Tag Archives: Business-Technology

What is the future of IT in business?

I’ve come to the realisation that there are no good forums for folk trying to understand what new operational models and opportunities the current technological and business environments might offers us. Somewhere to toss back and forth new ways of solving problems, not just incremental improvements on what was done in the past. Somewhere inclusive enough to involve small, medium and large businesses, and not just start ups.

Rather than continuing to complain about this to friends over beers, I thought I might see if I can start one.

Continue reading What is the future of IT in business?

Innovation [2010-08-02]

Another week and another collection of interesting ideas from around the internet.

As always, thoughts and/or comments are greatly appreciated.

What I like about jet engines

Rolls-Royce{{1}} (the engineering company, not the car manufacturer) is an interesting firm. From near disaster in the 70s, when the company was on the brink of failure, Rolls-Royce has spent the last 40 years reinventing itself. Where it used to sell jet engines, now the company sells hot air out the back of the engines, with clients paying only for the hours an engine is in service. Rolls-Royce is probably the one of the cleanest examples of business-technology{{2}} that I’ve come across; with the company picking out the synergies between business and technology to solve customer problems, rather than focusing on trying to align technology delivery with a previously imagined production process to push products at unsuspecting consumers. I like this for a few reasons. Firstly, because it wasn’t a green fields development (like Craig’s List{{3}} et al), and so provides hope for all companies with more than a few years under their belt. And secondly, as the transformation seems to have be the result of many incremental steps as the company felt its way into the future, rather than as the result of some grand, strategic plan.

[[1]]Rolls Royce[[1]]
[[2]]Business-Technology defined @ Forrester[[2]]
[[3]]Craig’s list[[3]]

A Rolls-Royce jet engine

I’ve been digging around for a while (years, not months), looking for good business-technology case studies. Examples of organisations which leverage the synergies between business and technology to create new business models which weren’t possible before, rather than simply deploying applications to accelerate some pre-imagined human process. What I’m after is a story that I can use in presentations and the like, and which shows not just what business-technology is, but also contrasts business-technology with the old business and technology alignment game while providing some practical insight into how the new model was created.

For a while I’ve been mulling over the obvious companies in this space, such as Craig’s List or Zappos{{4}}. While interesting, their stories don’t have the impact that they could as they were green fields developments. What I wanted was a company with some heritage, a history, to provide the longitudinal view this needs.

[[4]]Zappos[[4]]

The company I keep coming back to is Rolls-Royce. (The engineering firm, not the car manufacturer). I bumped into a story in The Economist{{5}}, Britain’s lone high-flier{{6}}, which talks about the challenge of manufacturing in Britain. (Which is, unfortunately, behind the pay wall now.) As The Economist pointed out:

A resurgent Rolls-Royce has become the most powerful symbol of British manufacturing. Its success may be hard to replicate, especially in difficult times.

[[5]]The Economist[[5]]
[[6]]Britain’s lone high-flier @ The Economist[[6]]

With its high costs and (relatively) inflexible workforce, running an manufacturing business out of Britain can be something of a challenge, especially with China breathing down your neck. Rolls-Royce’s solution was not to sell engines, but to sell engine hours.

This simple thought (which is strikingly similar to the tail of the story in Mesh Collaboration{{7}}) has huge ramifications, pushing the company into new areas of the aviation business. It also created a company heavily dependent on technology, from running realtime telemetry around the globe through to knowledge management. The business model — selling hot air out the back of an engine — doesn’t just use technology to achieve scale, but has technology woven into its very fabric. And, most interestingly, it is the result of tinkering, small incremental changes rather than being driven by some brilliant transformative idea.

[[7]]Mash-Up Corporations[[7]]

As with all these long term case studies, the Rolls-Royce story does suffer from applying new ideas to something that occurred yesterday. I’m sure that no one in Rolls-Royce was thinking “business-technology” when the company started the journey. Nor would they have even thought of the term until recently. However, the story still works for me as, for all it’s faults, I think there’s still a lot we can learn from it.

The burning platform was in the late 60s, early 70s. Rolls-Royce was in trouble. The company had 10% market share, rising labour costs, and was facing fierce competition from companies in the U.S. Even worse, these competitors did not have to worry about patents (a hangover from the second world war), they also had a large domestic market and a pipeline of military contracts which put them in a much stronger financial position. Rolls-Royce had to do something radical, or facing being worn down by aggressive competitors who had more resources behind them.

Interestingly, Roll-Royce chose to try and be smarter than the competition. Rather than focus on incremental development, the company decided to designed a completely new engine. Using carbon composite blades and a radical new engine architecture (three shafts rather than two, for those aeronautical engineers out there) their engine was going to be a lot more complex to design, build and maintain. It would also be a lot more fuel efficient and suffer less wear and tear. And it would be more scalable to different aircraft sizes. This approach allows Rolls-Royce to step out of the race for incremental improvements in existing designs (designing a slightly better fan blade) and create a significant advantage, one which would take the company’s competitors more than the usual development cycle or two to erase.

Most of the margin for jet engines, however, is in maintenance. Some pundits even estimate that engines are sold at a loss (though the manufactures claim to make modest margins on all the engines they sell), while maintenance can enjoy a healthy 35%. It’s another case of give them the razor but sell them the razor blades. But if you give away the razors, there’s always the danger that someone else may make blades to fit your razor. Fat margins and commoditized technology resulted in a thriving service market, with the major engine makers chasing each other’s business, along with a horde of independent servicing firms.

Rolls-Royce’s interesting solution was to integrate the expertise from the two businesses: engine development and servicing. Rather than run them as separate businesses, the company convinced customers to pay a fee for every hour an engine was operational. Rather than selling engines, the company sells hot air out the back of an engine. This provides a better deal for the customers (pay for what you use, rather than face a major capital expense), while providing Rolls-Royce with a stronger hold on its customer base.

Integrating the two business also enabled Rolls-Royce to become better at both. Maintenance data helps the company identify and fix design flaws, driving incremental improvements in fuel efficiency while extending the operating life (and time between major services) tenfold over the last thirty years. It also helps the company predict engine failures, allowing maintenance to be scheduled at the most opportune time for Rolls-Royce, and their customers.

Rolls-Royce leveraged this advantage to become the only one of the three main engine-makers with designs to fit the three newest airliners in the market: the Boeing 787 Dreamliner, the Airbus A380 and the new wide-bodied version of the Airbus A350. Of the world’s 50 leading airlines, 45 use its engines.

Today, an operations centre in Derby assess, in real time, the performance of 3,500 jet engines enabling to Rolls-Royce to spot issues before they become problems and schedule just-in-time maintenance. This means less maintenance and more operating hours, fewer breakdowns (and, I expect, happier customers), and the operational data generated is fed back into the design process to help optimise the next generation of engines.

This photograph is reproduced with the permission of Rolls-Royce plc, copyright © Rolls-Royce plc 2010
Rolls-Royce civil aviation operations in Derby

This service-based model creates a significant barrier to competitors for anyone who wants to steal Rolls-Royce’s business. Even if you could clone Rolls-Royce’s technology infrastructure (hard, but not impossible), you would still need to recreate all the tacit operational knowledge the company has captured over the years. The only real option is to recreate the knowledge yourself, which will take you a similar amount of time as it did Rolls-Royce, while Rolls-Royce continues to forge ahead. Even poaching key personnel from Rolls-Royce would only provide a modest boost to your efforts. As I’ve mentioned before{{8}}, this approach has the potential to create a sustainable competitive advantage.

[[8]]One of the only two sources of sustainable competitive advantage available to us today @ PEG[[8]]

While other companies have adopted some aspects of Rolls-Royce’s model (including the Joint Strike Fighter{{9}}, which is being procured under a similar model), Rolls-Royce continues to lead the pack. More than half of its existing engines in service are covered by such contracts, as are roughly 80% of those it is now selling.

[[9]]The Joint Strike Fighter[[9]]

I think that this makes Rolls-Royce a brilliant example of business-technology in action. Rolls-Royce found, by trial and error, a new model that wove technology and business together in a way that created an “outside in” business model, focused on what customers what to buy, rather than on a more traditional “inside out” model based on pushing products out into the market that the company wants to sell. You could even say that it’s an “in the market” model rather than a “go to market” model. And they did this with a significant legacy, rather than as a green fields effort.

In some industries and companies this type of “outside in” approach was possible before advent of the latest generation of web technology, particularly if it was high value and the company already had a network in place (such as Rolls-Royce success). For most companies it is only now becoming possible with business-technology along with some of the current trends, such as cloud computing, which erase many of the technology barriers.

The challenge is to figure out the “in the market” model you need, and then shift management attitude. Given constant change in the market, this means an evolutionary approach, rather than a revolutionary (transformative) one.

People don’t like change. (Or do they?)

I seem to be having a lot of conversations at the moment around whether people (you, me and everyone else) like and embrace change, or whether they resist it. The same question arises for companies. Like a lot of these questions, I think it depends. As individuals we don’t mind change, given appropriate circumstances. Organisations also want to change (and in today’s business environment it seems to be a question of changing or becoming irrelevant). However, people in organisations are usually strongly incentivised to dislike change, especially if they want to make that next repayment on their new mortgage. Fixing this, and creating a culture that embraces change, means changing the way we think about and structure our organisations and our careers. It means rethinking the rules of enterprise IT.

Every time a conversation comes around to the topic of change, I’m always reminded of a visit I made to a Toyota factory something like a decade ago. It’s so long ago now that I can’t even remember the reason for the visit, but that’s not the point of this missive.

Toyota, like most businesses, loves change. (Many large companies reorganise so often that change seems to be the only constant.) Change, embodied in the development of the Toyota Production System, was what took Toyota from the bottom of the global car industry to the top. Change is also why many of us have moved companies, following jobs as our employers reorganise their operations. For some of us, change is an opportunity. For many though, change is the tool of the man as he tries to disrupt our lives. Change means unwanted relocations, pay cuts, career stalls, or the need to shift jobs when we don’t want to. Change is something to be resisted.

What was interesting about my visit to Toyota though, was the attitude of the workers on the shop floor had to change. They didn’t hate it. They didn’t even resist it. They actually arrived at work each day eager to see how work practices had been changed since the end of their last shift.

A Toyota assembly line circa 2000.
A Toyota assembly line circa 2000

The concrete example I saw of this was the pre-sorting of seatbelt parts into coloured tubs. Apparently only a few weeks earlier the parts had been arranged on a wall. All hooks and dangling parts, like your Dad’s tools in the shed. When a car came down the assembly line a worker would select the parts appropriate for the car model, and then attach them to the car. Each seat belt had roughly four parts, so that meant there was three unnecessary decisions. Unnecessary decisions usually mean mistakes, mistakes waste time and money, and there were a number of mistakes made.

One day a member of the shop floor team had had the bright idea of pre-sorting the seat belts to avoid these mistakes. Some coloured tubs were sourced (some of the shop floor team drove to the local Walmart with a little petty cash), parts were sorted into tubs, and they gave the idea a trial run. Selecting seatbelt parts for a car now only required one decision: which tub?

The idea was a huge success; error rates went down dramatically. I hear that it was even taken global, and implemented in most Toyota factories around the world. (Though being around ten years ago, and with today’s rapid pace of change, I expect that the tubs have been superseded by now.)

What’s interesting about this story is that the change originated on the shop floor, from the assembly line worker who were actively looking to improve operations, rather than from head office as part of a reorganisation. Some of the improvements I heard about even resulted in the elimination of jobs, with the workers redeployed elsewhere in the factory. Workers weren’t just changing how they did something, they were also changing what they did. Change was what made the work interesting and engaging for the workers, rather than being seen as an oppressive tool used by the man.

I think we can safely set aside the idea that works don’t like change, as this story is not an isolated incident. Why then, do so many people resist change? Why, for every Toyota factory, there is a story like the UK newspaper industry, where workers (and unions) resisted change for decades, until Rupert Murdoch came along.

Rupert Murdoch, destroyer of unions, and good Melbourne boy
Rupert Murdoch, destroyer of unions, and good Melbourne boy

The problem is not people or organisations, but people in organisations.

People are funny things; they tend to do what you incentivise them to do. There’s an excellent article over at the NY Times, The no-stars all-star, which talks about measurement and incentives in basketball. We often talk about “what gets measured determines what gets done” from an employee incentive point of view, but this article puts some real meat on the bones of that argument.

Shane Battier, the no-stars all-star
Shane Battier, the no-stars all-star

As the article says (on page two):

There is a tension, peculiar to basketball, between the interests of the team and the interests of the individual. The game continually tempts the people who play it to do things that are not in the interest of the group.

A little later it goes on to mention (on page three):

A point guard might selfishly give up an open shot for an assist. You can see it happen every night, when he’s racing down court for an open layup, and instead of taking it, he passes it back to a trailing teammate. The teammate usually finishes with some sensational dunk, but the likelihood of scoring nevertheless declined. “The marginal assist is worth more money to the point guard than the marginal point,” Morey says.

The point guard’s career is defined by the number of assists he makes (among other metrics), and he’ll try and increase the number of assets even if it’s not in the best interest of the team. After all, teams come and go, while he has a career to maintain.

Once you place a person into a role you have put them on a career path which will determine their attitude to change.

Usually we take an operational approach to defining roles, rewarding people for the volume of work they are responsible for. Career progression then means increasing the amount of work they are responsible for, regardless of what this means for the company.

Measuring a project manager in terms of head count or revenue under management will give them a strong preference for creating ever bigger projects. It doesn’t matter if the right thing to do is create more, smaller projects, rather than run a programme of a few major projects as we have in the past. Your project manager’s career path is to increase their head count and revenue under management. And they do have those private school fees due soon.

Just like the point guard, change that will prevent career progression will be resisted (remember those kids in private school), even if it is counter to the company’s best interests. Which makes the current transformation we’re seeing in IT all the more important, because if we set the wrong incentives in place then we just might be our own worst enemies.

We can’t force a square peg into a round hole; nor can we force our existing employees to take their current roles and careers into a new organisational model. They just don’t fit. Take IT for example. We can’t expect many modern IT departments to spontaneously modernise themselves, transforming into agile business-technology engines under their own volition. It’s not that the departments don’t want to change: they do. Nor are most of the employees, as individuals, opposed (remember the Toyota example). But the combination of people and organisation will repel all but the most destructive boarders.

It’s interesting how other games, games other than basketball that is, have structural solutions to this problem. One solution is the line-up in baseball. From the NY Times article (page two, again):

“There is no way to selfishly get across home plate,” as Morey puts it. “If instead of there being a lineup, I could muscle my way to the plate and hit every single time and damage the efficiency of the team — that would be the analogy.”

Solving this problem in IT means rethinking the rules of IT.

The game of IT has, for the last few decades, been determined by the need to deliver large, enterprise applications into the IT estate. Keep the lights on, don’t lose orders, and automate anything that hasn’t yet been automated. Oh — and I’d like my reports accurate and on time. IT as the game of operational engineering. It was these rules that drove the creation of most of the roles we have in enterprise IT today.

However, this has changed. Decisions are now more important than data, and the global credit crunch is driving us to reconsider the roles we need in IT. We’re trying to reinvent our IT departments for the modern era – I even posted about how this was driving the need the need to manage technology, and not applications – but we haven’t changed the rules to suit.

If we want out people to embrace change, as the people on the shop floor at Toyota did, then we need to provide them with roles and careers that support them in the new normal. And this means changing the rules. Out with the more – more applications, larger projects, more people – and in with the new.

So what are the new rules for IT?

The IT department we have today is not the IT department we’ll need tomorrow

The IT departments many of us work in today (either as an employee or consultant) are often the result of thirty or more years of diligent labour. These departments are designed, optimised even, to create IT estates populated with large, expensive applications. Unfortunately these departments are also looking a lot like dinosaurs: large, slow and altogether unsuited for the the new normal. The challenge is to reconfigure our departments, transforming them from asset management functions into business (or business-technology) optimisation engines. This transformation should be a keen interest for all of us, as it’s going to drive a dramatic change in staffing profiles which will, in turn, effect our own jobs in the no so distant future.

Delivering large IT solutions is a tricky business. They’re big. They’re expensive. And the projects to create them go off the rails more often than we’d like to admit. IT departments have been built to minimise the risks associated with delivering and operating these applications. This means governance, and usually quite a lot of it. Departments which started off as small scale engineering functions soon picked up an administrative layer responsible to the mechanics of governance.

More recently we’ve been confronted with the challenge with managing the dependancies and interactions between IT applications. Initiatives like straight-through processing require us to take a holistic, rather than a pieces-parts, approach, and we’re all dealing with the problem of having one of each application or middleware product, as well as a few we brewed in the back room ourselves. Planning the operation and evolution of the IT estate became more important, and we picked up an enterprise architecture capability to manage the evolution of our IT estate.

It’s common to visualise these various departmental functions and roles as a triangle (or a pyramid, if you prefer). At the bottom we have engineering: the developers and other technical personnel who do the actual work to build and maintain our applications. Next layer up is governance, the project and operational administrators who schedule the work and check that it’s done to spec. Second from the top are the planners, the architects responsible for shaping the work to be done as well as acting as design authority. Capping of the triangle (or pyramid) is the IT leadership team who decide what should be done.

The departmental skills triangle

While specific techniques and technologies might come and go, the overall composition of the triangle has remained the same. From the sixties and seventies through to even quite recently, we’ve staffed our IT departments with many technical doers, a few less administrators, a smaller planning team, and a small IT leadership group. The career path for most of us been a progression from the bottom layers – when we were fresh out of school – to the highest point in the triangle that we can manage.

The emergence of off-shore and outsourcing put a spanner in the works. We all understand the rational: migrate the more junior positions – the positions with the least direct (if any) contact with the business proper – to a cheaper country. Many companies under intense cost pressure broke the triangle in two, keeping the upper planning and decision roles, while pushing the majority of the manage and all the do roles out of the country, or even out of the company.

Our first attempt at out-sourcing

Ignoring whether or not this drive to externalise the lower roles provided the expected savings or not, what it did do is break the career ladder for IT staff. Where does you next generation of senior IT personnel come from if you’ve pushed the lower ranks out of the business? Many companies found themselves with an awkward skills shortage a few years into an outsourcing / off-shore arrangement, as they were no longer able to train or promote senior personnel to replace those who were leaving through natural attrition.

The solution to this was to change how we brake-up the skills triangle; rather than a simple horizontal cut, we took a slice down the side. Retaining a portion of all skills in-house allows companies provide a career path and on the job training for their staff.

A second, improved, go at out-sourcing
A second, improved, go at out-sourcing

Many companies have tweaked this model, adding a bulge in the middle to provide a large enough resource pool to manage both internal projects, as well as those run by out-sourced and off-shore resources.

Factoring in the effort required to manage out-sourced projects
Factoring in the effort required to manage out-sourced projects

This model is now common in a lot of large companies, and it has served us well. However, the world has a funny habit of changing just when you’ve everything working smoothly.

The recent global financial criss has fundamentally changed the business landscape. We are experiencing not merely another turn of the business cycle, but a restructuring of the economic order. Many are even talking about the emergence of a new normal. The impact this will have on how we run our businesses (and our IT departments) is still being discussed, but we can see the outline of this impact already.

Companies are becoming more focused, while leaning more heavily on partners and services companies (BPO, out-sourcers, consultants, and so on) to cover those areas of the business they don’t want to focus on. We can see this from the global companies who have effectively moved to a franchise model, though to the small end of town where startups are using on-line services such as Amazon S3, rather than building internal capabilities. While this trend might have initially started as a cost saving, most of the benefit is in management time saved, which can then be used to focus on more important issues. We’re all finding that the limiting factor in our business is management time, so being able to hand off the management of less important tasks can help provide that edge you need.

We’re also seeing faster business change: what used to take years now takes months, or even weeks. The constant value-chain optimisation we’ve been working on since the 70s has finally cumulated in product and regulatory life-cycles that change faster than we can keep up. Nowhere is this more evident than the regulated industries (finance, utilities …), where updates in government regulation has changed from a generational to a quarterly occurrence as governments attempt to use regulation change to steer the economic boat.

Money is also becoming (or has become) more expensive, causing companies and deals to operate with less leverage. This means that there is less capital available for major projects, pushing companies to favour renting over buying, as well as creating a preference for smaller, incremental change over the major business transformation of the past.

And finally, companies are starting to take a truly global outlook and operate as one cohesive business across the globe, rather than as a family of cloned business who operate more-or-less independently in each region.

We can draw a few general conclusions on the potential impact on IT departments of these trends.

  • The increase reliance on partners, the broader partner ecosystem this implies, and an increasingly global approach to business will create more complex operational environments, increasing the importance of planning the IT estate and steering a company’s IT in the right direction.
  • The need to reduce leverage, and free up working capital, is pushing companies toward BPO and SaaS solutions, rather than the traditional on-premisses solutions, where the solution provider is paid per-seat, or might even be only paid a success fee.
  • The need for rapid project turn-around is pushing us toward running large portfolios of small projects, rather than a small number of large projects.
  • A lot of the admin work we used to do is now baked into web delivered solutions (BaseCamp et al).

This will trigger us to break up a the skills triangle in a different way.

A skills/roles triangle for the new normal
A skills/roles triangle for the new normal

While we’ll still take a slice down the side of the triangle, the buldge will move to the ends of the slice, giving it a skinny waist. The more complex operational environment means that we need to beef up planning (though we don’t want to get all dogmatic about our approach, as existing asset-centric IT planning methodologies won’t work in the new normal). A shift to large numbers of small projects (where the projects are potentially more technically complex) means that we’ll beef up our internal delivery capability, providing team leads with more autonomy. The move to smaller projects also means that we can reduce our administration and governance overhead.

We’ll replace some skills with automated (SaaS) solutions. Tools like BaseCamp will enable us to devolve responsibility for reporting and management to the team at the coalface. It will also reduce the need to develop and maintain infrastructure. Cloud technology is a good example of this, as it takes a lot of the tacit knowledge required to manage a fleet of servers and bakes it into software, placing it in the hands of the developers. Rumor has it that that a cloud admin can support 10,000 servers to a more traditional admin’s 500.

And finally, our suppliers act as a layer through the middle, a flex resource for us to call on. They can also provide us with a broader, cross-industry view, of how to best leverage technology.

This thinning out of the middle ranks is part of a trend we’re seeing elsewhere. Web2.0/E2.0/et al are causing organisations to remove knowledge workers — the traditional white collar middle layers of the organisaiton – leaving companies with a strategy/leadership group and task workers.

Update: Andy Mulholland has an interesting build on this post over at the Capgemini CTO blog. I particularly like the Holm service launched by Ford and Microsoft, a service that it’s hard to imagine a traditional IT department fielding.

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

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.

Updated: A good friend has pointed out the one area of consulting — one which we might call applied business consulting — resists the trend to be commoditized. This is the old school task of sitting with clients one-on-one, working to understand their enterprise and what makes it special, and then using this understanding to find the next area or opportunity that the enterprise is uniquely qualified to exploit. There’s no junior consultants in this area, only old grey-beards who are too expensive to stay in their old jobs, but that still are highly useful to the industry. Unfortunately this model doesn’t scale, forcing most (if not all) consultancies into a more operational knowledge transfer role (think Six Sigma and LEAN) in an attempt to improve revenue and GOP.

Updated: Keith Coleman (global head of public sector at Capgemini Consulting) makes a similar case with Time to sell results, not just advice (via @rpetal27).

Updated: I’ve responded to my own post, tweaking my consulting page to capture my take on what a consultant needs to do in this day and age.

Time for a new covenant between business and IT

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

The changing role of Government

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).

The price of regret

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

We can be our own worst enemy

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.