Sunday, June 24, 2012

Appreciating Asymmetrical Advantage (Lean IT)

Competitive weapons

Napoleon said an army marches on its stomach. The ability to provide food, supplies, and shelter to his troops was his primary building block of success. He didn't attribute his victories to the obvious factors of battlefield tactics, great weapons, or excellent training. His focus on logistics was much more mundane, yet infinitely practical. He created a simple advantage that his enemies could not match easily. Can your IT organization identity something it does that no one else does nearly as effectively? Strategy is about advantage, so what makes you so special that it gives you an edge over your enemies?

Creating an effective IT strategy begins with developing an appreciation of your own IT organization’s asymmetrical advantages. What do you have that your competitors don't have? Such advantages can be measured by context, influence, and tolerance. By context, I mean how deep is your awareness of all the market forces affecting your competitive position. Influence means how much you can affect outcomes in your chosen market. Finally, tolerance is the degree to which you are willing accept the risks of competing.

Big vs. lean

Let’s look at the example of a large IT organization vs. a lean one. The lean IT organization typically has a much smaller staff and budget relative to comparison organizations in the same industry, and operates with a minimal margin for error. Leading a large IT organization makes strategy easy. You can afford to "let 1,000 flowers bloom" by experimenting, testing, and making mistakes. Your context is big, your influence is substantial, and your tolerance is high. But a lean IT organization does not have that luxury. These organizations need to leverage every opportunity available and maximize their return from every investment.

The simplest comparison between big and lean is their approach to an ERP system. A large organization can afford to buy, run, and customize their ERP system. They can fine-tune it to every nuance of their specialized processes. But a lean IT organization is forced to rent a standardized version where they accommodate their business processes to fit the system - customization is an unaffordable luxury.

Let’s assume you run a smaller lean IT group. How do you level the playing field? You can start by thinking differently about every aspect of your operations. No IT organization needs their own data centre if they are willing to take the necessary precautions and make the necessary sacrifices to move everything to the cloud. No IT organization needs to customize their applications suite if they are willing to modify their business processes. No IT organization needs to run its own enterprise systems like email, content management, and collaboration software if they are willing to use industry standard software services.

If you actively move in all of these directions, your lean IT organization pushes the implementation, management, and support of conventional and traditional systems out the door. Does that mean you should shut down your IT department? Hardly. What you do with what you have left is your asymmetrical advantage. The core IT staff members become your unique footprint in the industry. These are the folks that understand the business processes at the very core of your organization. These are the folks who will integrate and leverage the low cost tools you have pushed out the door.

The ability to integrate technology and to improve process becomes a strategic advantage of the lean IT organization. You have the remarkable opportunity to focus the intimate business knowledge of your subject matter experts on building unique projects, processes, and initiatives that the big organizations are ignoring because they are too busy running their overly complex in-house information systems.

Should, can, and control

So how do you get there? The lean IT organization uses the concepts of context, influence, and tolerance to whittle down its list of strategic initiatives into two piles. The stuff they can give to someone else is in the first pile. The second pile is the stuff they are uniquely positioned to implement better than anyone else in their industry.

Context dictates what technologies the IT department should operate. What market forces are buffeting your competitive position? If the industry is consolidating, where can you collaborate with other organizations to create shared services? Is this really an activity that gives your organization a competitive advantage? Is this IT function really part of the core business? Ask yourself these questions for all aspects of your information systems.

Influence determines what technologies the IT department can operate. Sometimes you simply may not have the right resources to operate the IT services you might like to keep within your organization. Sometimes geographic isolation or over-subscribed demand for specific technical skills forces you to consider alternative delivery mechanisms outside your IT organization. Often you simply don’t have enough budget money to do everything you would like to do. Don’t operate the functions you cannot properly influence.

Tolerance defines how much control the IT department needs to successfully operate these technologies. What is your risk profile? What is the probability of success? What is the degree of impact if you fail? If you can’t stand the heat then get out of the kitchen. Some IT initiatives are just too risky for the culture and risk tolerance profile of your organization. Stop doing them and give them to someone who is willing to take the risks or can mitigate the risk through systemic factors.

An example

These three factors act like a series of successive filters. For example, if you are considering moving a new data warehouse system to the cloud you need to first assess context. Do you really want to be in the business of managing the servers needed to support the new system? Unless you are a technology company it is unlikely that you would consider server management to be part of your core business, so your context would indicate support for the move.

Now consider your degree of influence: do you really have the database administration skills in your organization to manage the new technology efficiently? A lean IT organization may not be able to afford high-priced data base administrators or may want to focus their precious skills on other systems. Since you would struggle to support the technology internally, the externalization of the system makes sense from an influence perspective.

Finally, are you willing to tolerate the risk by placing this sensitive information in another organization's care? If can successfully write a contract that transfers the risks associated with housing mission-critical data to a third party, then the last filter also supports the move.

In this example all three gates have been opened and the move makes sense. Only when all three filters are aligned should you be willing to make the strategic change, because then you have a conclusive asymmetrical advantage.

Lean on your asymmetrical advantage

Becoming a lean organization is an asymmetrical advantage despite your size. When you are forced to scrutinize every IT investment for maximum leverage and return, you inevitably become more efficient than the big players. For each dollar invested in IT, you gain business improvements that outstrip your larger competitors. Ultimately, your relative size can change your behaviour and gives you a distinct lead over the bigger and slower competitors. You can float like a butterfly and sting like a bee even if you a mere David to your competitor's Goliath. 

As you become more effective, don't lose sight of your core competencies defined by context, influence, and tolerance. Remember, Napoleon conquered all of Europe with a lean military organization. But he was resolutely defeated when he lost sight of his core competencies and let his army starve in Russia.


Thursday, June 7, 2012

The Process Design Blues

Everyone needs a hobby and mine is playing blues guitar. I may not be very good at it, but I'm not ready to sell my soul at the crossroads just yet. What I find fascinating about the blues is how such a simple musical structure becomes a portal into an infinite variety of musical improvisation and creativity. From a basic chord progression of 12 simple bars, the opportunity to innovate is literally limitless. Strangely enough, playing the blues is a great opportunity to think differently about business process.

Having designed many business processes, I have discovered great process design is lot like the blues musical structure: you need to leave lots of room for improvisation within a tightly structured and easy-to-understand framework. Good process design optimizes an algorithm for getting things done, but great process design builds in room to handle inevitable change. Great process design empowers process users to make independent decisions within the framework of the process. Great processes give users the room to deal with the variability of real life while simultaneously enforcing tight controls and high expectations around the key milestones in the process.

The concept of using a loose/tight process design makes some folks uncomfortable. Traditional thinking dictates highly structured and specific steps with no room for independent thought. And that is exactly where traditional process thinking fails - not leaving any room for autonomous and liberated thought. If you want processes to be agile and adaptive to change you need to leave room for human intelligence and creativity to engage. But business processes are not like Grade 2 art class. You need to be very disciplined at the key milestones. Each key milestone in the process needs to be measurable and comparable. Exceptional rigour around defining these process checkpoints ensures the process is executed appropriately. Installing metrics for all milestones ensures managerial control during process execution.

These metrics also enable process improvements over time as the process is executed repeatedly. You need to experiment continually with improvements to the process and measure the results. Measuring the change helps you understand the effect of the change. By comparing multiple executions of the process over time you begin to identify new and better ways of running the process. If you can't measure it, you can't improve it.

As a manager you need to carefully weigh your own engagement in the process. In between these highly controlled and evaluated milestones, you need to empower your staff. Leave the decision-making between milestones up to the discretion of your staff. They should be given your absolute trust to make the right decisions between milestones. After all, you did hire good people didn't you? So give them the opportunity to shine. If you are not comfortable with the room to maneuver you have given them between milestones then you need to re-think the process design. Are there other milestones you need to build into your process? Remember not to overdo it, or the milestones become millstones and the whole process slows down and looses it flexibility and agility. Finally, remember not to abdicate your responsibility to monitor the process for performance variations. If the variations are too extreme, then you need to get engaged.

As an example of this process design philosophy, let's examine a key strategic process for any organization - the project management process. You must be absolutely tight around several key milestones. The first is the project charter. It has one simple objective: define, in certain and quantifiable terms, why you want to do the project. The act of requiring this document as a milestone demands extensive analysis, collaboration, and consensus building before the document is submitted for approval. As a process owner, you do not need to manage the analysis work, but you absolutely must assess the results of the analysis and use the project charter to make the crucial go or no-go decision.

The next milestone is the Project Plan. This document is the contract between the project team and the sponsor. As a contract, it articulates the specific scope, budget, timeline, resources, and risks of the project. Once again, the process owner does not need to engage in the detailed analysis and development work. The project staff members are more than capable of building the components such as a work breakdown structure. However, this contract document is of mission-critical importance to the project sponsors. As a project process owner your role is to ensure the results of the analysis stand-up to significant, extensive, and careful scrutiny. The Project Plan milestone sets the stage for the most expensive stage of the project, so you want to use the milestone to be absolutely positive the project is ready to move to the next stage.

Once you have an approved plan, the execution begins. A well-written project plan has specific execution milestones defined. These milestones report on completion of activities according to scope, budget, and timeline of the plan with a change control mechanism. Once again, the project sponsor and project owner need to be actively informed and engaged in reviewing these execution milestones. If milestones are meeting promises (or appropriate change requests are approved), then the project manager and her/his team are perfectly capable of implementing the work between milestones without interference. However, if the project misses milestones, then the process owner and sponsor must engage in the project's detail work.

Assuming everything goes well the final milestone is the Project Closure. At this milestone you decide if you did what you said you would do. Are all the expected project products and services completed to a satisfactory quality level? Will the organization reap the benefits promised in the project charter? The sponsor and process owner review the original project charter to determine if the project delivered on the promises made. This milestone is used to determine if the project is truly finished. These two leaders do not need to be involved in the final development work for the product or service, but they do need to ensure it is are completed properly, hence the existence of a milestone at this point in the process.

Throughout this project management process there are specific and explicit expectations in each of the milestones, and liberal room to empower project managers to use their judgment and make decisions throughout the process. The worst project management methodology I have ever seen consisted of 14 binders, each 2" thick. They were never opened and never used. Conversely, the best project management methodology I've ever seen was a single 1" binder that was well thumbed with lots of coffee stains. It was a process that left lots of room for individual creativity within a tight context of specific milestone-based deliverables.

I can always tell when I hear great blues. The old familiar structure is always there, yet the great artists make every blues song sound unique, inspiring, and wonderful. Just like great blues music, great processes can lead to business innovation and creativity. But don't let them run amuck or you will get 20-minute guitar solos that bore your audience to tears.