Crowdsourcing - social outsourcing

Crowdsourcing David Rowan

Sometimes a new trend catches on so quickly that, if you sit well back and wear protective goggles, you can just catch its vapour trail as it zips through the culture. That has just happened with a concept known as "crowdsourcing" that you’re about to hear a lot more of. A month ago, nobody had even heard of it. Indeed, on May 18, Google could find only three web pages that mentioned it. Suddenly, though, there are 400,000 "crowdsourcing" references on the net and rising. What on Earth could have popularised a new coinage so quickly? The answer is another astute article in Wired, the digital-culture magazine that keeps tapping presciently into significant innovations. Last year, this column explored "the long tail", an emerging business concept defined by Wired’s editor, Chris Anderson, as the slowly diminishing trail of demand for niche products, such as obscure DVDs, that, thanks to the net, can now find an audience without any of the traditional marketing costs. A year on, Wired journalist Jeff Howe has identified a new way in which businesses are using the net to connect thousands of strangers in order to make cash. But this time, rather than customers, the strangers are serving as a cheap pool of labour. Think of it as an extension of outsourcing, whereby a business contracts out certain tasks to save money. Rather than going offshore to find cheap workers, the clued-in digital business is now simply using the vast pool of skills available from the online public. Anyone with a modem and net connection is invited to perform a task or provide a digital product in return for a small fee. Yet because the online crowd is now so huge, businesses are finding what they’re asking for despite the pitiful wages. Take the business of stock photography. In the old world, if your magazine or corporate brochure needed a few images to perk it up, a conventional picture library would sell you the reproduction rights for perhaps £100 each. Suddenly, that has all changed, thanks to new online libraries such as iStockphoto that have cut the price to as low as 60p. The secret? The 22,000 amateur photographers who between them have uploaded 851,000 royalty-free snaps to the site, all now available for anyone to browse and acquire. The photographers earn a few pennies, the customer gets a bargain. And in the middle, the stock library provides the online exchange that makes it all possible. Science companies are also looking to the crowd as a source of low-cost labour. InnoCentive is a web-based community where businesses such as Procter & Gamble and Boeing post R&D problems and seek help from the crowd in solving them in exchange for cash. Jill Panetta, InnoCentive’s chief scientific officer, claims that the site has solved at least 30 per cent of the challenges set, many of them worked through by hobbyists rather than professionals. Other online exchanges are even more wide-ranging. Amazon Mechanical Turk, an offshoot of the bookstore, lets anyone post requests for others to perform what it calls "human intelligence tasks", from transcribing podcasts to verifying legal documents. Take the job, and you’ll earn anything from pennies to pounds. Karl Marx might have had concerns: as competition squeezes wages, it’s hard to see how workers might empower themselves. But that’s capitalism for you. Somewhere along the line, the commune became just another online exchange. david.rowan@thetimes.co.uk

ChangeManagement: Avoid Havoc In Very Uncertai...

ChangeManagement: Avoid Havoc In Very Uncertain Times
By Marcia Zidle

Escalating gas prices...tensions and turmoil in the Middle East...a struggling world economy. Leadership, in times ofuncertainty, is not that much different from that of normal times. What doesdiffer is the degree to which basic tactics of change management are applied.In times of uncertainty, leaders must pay even more attention to the peopleissues in change. Here are five ways to avoid leadership havoc.

Get off of autopilot.
Examine your organization s strategy. With your leadership team confirm orrevise your current strategy or mission. Should it change as a result of whatis going on in the environment? Should it change as a result of what is goingon with customers or competitors? Should you continue going in the samedirection swerve to the right or left or take a totally new path? Do notoverreact but do not sit still waiting for it to pass.

Manage and multiple the impact.
During uncertain times, employees are inundated with stories of downsizing, payreductions, etc. There's no one perfect way to communicate change. Someorganizations make an enormous mistake in using only low touch methods suchas newsletters or the company intranet site. But high touch face-to-faceencounters is vital. One manager puts it this way: It is important to geteyeball to eyeball to see and react to your people. Effective communicationis inclusive, candid, and decidedly two-way.

Identify your key players and re-recruit them.
Who are the most important people in your organization or team? Be aware theycan be at all levels, not just the top. Meet with this them on a regular basisto monitor what is going on. Seek their input, clarify specific performancegoals, give them the resources they need, let them go, and reward them inwhatever way you can for results. Do not lose them or their commitment.

Get out of your ivory tower pay attention to frontline action.
Related to the earlier point about refining existing strategies, it becomescritical to ensure that these strategies are turned into frontline actionplans. Changing goals and performance outcomes must be translated so thatpeople understand them, buy into them, and are motivated by them. This is thetime to power up your people engine.

Build and maintain stretch alliances.
During uncertain times it is more important than ever to maintain strongrelations with the senior leadership and with other key managers. It is also agood time to strengthen external relationships with others such as suppliers,vendors, selected customer groups, and perhaps even other organizations in asimilar business as you.

Change creates uncertainty for employees, customers, and suppliers. If youfollow these five change management techniques you will more likely maintainproductivity, retain key employees and stay sane in a world that does not stopchanging.

 

Eight Mantras to a Successful Software Implemetation

Wether it is E-Commerce, CRM, SCM, ERP or any comparable initiative, if you are taking on a high-impact implementaion that could result in organizational shifts, you have eight things to remember. Here they are

Put in Place a Change Management Program
Mission-critical initiatives will most likely change anorganization’s culture. Therefore, it is necessary to includethis important aspect in your implementation strategy. Determine how todeal effectively with change. Be prepared for issues such as these:

• Resistance:  People will resist the change for fear of losing some control over their business unit, system or even their jobs.   
• Fear of Failure:  Onthe other hand, people may choose to sit on the sidelines rather thanrisk project failure. This may foster a low sense of urgency that couldresult in delay of project initiation and delivery. 
• Non-Visionaries:  Youwill be dealing with people who don’t have a clear understandingof the long-term relevance and importance of the project. 

Thekey to any change management program is communication, communicationand communication! Management needs to communicate the importance ofthe project throughout the organization.

Secure Management Support and Commitment
Secure a "projectchampion." The champion is usually the visionary with access to variouslevels of management. Top management commitment can be secured bydemonstrating that technological automation enables business strategyto be realized. A good way to show this is to start with the strategyand then identify the business processes that are or will be in placeto fulfill the strategy. The next step is to visualize and outline howthe new system will help the organization execute identifiedprocesses.  Also include quantitative and qualitativebenefits like improved margins, higher sales revenues, higher customerand employee satisfaction, better employee productivity and reducedcosts.  Document a business case for automation based onbusiness impact. 

Setup a steering committee that includes a senior IT manager,implementation team project manager and business unitmanager.  This committee should provide updates to seniormanagement and project sponsors periodically concerning the status ofthe project. 

Know Your CIO's and the Organization's IT Priority
One of the keyissues organizations run into is the dilemma of deciding between a"best of breed" solution versus a "one vendor" solution. For example,lets say your organization implemented a SAP solution for your ERPneeds and now a CRM initiative is on the agenda. There are several CRMsoftware vendors out there with Siebel leading the marketplace and SAPmaking a strong entrance into the CRM market. The dilemma of choosingbetween a known vendor SAP with the benefit of tight ERP  andCRM integration ("one vendor") versus going with Siebel, which has aproven CRM product with rich front office functionality ("best ofbreed"). What do you do? In your recommendation, make sure you show aclear advantage in going with the option you choose. The end result isthat you will have to convince top management of your recommendationwith cost comparisons, factors that contribute to competitiveadvantage, and a comparison that shows the degree to which the solutionsatisfies your business and technical requirements.

Develop a Roadmap
The roadmap isdesigned to show various phases of the overall initiative. Show whatthe end result will be and the time scale anticipated to achieve it.Make sure the roadmap is blessed and communicated by managementthroughout out the organization. Include this in your change managementcommunications.

Start with a Pilot
A phased approachcan provide several benefits. Start with business units, functions andgeography that will generate the biggest "bang for your buck." Thesuccess of the project will build confidence and motivate individualsto execute on the rest of the phases outlined in your roadmap. It iscritical not to have an extensive scope for the pilot phase toaccommodate "speed to value." The sooner a solution is rolled out to abusiness, the faster a company will begin to see a return oninvestment. However, keep in mind that the scope should encompassenough functionality to provide value to the users. The pilotfacilitates the introduction of new technology, testing it with limitedrisk and cost, and helps bring change to your organizationincrementally.

Pick Your Implementation Team Wisely
Organizationshave several options when it comes to choosing the implementation team.Usually there are three options: internal IT organization; consultingorganizations; and package software vendors’ client/professionalservices groups. Internal IT staff are ideal when time is in yourfavor, however, issues regarding resource availability and a learningcurve can propel you to look for assistance outside the organization.Consulting organizations serve a good purpose, since they can provideunbiased third-party recommendations and also provide insights intoprior challenges faced when implementing a similar system. However,consultants may not be exposed to all aspects of the product related tonew version upgrades, new features, etc. The software companies'professional services groups can provide benefits such as intimateproduct knowledge and vendor's product strategy, however the bias canstill exist when recommending strategies, and sometimes the skills andinterest to integrate external systems to the software may be limited.Organizations have their own preference in choosing the implementationteam, however I believe that it may be beneficial to have a flavor ofall three sources:

• Includesome members of your IT organization to ensure knowledge transfer aswell as to provide insights to existing systems and internal resources. 
• Engage consultants to provide implementation expertise, skilled resources, and for unbiased recommendation.   
• Include one or two members from the software vendors’ professional services or product development groups.

The challenge should be to decide on the ratio and balance of the implementation team.

Choose Your Angels
Pilot system orend users should be treated as angels, hence the term "Angel Users."Get users involved early to make sure that the automation systemaddresses their needs. The process should include documenting  a "wish list" of how the new system would improve their work processes. Ifusers and their "wish lists" are not sufficiently represented on thetask force, they can end up revolting against the system. However,remember to maintain scope balance. Negotiate with the endusers.  Don't be afraid to hand over "ownership" of thesystem to the users. 

Ensure Adequate "Angel User" Training
If the users areunable to understand and use the system, the project is a failure evenif you executed everything else perfectly. That is why it is extremelyimportant that adequate time is allocated to end user or "Angel User"training. The best approach is the "train the trainer" approach, wherethe end users are trained by one of their own, someone within the samebusiness unit. Usually the trainers are exposed to the systemthroughout the implementation cycle. Users should have access tonon-technical user documentation and should be shown how to access anduse the new system. It is also good to have telephone support for a fewmonths after the initial rollout of the system.

If you fail to consider these issues "straight up," your implementation has a high risk of going "straight down" the drain!

 

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Survey:SOA muddles up business processes

From ZDNet Survey

 

SOA is all about streamlining and managing business processes, but if you really need to streamline and manage your business processes, stay away from SOA. 

That's one interpretation from a recent survey on SOA implementations. Does SOA make business process management (BPM) even more difficult than it already is? Line56's Tamina Vahidy dissected the latest research out of AMR Research, which found that a fifth of respondents (20%) had deployed SOA, with another third planning to implement in the coming 12 months.

AMR conducted a survey and found "Web services" deployments to perceived as the primary delivery vehicle of SOA  (71%), followed by portal frameworks (61%), application servers (46%), and integration frameworks (43%). About 14% regarded business process management solutions to be the ticket to SOA, and another 14% cite enterprise service bus.

There are a number of perceived benefits with SOA, including faster and more flexible reconfiguration of business processes (48%), decrease of operational costs of IT (28%), and another 15% citing secure and reliable service levels.

Vahidy notes that while BPM is the biggest benefit in SOA, the survey finds SOA companies are more likely to be having issues with business processes than non-SOA companies. Among companies that are already using SOA, 36% find themselves unable to reconfigure business processes as needed — versus 13% of non-SOA adopters.

Okay, what gives here?

According to AMR, the reason for this is likely to be the low level of BPM solutions adoption (14%), and the difficulty in service-enabling large, complex legacy systems. An SOA rollout needs to be joined by a BPM rollout. Vahidy concludes that "this illustrates the impossibility of tackling SOA as a discrete investment or strategy. It involves and benefits from adjacent technologies, like BPM, and does better in environments that have already been simplified and rationalized. In other words, if you're not willing to spend on SOA-supporting technology and have a sprawl of legacy systems, this might not be the right time to leap into SOA, especially if what you want out of the deployment is the more efficient reconfiguration of business processes."

Hey, I thought SOA was supposed to simplify things! 

The AMR finding may prove that age-old adage: "If you automate a mess, you get an automated mess." It also suggests that sometimes SOA means taking two steps forward and one step backward. Breaking down business processes into components can be a non-trivial task. In the long run, there are tantalizing long-term benefits in terms of agility and flexibility. But the short run can be messy. And politically risky if users perceive that the old application is humming along just fine.

Perhaps there is also a skew with the respondents of the survey, in which those involved in SOA are simply more aware of problems with their business processes, because they have already sat down and sorted through the issues. Perhaps they are adopting SOA because they couldn't deal with business processes under the old regime. (A causal relationship.) Or, the non-SOAers may be reporting fewer problems because the legacy system is chugging along just fine, and they have not yet begun to closely scrutinize their processes.  (Another adage kicks in here: "If it isn't broke, then break it!") 

PolarLake's Ronan Bradley also posted some commentary on this survey report, and puts the blame on the large vendors for this apparent disconnect between SOA and BPM. He notes that these results show "the first measurement I have seen of the gap between the SOA dream and the SOA reality. And that gap is BIG and likely to get bigger." Bradley says that's because there are no tangible products for SOA yet, and vendors are repackaging their old EAI products as ESB products.

So much for simplicity.

Conference snoozefests: why DO we have Powerpoint?

"We end up being flown on average planes to average hotels to sit in average conference rooms and hear average speakers doing presentations filled with bullet points."

 

There must be better way....    there is..

 

"The sound of one room napping"....

http://presentationzen.blogs.com/presentationzen/2005/11/the_sound_of_on.html

 

Well worth watching is Dick Hardt's presentation, which can be seen here

Correct Approach Required for HR Outsurcing Success

Correct Approach Required for HRO Success – Hackett Group

As per a new study by the Hackett Group, a majority of HR Outsourcing (HRO) deals singed by ‘typical’ companies result in increased cost even after relying on selective outsourcing of highly repetitive tasks as against ‘world class’ companies which manage to reduce costs by 25 percent.

The study points out to a correlation between increased spending on outsourcing and that of increase in HR cost incurred per employee. The many reasons cited for such an increase include lack of attention to streamlining the process and failure to retain staff responsible for the outsourced function. However, ‘world class’ companies, as per the report, are able to achieve a better execution of outsourcing deals by balancing factors like BPO mix and increased internal focus on strategic activities. The report also found world class companies to spend about 25 percent less and have about 16 percent less HR staff.

 

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The Usual Suspects

When it comes to driving improved performance there are 6 "Usual Suspects" which are wheeled out.  These are the ones that are going to be able to fix the performance or process issues.  In reality it is none of these, because you need to dig deeper into the root cause of the problems.

 

So the line up is:

 

Training  - if we just give the guys some more training then they will perform better

Inspection - we need to do more checking of the delivered product/service

Automation - there's some software which means that we can remove all humans

Add people - lets throw more people at it

Reorganize - once the team reports to Harry it will be fine

Outsource - let's make it someone else's problem

Companies need to make managing change a COMPETENCE, not just have experienced a lot of change

 

 Many companies say that they "experience a great deal of change", or even "are experienced at change".

 

But to really drive continuous improvement in a fast moving world, comapneis need to make change management a Competence.  Something that they recognise as a skill that can be taught, honed and developed.

Outsourcing - an increasingly mature market?...

A measure of the increasing maturity and sophistication of the outsourcing market is the level of discussion it can now sustain. Where outsourcing might once have been a sub-topic at an IT conference, it is now able to sustain heavyweight conferences of its own that address the full range of business functions and processes.

A case in point is the 2nd annual European Outsourcing Association conference in Frankfurt, which brought together outsourcing companies, advisers and clients for three full days of presentations and discussion under the rubric of “Outsourcing and Shared Services”. It’s clear that outsourcing is no longer simply a case of an outsourcer delivering expertise and an outsourced solution to clients. Outsourcing expertise now resides in many places, with clients increasingly structuring solutions themselves and many opportunities for consultants to become involved in deals as third-party advisers.

Deals are no longer a simple hand-over of processes and staff to a vendor, but can be complex structures involving multiple vendors and a mix of in-house and off- or near-shore solutions. The title of this conference is significant in this respect — not long ago a BPO consultant confided to me that his firm didn’t push shared services so much, because once a client had implemented a shared services structure there wasn’t enough value left in the outsourcing contract. Those days are clearly over: clients are increasingly aware of the value in combining transformation and outsourcing and want to retain as much of the transformational value in-house as possible.

The conference featured a number of remarkably frank client presentations, with a particularly interesting contribution coming from Deutsche Bank’s chief economist Dr Jurgen Schlaf. Schlaf’s presentation addressed the question of whether European companies could compete globally without outsourcing. One conclusion was that, in IT at least, providing services in house no longer offers any competitive advantage over rivals. Ownership of resources was no longer as important as sourcing management, with companies making the decision not just between in-house and outsourced provision, but also whether to look for outsourcing providers locally or set up their own “captive” offshore resources. This theme was taken up by other presenters at the conference, and can be summed up as “No outsourcing without sourcing”. Other client presentations from the City of Copenhagen and French engineering company Alstom looked at both the upsides and the downsides of insourced versus outsourced solutions, with Alstom vice-president Luc Schmitz offering what deserves to be another maxim of outsourcing: “Never attempt to outsource a problem if there is no clear plan to solve it.”

Two other strong themes of the conference were the importance of governance and risk management in outsourcing. Adrian Quayle, Vice President Strategic Sourcing, EMEA, at the Gartner group argued that these two factors were the most critical needed to realize offshore savings and that labour arbitrage was now a small and shrinking component of the overall outsourcing equation — and getting smaller. He added that with a wide range of both offshore and traditional providers, and a widening range of countries offering offshore services, companies should consider a balanced portfolio of providers to minimize risk and optimise service delivery. Also featured at the conference were explorations of newer outsourcing markets such as Poland and South Africa, and also the continued development of traditional locations such as India.

This theme was echoed by Duncan Aitchison, managing of outsourcing advisory firm TPI. In an analysis of 72 “mega-deals” he showed that, perhaps contrary to expectations, incumbents did not on the whole enjoy an exclusive relationship with their clients after deals were signed, and that the tendency to set-up multivendor relationships increased with the size of the outsourcing arrangement.

Taking up the point that “you can’t have an outsourcing strategy without a sourcing strategy”, he argued for outsourcing to be placed inside a broader agenda for change, and for companies to explore the full range of service delivery models. This can of course include “backsourcing” or the bringing in-house of formerly outsourced functions. This need not reflect failure of an outsource but rather changing business priorities. Alexander Duisberg, a partner in German law firm Bird & Bird argued that these “exit strategies” should be built in at the very beginning of an outsourcing deal, so that exits can be cooperative rather than confrontational episodes.

The success of the conference reflects both the growth of outsourcing in mainland Europe and also the growth of the EOA itself. With roots in the UK’s own National Ousourcing Association, the EOA now has member associations in Germany, France and the Netherlands, with Belgium and Spain in the pipeline. Next year’s conference should therefore offer an even wider spread of clients, countries and viewpoints.

All views expressed in this article are those of Mick James and do not necessarily reflect the views of Top-Consultant.com and Consultant-News.com

  

 

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Good ERP relies on simplicity and standards.

By Matt Hines

A new study indicates that many companies continue to spend large amounts of money on their enterprise resource planning (ERP) efforts because they've made their projects too complex.

In a report to be issued publicly at the end of July, researchers at the Hackett Group found that companies end up paying more when they fail to maintain a straightforward approach with human resources and financial software systems, both of which are considered part of ERP.

Specifically, the researchers said that businesses building too much complexity into those types of systems spend 30 per cent more per employee on finance operations, and 18 per cent more per worker on human resources, compared with companies that have simple strategies. The research group said its findings were based on interviews with more than 2,000 companies.

Companies that work with a smaller number of ERP vendors and reduce the amount of customisation in their projects reap greater value from the applications, the Hackett Group said.

The research firm added that companies using the so-called best-of-breed approach in their ERP plans will struggle to keep costs down, as that approach leads a company to use a different vendor for each function. Businesses that engage in deep application customisation may also struggle with costs.

"You have to simplify the applications portfolio and also look inside the software at how you can simplify there to truly reduce overhead," said David Hebert, an analyst at the Atlanta-based Hackett Group. "With customisation, companies have been adding quite a bit, and sometimes not even tracking their work, which can make [ERP] very difficult to support and especially hard to upgrade."

According to Hebert, even those customers using only a couple of ERP vendors have to keep a close eye on software pricing and internal customisation, as some of the all-encompassing "enterprise suites" offered by companies such as Oracle and SAP are very complex. Many companies also end up running different versions of the same products made by such vendors, which presents another challenge in keeping costs down, Hebert said.

The Hackett Group's research contradicts the popular notion that utilising so-called on-demand software, or hosted applications, offers an immediate method of reducing cost and complexity. While some hosted tools - web-based applications administered by an outside vendor - help simplify certain functions, hosted providers typically don't provide comprehensive ERP service. So going with hosted providers often means the customer will end up using more vendors, which in turn makes overall enterprise resource planning harder to manage, according to the report.

"What's more important than adopting hosted applications is driving to a more standardised, simplified (ERP) model overall; if you can drive that through on demand, it can work," Hebert said. "To reduce costs, it's crucial to cut down on the number of variables that you have to manage, and bringing on demand into the picture still tends to add more complexity from that standpoint."

Hebert said that one hallmark of the companies able to successfully reduce ERP costs while still meeting internal goals is that those companies have business leaders who understand the issues at play in installing and maintaining the applications. The analyst said that chief information officers must communicate openly with other executives about the impact of changing business processes as their ERP projects develop over time.

"CIOs are constantly faced with business leaders who truly believe that their particular group or unit is different and has unique requirements, and who will resist standardisation efforts, fearing they will lose their competitive edge," he said. "IT leaders need to hold the line, sell the value of standardisation and simplification, and at the same time be aware of situations where a valid business cases exist to support customisation."

Matt Hines writes for CNET News.com .

 

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Jim Collins on Making Tough Calls

Published in Fortune Magazine , Jerry Useem interviews Jim Collins on Tough Calls

“It's really a stream of decisions over time, brilliantly executed, that accounts for great outcomes.”

When he's not out scaling mountains (he's a world-class rock climber), author Jim Collins eats, drinks, and sleeps business. So when FORTUNE senior writer Jerry Useem (a sometime Collins collaborator) asked him to discuss the art of decision-making, he got so into the idea that he pored over 14 years of research and interviews he had amassed in the course of writing his business blockbusters Built to Last and Good to Great. Then, in a series of conversations, he and Useem explored the intriguing insights he had gleaned from analyzing the processes behind key decisions in business history. For example, lasting excellence in corporations seems to stem less from decisions about strategy than decisions about people, and seeking consensus is not the way to make the tough calls. Here are edited highlights of their talks.

What were the surprises when you reexamined your research through the lens of decision-making?
We tend to think that decisions are very much about "what." But when I look at my research notes and I look at interview transcripts from the executives we've interviewed, one theme that comes through is that their greatest decisions were not "what" but "who." They were people decisions.

Why are people decisions so important?
Fundamentally, the world is uncertain. Decisions are about the future and your place in the future when that future is uncertain. So what is the key thing you can do to prepare for that uncertainty? You can have the right people with you.

Let's take a nonbusiness case and a business case to illustrate the importance of the people piece. In 1978, Jim Logan and his partner, Mugs Stump, became the first people to climb the Emperor Face of Mount Robson in the Canadian Rockies. And to this day, everybody else who's tried the face has either died or failed on the route. When I asked Logan, "Why were you able to do the Emperor Face?" he said, "Because I made the single most important decision, I picked the right partner."

He told me that there was this one place, the "death zone," and once they went above it, they really couldn't retreat. They were going to either summit or die–no going back. They didn't know what they were going to find beyond that point, and they didn't know what the weather was going to be. And so, therefore, what's your greatest hedge against uncertainty? Having people who can adapt to whatever the mountain throws at you.

Give us the business example.
Let's take the story of a company heading into a very uncertain world: Wells Fargo in the late 1970s. Everybody knows the storm of deregulation is going to hit. But nobody knows precisely how it's going to shake out. When is it going to hit? What exact form is it going to take? What impact is it going to have on the banking industry? Dick Cooley, chief e

Okay, but once you have great people in place, you still have to make decisions.
Great decisions begin with really great people and a simple statement: I don't know. The research evidence on that is very clear–that the leaders who ended up setting things in place that produced extraordinary results over time, and a series of great decisions over time, really were very comfortable saying "I don't know" until they knew.

And really, they were just being honest. I mean, which is best? Lying–meaning saying you don't know when you've already made up your mind? Or presuming to know when you don't and therefore lying to yourself? Or speaking the truth? Which is, "I don't yet know, but I know we have to get it right."

How do you say that without looking irresolute? Don't people expect leaders to say clearly, "Here's where we're headed"?
That's the typical thing that happens in companies. The CEO has already made a decision, and his definition of leadership is to get people to participate so that they feel good about the decision he's already made.

What's wrong with that?
For one thing, you're ignoring people who might know a lot that would be useful in making the decision. You're accepting the idea that because you're in the CEO seat, you somehow know more or you're smarter than everyone else. But what you're really doing is cutting yourself off from hearing options or ideas that might be better.

How do you create the kind of atmosphere where information flows freely?
You have to recognize that your position can be a hindrance to getting the best information. And so can your personality. My own greatest enemy is my personality–I can convince the people on my team of a point of view. I'm older than they are. I've done more research than they have. I know more than they do. I can influence them perhaps too much and therefore not get the best answers. So when we were doing the research for Good to Great, I built a culture that began with disagreements, that set people up to disagree with each other and disagree with me.

I tried to increase what I call my questions-to-statements ratio. I learned this from the Good to Great leaders we were studying. They were just marvelous at igniting dialogue and debate with Socratic questions. And I tried to make heroes out of those on my team who identified flaws in my thinking. At the next meeting I might say, "I really want to give Leigh or Brian or Stefanie credit. She really pushed my thinking, and I wasn't looking at this right."

I looked for people with a streak of irreverence and independent thought. One of my favorite researchers is a young man who went to Princeton, majored in medieval literature, and then joined the Marine Corps. Now, that's independent thinking. I wanted him on my team because he's not going to care what I think.

The really critical part came in designing the research so that for every piece of the puzzle–for every case, every analysis–someone on the team knows that piece as well as I do or better. This was a key mechanism to reduce the odds that my authority and strong personality would override the evidence.

Does having that kind of team make it harder to reach consensus?
I really want to underscore something. This is not about consensus.

You mean it depends on conflict?
That's the key. What we found in companies that make good decisions is the debate is real. When Colman Mockler at Gillette is trying to decide whether to go with cheaper, disposable plastic razors or more expensive ones, he asks marvelous questions. He's Socratic. He pushes people to defend their points of view. He lets the debate rage. And this is, by the way, not an isolated case. We found this process in all the companies we studied, when they made a leap to greatness. The debate is real. It is real, violent debate in search of understanding.

And then in the end, the leader makes the call?
Yes. It's conflict and debate leading to an executive decision. No major decision we've studied was ever taken at a point of unanimous agreement. There was always some disagreement in the air.

Doesn't that make it hard to carry out the decision?
Our research showed that before a major decision, you would see significant debate. But after the decision, people would unify behind that decision to make it successful. Again, and I can't stress this too much, it all begins with having the right people–those who can debate in search of the best answers but who can then set aside their disagreements and work together for the success of the enterprise.

Okay, so creating a debate is crucial. What are some other ingredients of great decisions?
Most people start with the outside world and try to figure out, How do we adapt to it? Greatness doesn't happen that way. It starts with an internal drive. And there's a really key question with big decisions: What is the truth of this situation? There are three parts to this question. The first is internal: What are our real core values and our real aspirations? I mean, what do we really stand for? What do we really want to get done? What is internally driving us? I believe that it is the internal imprint that drives all the action. Everybody harps about "It's all about responding to the outside world." But the great companies are internally driven, externally aware.

So the first question is, What is really driving us internally? The second question is, What is the truth about the outside world? And in particular, What is the truth about how it operates and how it is changing?

And the third question is, When you intersect our internal drive with external reality, what's the truth about what we can distinctively contribute potentially better than anyone else in the world?

Now, let's look at Boeing's decision to build the 707. [See "Billion-Dollar Bets."] What are the factors? First, you have the values of Boeing, which had to do with "We're adventurers, for goodness' sake. We like doing big, adventurous things. We'd rather not be in business than not do that." And second, the aspiration to make Boeing even greater than it was. Those are internal drives. They had nothing to do with adapting to the outside world.

But the second question–What was the truth about the outside world and how it was changing?–well, the war was over. There wasn't going to be as much demand for bombers. And there was a major change in technology, from propellers to jets. And the demand for military aircraft was going to decline relative to demand for commercial aircraft. So that's how the outside world was changing.

On to question No. 3: What could Boeing do better than anyone else in the world? Well, they had jet technology. They'd been building those big strato bombers, the B-47 and the B-52. They had experience, so they knew they could build a large-scale jet. Boeing confronted the truth, internal and external, and grasped that it could make a distinctive impact by bringing the world into the Jet Age–and that's when Bill Allen pulled the trigger on the 707.

We've been talking about big decisions, but there's a lot more to running a business than making one life-or-death decision, right?
No decision, no matter how big, is any more than a small fraction of the total outcome. Yes, some decisions are much bigger than others, and some are forks in the road. But as far as what determines outcomes, the big decisions are not like 60 of 100 points. They're more like six of 100 points. And there's a whole bunch of others that are like 0.6, or 0.006. They add up to a cumulative result. Business schools have regrettably taught us that it's all about the singular case decision. And when you and I write, we like the dramatic moment of decision.

Right. So-and-so leaned back in his chair, looked out the window, and said, "Should I do X or Y?"
But that's not the way life really happens. Yes, there are pivotal decisions, but it's really the stream of decisions over time, brilliantly executed, that accounts for great outcomes.

What elements of a leader's psychology, or the company's psychology, affect decision-making?
One big factor is, Do you believe that your ultimate outcomes in life are externally determined–"I came from a certain family, I got the right job"? Or do you believe that how your life turns out is ultimately up to you, that despite all the things that happen, you are ultimately responsible for your outcomes?

Consider the airline industry, and think of all the events and factors outside managerial control that have hit it since 1972: fuel shocks, interest rate spikes, deregulation, wars, and 9/11. And yet the No. 1 performing company of all publicly traded companies in terms of return to investors for a 30-year period from 1972 to 2002 is an airline. According to Money magazine's retrospective look in 2002, Southwest Airlines beat Intel, Wal-Mart, GE–all of them! Now what would have happened if the folks at Southwest had said, "Hey, we can't do anything great because of our environment"? You could say, "Yeah, the airline industry is terrible. Everyone in it is statistically destined to lose money." But at Southwest they say, "We are responsible for our own outcomes."

Are you saying that you can control your own destiny with good decisions?
Not entirely. Luck is still a factor. But overall our research is showing that the primary factors reside more inside your control than outside. Yes, the world throws a lot at us, but the fundamental assumption needs to be like Southwest's–the ultimate responsibility for your destiny lies with you. The question is not what the world does to you but how you make an impact on the world. Decision-making is ultimately a creative act.

So it's hard to make good decisions if you don't really think they're going to make that much difference in the end. What else counts?
Our research shows one other variable to be vitally important for both the quality of decisions and their implementation. If you look at some of the great decisions in business history, the executives had the discipline to manage for the quarter-century, not the quarter. Look at Andy Grove deciding to abandon memory chips at Intel, Bill Allen and the Boeing 707, Reg Jones choosing Jack Welch to run GE, Darwin Smith selling the mills at Kimberly-Clark, Jim Burke standing firm in the Tylenol crisis, Tom Watson Jr. and the IBM 360. Those leaders were very clear that their ambition was for the long-term greatness of the company. And where decisions can go awry is when there's ambiguity or confusion about what you are really making decisions for–yourself or the company. Why should people throw their full creative energies into a decision that is ultimately about you?

Can you give us a preview of your current project?
My colleague Morten Hansen, formerly a professor at Harvard and now at Insead, and I conceived a simple question: Why do some prevail in brutally turbulent environments, while others do not? How do you retain control over your destiny when you are vulnerable to an environment that seeks to rip that control away from you or where you are statistically destined to fail? Think of it this way: If you wake up at Everest base camp and an unexpected storm hits, you'll probably be fine, but if you're high on the mountain when that storm hits, you just might die. Morten and I believe leaders increasingly feel they are high on the mountain, facing storms they never anticipated. We want to know, How do you build greatness anyway?

And the answer is?
We're early in our research, and we don't yet know. But one thing we're learning is a great relief to me, because I'm so hard on myself. You can make mistakes, even some big mistakes, and still prevail. That's a wonderful thing to know. You don't need a perfect hit rate. You might need to go four out of five on the really big ones, and there are some killer gotcha mistakes from which you can't recover, but you don't have to go five out of five. And I didn't know that before.

 

 

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How to Make Great Decisions...

Published in Fortune Magazine by Jerry Useem

Strategies, careers, companies: They're all made of decisions. .

"Nothing is more difficult, and therefore more precious, than to be able to decide," Napoleon said. The Frenchman definitely made some major calls, such as invading Russia. Now that was a decision. A big, cold decision 1,000 miles long, with no food, bad clothes, and a lot of unfriendly locals. And you see what Napoleon was talking about. Some decisions leave you wearing an emperor's crown; others leave you in pajamas on Elba.

It's horrifying, really. If there's one thing we humans abhor, it's uncertainty. The Romans dealt with it by worshiping Fortuna, goddess of randomness. The Persians had another approach, which Herodotus recorded around 430 b.c.: "If an important decision is to be made, they discuss the question when they are drunk. The following day, the master of the house submits their decision for reconsideration when they are sober. If they still approve it, it is adopted; if not, it is abandoned. Conversely, any decision they make when they are sober is reconsidered afterwards, when they are drunk." They were mysterious, the ancients. Or maybe just loaded.

For modern decidophobes, business is a bad hiding place. Strategies, careers, companies–they're all made of decisions the way glass is made of sand. The quality of your decisions is what makes you valuable. And the hardest ones roll uphill: A CEO's job, it's been said, is to make the decisions that can't be delegated.

You'd think people would give serious thought to such a serious business. But most of us get … what? Campfire stories about Johnson & Johnson's pulling Tylenol from the shelves. Warmed-over parables about visionaries who saw the future. Shopworn examples of famous blunders (the Edsel). The lesson? Go with your gut except when it's wrong. And don't be stupid.

Hey, thanks. But what am I to do with this memo telling me to "reduce headcount" in my department? That's where this issue comes in. Part two of FORTUNE's 75th-anniversary celebration is devoted to decisions–and to helping you make better ones.

We're serious about this. Yes, we wanted to create a package of delectably good reads. But visiting a flaming Colorado mountainside (In the Heat of the Moment) or the hallways of the Pentagon (How I Make Decisions) or the Siberian oil frontier (Billion-Dollar Bets) isn't just a way of bringing decision-making alive. You'll come away with a set of ideas, tools, and questions that you can carry into any decision-making context.

Now a question for you: Are you serious about decisions? Start with the Latin decidere. It means, literally, "to cut off." Decisions force us to foreclose other opportunities–jobs not taken, strategies never attempted, options unpursued. Would that sales gig in Houston have worked out better? You'll never know.

Most of us will do just about anything to avoid uncertainty. We might defer decisions endlessly (thus surrendering what power we do have to control our own destinies) or, like ripping off a Band-Aid, pull the trigger all at once. Making a call takes guts. It means inviting uncertainty into your home, offering it a drink, and asking it to stay for dinner. Uncertainty is a creepy houseguest, but not your captor.

If surmounting your anxieties is step one, step two is letting go of your inner perfectionist because there is no such thing as a perfect decision-maker. Even if you had all the information in the world and a hangar full of supercomputers, you'd still get some wrong.

But there's a big difference between a wrong decision and a bad decision. A wrong decision is picking Door No. 1 when the prize is actually behind Door No. 2. It's a lousy result, but the fault lies with the method. A bad decision is launching the space shuttle Challenger when Morton Thiokol's engineers predict a nearly 100% chance of catastrophe. The method, in this case, is no method at all.

The distinction is important, because it separates outcomes, which you can't control, from process, which you can. Wrong decisions are an inevitable part of life. But bad decisions are unforced errors. They're eminently avoidable–and there are proven techniques to avoid the most predictable pitfalls (see Great Escapes).

There is, of course, no one archetypical decision. Some are drawn out and deliberative, others made at the flick of a switch. If you find yourself at the receiving end of an Andy Roddick serve, for instance, pausing to weigh your options (forehand? backhand? law school?) is not an option. You have to jump, right now. For bond traders too, the time between analysis and action lasts milliseconds.

Now imagine you're responsible for a whole floor of bond traders. Orchestrated well, their decisions mean a great quarter; guided poorly, they'll dig a billion-dollar hole. You can't tell them what to decide, but you can train them how to decide, and select who does the deciding. That's how you build a decision-making machine–like GE or the Marine Corps. "If you explain to your subordinates the end state you want and the timeline you'd like to get there," says Gen. Peter Pace, "you can observe progress, provide resources, and know they're going to do things to get you to the goal. Maybe differently than you would do it. Often better. Sometimes worse. But inside the lines you've painted."

Some of our decisions will outlast us. We have those fading Polaroids because Edwin Land, in 1943, decided to answer his daughter's question, "Why can't I see the picture right away?" We have U.S. Steel because Andrew Carnegie wrote "$480 million" on a piece of notepaper and J.P. Morgan said, "I accept this price." And in 1929 a woman named Lila Luce was given a list of names and picked one: Fortune. Her husband, Henry, had favored Power or even Tycoon. But her decision held–and lives on, more than 1,000 issues later.

 

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Nokia and agility.

The giant's makeover

 From The Economist

This time last year, Nokia, the world's largest maker of mobile phones, suddenly found itself on the ropes. Its market share in the first three months of 2004 had fallen to 28.9%, having hovered around 35% for years. The firm cut prices, but that was only a short-term fix: it then set about addressing the underlying causes. The unveiling of its latest batch of handsets this week provided new evidence that Nokia has changed its ways.

Nokia's woes had two main causes: lacklustre products which failed to address consumers' enthusiasm for “clamshell” or “flip-phone” camera-phones and highlighted Nokia's loss of leadership in design; and the company's reluctance to produce customised versions for mobile operators. Many operators have been turning to specialist “original design manufacturers” (ODMs), mostly based in Taiwan, to supply custom handsets. These are often sold by operators under their own brands, to help differentiate themselves.

So the seven new handsets launched by Nokia this week were telling. Four were “slider” designs, in which the keypad can be hidden under the display, and two were clamshells. “What's encouraging is to see Nokia dumping the 'not-invented-here' mentality and becoming a fast follower,” says Ben Wood of Gartner, a consultancy. Per Lindberg, an analyst at Dresdner Kleinwort Wasserstein and a noted Nokia critic, says this is the best new batch of handsets the firm has produced for four years.

This follows the unveiling in April of a new line of high-end handsets, the most advanced of which, the N91, includes iPod-style music playback from a tiny hard disk.

Meanwhile, Nokia has also changed its tune on customisation. As well as offering to modify the software on its phones to suit particular operators, it has started to offer custom handsets. The first is being made for China Mobile, with others to follow soon, says Kai Oistamo of Nokia. And having traditionally been reluctant to outsource manufacturing, Nokia has started to use ODMs, as its rivals do, to plug any gaps in its product line. The firm has become “more open-minded, more flexible as the world around us changed,” Mr Oistamo says.

Challenges remain, however. Having bounced back in the last three months of 2004, Nokia had a weaker first quarter this year, largely due to poor sales in North America, where many network operators use CDMA technology rather than the GSM technology used in Europe. “That's their Achilles heel,” says Mr Wood. Nokia is said to have done a deal to buy advanced CDMA handsets from SK Teletech, a South Korean manufacturer, for resale under its own brand. This would beef up its range in America, but would also be a tacit admission that Nokia's own CDMA products are not up to scratch. Nokia says no such deal exists, but that may simply mean that no deal has been done yet.

Either way, it is clear that Nokia has changed its ways. “A big dose of humble pie was the best thing that could have happened to the company,” says Mr Wood. The company has, he notes, even licensed e-mail and media-playback protocols from Microsoft, its arch-rival in the field of smartphones–something that would have been unthinkable a year ago. Nokia is so determined to stay on top, it would seem, that nothing is sacred.

 

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How to choose a Business Management System (BM...

How to choose a Business Management System

 

Your choice of approach really depends on what you intend to get from it.  If all you want to do is appease the ISO auditor every 6 months then a text based set of procedures controlled by a central Quality team will be the least cost route.

 

However, most Quality professionals are looking to move from being a COST to the business to being an ASSET.  They want to support the business so it can perform better. They are even changing their titles – “Head of Process Improvement”, “Head of Performance Management”, “Director of Operational Excellence”.

 

The problem with the old ways of capturing, documenting and making the information available is it has failed to get any buy-in and ownership from the business.  The information gathers dust on the shelf, or in a dusty corner of the company intranet.

 

One simple word will change that: ADOPTION.  If the focus of the BMS is to get adoption of the processes, working practices, procedures and work instructions, then a very different approach is needed for creating the BMS, for accessing it, and for maintaining it. 

 

The BMS needs to be described in terms of end to end processes.  Broken down hierarchically from the Board level to the shop floor.  In a format everyone can understand. Captured in live workshops to ensure adoption and consensus.    Links to supporting documents, forms, work instructions and applications (systems) attached to the relevant activity.  Maintenance of processes is delegated owners in the business. Finally performance metrics displayed with the activities that drive the numbers.

 

The benefits are compelling – Lockheed Martin UK: £21m of process improvement savings, £30m of new business won.

 

This approach, supported by case studies drawn from over 200 clients is in Ian's latest book – “Common Approach, Uncommon Results”, published by Ideas Warehouse (www.ideas-warehouse.com)

 

 

 

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CPM explained - Interview with Ian Gotts, author of Common approach, Uncommon Results

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

 

 

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Performance = Process & Metrics, but which comes first?

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

 

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

 

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

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

 

Linking processes and metrics

 

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

 

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

 

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

 

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

 

Corporate Performance Management

 

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

 

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

 

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

 

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

 

What comes first: Metrics or Process?

 

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

 

So what exactly do I mean by metrics?

 

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

 

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

 

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

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

 

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

 

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

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

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

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

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

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

 

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BPM markets continue to evolve...

BPM Market Continues to Evolve www.upsideresearch.com :

By Heather Ashton

BPM adoption continues to spread across all industries, as we hit the

halfway mark of 2005. No longer limited to obvious verticals like financial

services and manufacturing, BPM's broad appeal is spreading to any company

with processes that require a workflow involving information, people, and

systems. Today, BPM solutions can be found in such diverse markets as

pharmaceutical, government, transportation, and healthcare. In our most

recent informal market survey, Upside Research saw the continuation of

previous patterns for adoption and implementation of BPM solutions, as well

as some interesting trends that highlight BPM's impact on the greater

enterprise software solutions market. The following results indicate that

BPM is becoming an effective solution for many enterprises.

* Sales growth continues but pace is more moderate. After several years of off-the-charts growth for many BPM pure-plays as they quickly ramped up their efforts and started signing marquees customers, the most recent check of revenues for BPM vendors indicates the growth has become more moderate.The average growth from the survey respondents between Q4 2004 and Q1 2005 was 20%, with many vendors adding between 10-20 new enterprise customers. A few vendors actually had no growth in the first quarter because of extended sales cycles, but have seen that business close in the second quarter.

* EMEA seeing greatest increase. The majority of BPM sales continue to occur in North America, but there has been a significant increase in sales to Europe, the Middle East, and Africa (EMEA). This can be attributed to the efforts on the part of the vendor community and industry-driven organizations to educate global enterprises about BPM's role in business strategy. Similarly, as many early adopters roll out enterprise-scale process automation, BPM is showing up in all corners of the world, sparking the global interest.

* Adoption rates hampered by market confusion. While general awareness of BPM as a technology by the end user population has risen over the past several quarters, there still exists a significant level of market confusion. Because a variety of technologies are calling themselves "BPM, including Enterprise Application Integration, ERP, and Content Management, end users are confused by what constitutes a business process management solution and what components are necessary to solve specific business problems. Vendors are seeing more awareness of BPM, but are challenged by the market confusion, which is leading to longer sales cycles in some cases.

* Technology synergies are emerging. As with any technology market, as the market progresses, complimentary technologies emerge as important areas of overlap. BPM is no exception, and the market has seen a growing interest over the past six months in several synergistic technologies. The greatest interest has been in business rules engines, either providing the ability to integrate with an organization's existing rules engine or providing an OEMed rules engine to customers. Two other technologies, process modeling and simulation capabilities, have found themselves increasingly a part of the core BPM offering from vendors.

The Upside Uptake

The most recent survey results continue the trend that Upside Research has been following for more than two years: Business Process Management is a noteworthy solution for many enterprises. As the most recent survey results indicate, BPM continues to gain ground and grow from a trendy technology into a viable, enterprise-strength solution. The slower pace of growth indicates some of the bumps that BPM is hitting as it moves along the road toward mainstream technology solution. Enterprises are kicking the tires of BPM, but once they determine it can help solve some of their process issues, they are buying in a big way.

The continuation of development in emerging markets for BPM is also encouraging for BPM's longevity. As the global market for BPM expands, so will the best practices and understanding of how to best leverage the technology. Upside Research expects this to continue, and for organizations to continue to find unique ways to apply BPM to their business problems. Because of the market confusion, Upside Research believes it is important for the BPM market to consolidate around several important pillars of functionality in order to firmly establish itself as an easily recognized class of technology solution. This consolidation should take place over the next 12 to 18 months and continue to sharpen the core focus of Business Process Management.

You can also download Upside Research's latest paper: BPM Survival Guide

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eSCM-SP: Threat or Opportunity for Outsourcing?

Who wants to help destroy value in their industry? A recent HBR article sets out a future where almost all processes are outsourced - but also largely commoditized as well. One of the key enablers of commoditization will be the growth of industry standards, which will allow buyers to mix and match more easily.

So you’d be forgiven for groaning at the emergence of eSCM-SP, the global standard designed to help buyers evaluate their service providers.

But as our latest White Paper shows, there are good reasons to think that eSCM-SP is likely to become mainstream quite quickly – it’s not difficult to see that eSCM-SP certification will become a standard RFP question within a year.

The upside is that any service provider at eSCM-SP Levels 4 and 5 is likely to be achieving what every business is striving for: reliable service delivery, relentless pressure on costs, continuing innovation and process improvement, and sound governance.

So, perversely, while taking eSCM-SP seriously may accelerate commoditization, it’s also in the interests of every service provider. Those organizations that achieve Level 5 certification are likely to be the winners in the long term.

Service providers are now working on eSCM-SP, and are using Nimbus control-ES software to achieve certification – as a by-product of a world-class process and performance management environment.