the value of information

This addresses an interesting comment (in email) by a U.K. colleague of mine. (Jon, stand up and be counted.) As Andy Mulholland pointed out, the upper right represents weak confusing signals, while the lower left represents strong, coherent signals. Being a delivery guy, Jon’s first though was how to manage the dangers in excessively focusing on the upper right corner of the figure. Sweeping a plane’s wings forward increases its maneuverability, but at the cost of decreasing it’s stability. Relying too heavily on external, early signals can, in a similar fashion, could push an organization into a danger zone. If we want to use these types of these signals to drive crucial business decisions, then we need to understand the tipping point and balance the risks.

My tram-doodle was a simple thing, converting a heat map to a mud map. For a given business decision, such as planning tomorrow’s stock levels for a FMCG category, we can outline the required performance envelope on the figure. This outline shows us the sort of signals we should be looking for (inside good, outside bad), while the shape of the outlines provides us with an understanding (and way of balancing) the overall maneuverability and stability of the outcome the signals will support. More external predictive scope in the outline (i.e. more area inside the outline in the upper-right quadrant) will provide a more responsive outcome, but at the cost of less stability. Increasing internal scope will provide a more stable outcome, but at the cost of responsiveness. Less stability might translate to more (potentially unnecessary) logistics movements, while more stability would represent missed sales opportunities. (This all creates a little deja vu, with a strong feeling of computing Q values for non-linear control theory back in university, so I’ve started formalizing how to create and measure these outlines, as well as how to determine the relative weights of signals in each area of the map, but that’s another blog post.)

An information performance mud map

An information performance mud map

Given a performance outline we can go spelunking for signals which fit inside the outline.

Luckily the mud map provides us with guidance on where to look. An internal-historical signal is, by definition driven by historical data generated inside the organization. Past till data? An external-reactive signal is, by definition external and reactive. A short term (i.e. tomorrow’s) weather forecast, perhaps? Casting our net as widely as possible, we can gather all the signals which have the potential to drive us toward to the desired outcome.

Next, we balance the information portfolio for this decision, identifying the minimum set of signals required to drive the decision. We can do this by grouping the signals by type (internal-historical, …) and then charting them against cost and value. Cost is the acquisition cost, and might represent a commercial transaction (buying access to another organizations near-term weather forecast), the development and consulting effort required to create the data set (forming your own weather forecasting function), or a combination of the two, heavily influenced by an architectural view of the solution (as Rod outlined). Value is a measure of the potency and quality of the signal, which will be determined by existing BI analytics methodologies.

Plotting value against cost on a new chart creates a handy tool for finding the data sets to use. We want to pick from the lower right – high value but low cost.

An information mud map

An information mud map

It’s interesting to tie this back to the Tesco example. Global warming is making the weather more variable, resulting in unseasonable hot and cold spells. This was, in turn, driving short-term consumer demand in directions not predicted by existing planning models. These changes in demand represented cost, in the from of stock left on the shelves past it’s use-by date, or missed opportunities, by not being able to service the demand when and where it arises.

The solution was to expand the information footprint, pulling in more predictive signals from outside the business: changing the outline on the mud map to improve closed-loop performance. The decision to create an in-house weather bureau represents a straight forward cost-value trade-off in delivering an operational solution.

These two tools provide us with an interesting approach to tackling a number of challenges I’m seeing inside companies today. We’re a lot more externally driven now than we were even just a few years ago. The challenge is to identify customer problems we can solve and tie them back to what our organization does, rather than trying to conceive offerings in isolation and push them out into the market. These tools enable us to sketch the customer challenges (the decisions our customers need to make) and map them back to the portfolio of signals that we can (or might like to) provide to them. It’s outcome-centric, rather than asset-centric, which provides us with more freedom to be creative in how we approach the market, and has the potential to foster a more intimate approach to serving customer demand.

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Using what you have

2009/10/11 in Business-Technology, Posterous by peg | Comments

All too often companies miss opportunities because they can’t make connections between the things they already know. There’s a well traveled story about a clothing company who bounces a customer’s request to return an item, as they don’t think it’s worth the bother even though the customer has a real complaint, only to find out later that the customer was the wife of the CEO of one of their major partners. She probably spent most of dinner that night complaining about the company’s customer service, must to the detriment of the CEO’s opinion of the partnership. If they’d just been able to make a couple of connections a little earlier, the outcome might have been a little different.

It’s nice to see some companies weeding through the pile of data available to them, and make some of the obvious connections. One bloke, after the flight from hell which was delayed due to weather, found out that Northwest Airlines had made the obvious connections and solved the problem before he arrived for his connecting flight.

So let me see if I got this right. I don’t need to find a free ground agent to get re-booked. I don’t need to schlep myself and my luggage in line along with 50+ other people who are all mad, tired and missing their families… to get re-ticketed? AND NWA was giving me $50 off another flight and frequent flier miles to boot? Remember this wasn’t their fault, its mother natures gig here. This was some customer service!!! I love it!

Operations knew that the flight was running late, and booking knew of the connection. I spent the Sunday before last standing around Sydney Airport and Virgin couldn’t make the obvious connection. Luckily, he didn’t have the same experience.

How often have you been frustrated because some company you’re dealing with can’t get the left hand to talk to the right?

Posted via email from PEG

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