An Agile Culture? Niel Nickolaisen COO, Deseret Book
Agenda Introduction Historical Environment Todays Environment and Results The Model Examples and Caveats
Introduction Main Points: We are in an environment of rapid change and increasing business and technology complexity. To be adaptive, we need to pick our battles and simplify our methods. The following approach is based on study and trial and error (and it seems to work).
Historical Environment In the good old days... Customers had fairly stable expectations. Technology did NOT drive change. IT (if it existed) was entirely in the backroom (data processing). Technology was, at worst, vertically integrated.
Todays Environment Change happens quickly. Increasing vertical and horizontal complexity. Technology is now involved in many (most?) business activities. IT supports almost all known business processes. Technology is (and it is worse) horizontally integrated.
Results What worked yesterday no longer works. What works today might not work tomorrow. Between % of all IT projects are challenged. Technology has undelivered (perhaps because it was over-promised). IT Does Not Matter The high impact benefits are rarely achieved (we crash on the shores).
The Reality of Value? Expected Benefits Expected Costs Planned ROI Real Benefits Real Costs Actual ROI
What Then Do We Do? Do things differently in order to: Create an adaptive culture (that can keep pace with the dynamic marketplace). Choose our battles (in order to simplify). Define and use metrics aligned with value. Align technology both strategically and tactically with the business. Properly allocate resources.
Methodology Define and use a decision framework (for example, the following model). Filter existing and potential business processes and initiatives through the framework. Based on the filtering, prioritize initiatives and changes. Allocate resources accordingly. Use adaptive design and implementation methods to deliver results. Re-filter and re-prioritize frequently (to match the dynamics of the marketplace and to resist the urge to complicate).
As An Aside If it were only that easy!
A Possible Decision Framework Purpose Use a set of criteria to simplify, filter, and prioritize decisions about business processes, technology, resource allocation, et cetera. The following Nickolaisen model seems to work reasonably well.
The Model Market Differentiating High Low Mission Critical Low High
Market Differentiating High Low Mission Critical Low High General Approach Partner Focus and Allocate Resources Who Cares? Achieve Parity
Example of Differentiating and Parity As a publisher and retailer, Deseret Books differentiating processes include product development and selection. Our parity processes include the mechanics of product development and acquisition (and a lot more). In our case, WHAT is differentiating, HOW (the mechanics) is parity. This approach allows us to pick our battles, simplify plans, and properly allocate resources.
Application / Infrastructure Model Applications (Differentiating and Parity) Infrastructure (Parity) IT Management Tools (Parity) Analysis Tools (Differentiating) What is the organizational analogy?
Customer Supply / Fulfillment Chains Transaction Core (FIN, MFG, HR, PR) Customer Interface Supplier / Fulfillment Interface Goal is Parity? Goal is Differentiation Goal is Parity Applied to Applications Channels What is the organizational analogy?
Customer Supply / Fulfillment Chains Transaction Core Customer Interface Supplier / Fulfillment Interface Channels What This Means In Practice Vanilla Mostly Vanilla What is the organizational analogy?
Even Within Customer Interface Example, E-commerce Channel Registration / Log-inStandard Shopping CartStandard PromotionsCustomize Ease of BusinessCustomize Credit Card ProcessingStandard User InterfaceCustomize Standard Result80 – 90% of stack can be standard (and simple )
All Together Now
Example: ERP Software Selection and Implementation My belief: ERP is an operating system - we maximize the benefits of the ERP if we select and implement the applications as quickly and cleanly as possible. Mapping business processes onto the model yields parity for ERP- supported processes. Adopt business processes to best practices (example drop shipping). Associate a measurable value with each proposed customization or complexity. Ideally (although it has not been done), do a three-week implementation.
Example – Application Development Use a decision framework (I am biased towards the Nickolaisen model) at a component level to align to and define strategic purposes and goals. Do not design to extremes in parity processes (what value will this provide?) Use adaptive development methods to achieve the tactical results of the development project.
Example – Application Development Document Management and Collaboration System Initial Development Budget = $2M and 18 months. Filtered desired functionality through the model with the results: Two differentiating components. Twenty-seven parity components (re-use or license). Reduced function points from over 7000 to 240. Final Budget = $350K and 4 months
Building Strategic and Tactical Plans Identify all known and desired business processes. Define filtering criteria (differentiating and mission critical). Segregate processes onto the quadrants. For processes that are split, break into components. Define current and desired process states. Perform a weighted gap analysis (gaps between current and desired states. Identify and prioritize business initiatives (and associated IT projects).
Example Process Process TypeEvaluation Criteria Current Score Desired Score DifferenceWeightScore eCommerce shopping cartParityOne click shopping Recall past transactions Price in advance of check out Track customer across channels Differentiating / Parity Identify customer at transaction site Common business rules Shop here, ship there PurchasingParityThree way match Drop ship to sites Consolidate site purchases to single order
Differentiating / Parity Criteria Guidelines Customer facing processes are likely the only real candidates for differentiation. Analysis can be differentiating Value-justify every complexity. Treat exceptions like exceptions. There may be significant work to achieve parity.
What This Requires At macro and micro levels: Value-based decision criteria Consensus (or obedience) on what differentiates On-going prioritization process At a macro level: Credibility and relationship of trust among management peers
Caveats This changes the culture of the organization. Changing cultures involves changing behaviors. Changing behaviors requires leadership (not management). Changing behaviors is a pain, however, the ability to adapt might be one of our most important characteristics. What differentiates today can be parity tomorrow (i.e. fast pay). Constantly evaluate and re-evaluate previous decisions and priorities. There are no complexity initiatives (they happen by themselves). Think in terms of future perfect to define and design phases.
Summary I am not sure we have a choice about developing an adaptive organization. To be adaptive, we need to have and rigorously use a metrics-based method for filtering and prioritizing at both the strategic and tactical levels. This requires leadership and a methodology!
Summary At the 2004 MIT CIO Summit, 88% of the participants rated corporate agility as highly important. 72% said that IT was an enabler of corporate agility. The three fundamentals of effective change management are Focus, Execution, and Leadership. - Lou Gerstner