Performance management for digital transformation Jean Vieille, Industrial systems control Second 4P Factory online Seminar Wednesday 16th March 2016

Agenda IT transformation Enterprise control Performance management Use case J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar2

Context Hyper-connected World ◦ Increasing complexity, opportunities Enterprises keep morphing to adapt to the changing environment IT keeps progressing, pushing new technologies and hypes to support them Industrial IT is aging, intricate ◦ Need to improve IT support to business, ◦ Need to leverage opportunities and technologies ◦ Without compromising operations, limiting risks J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar3

Questions How to handle IT transformation ? ◦ To serve business ◦ While leveraging technology How to link IT improvement to enterprise bottom line ? ◦ Budget for IT operations ◦ Budget for projects ◦ Priorities J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar4

IT at the heart of enterprise J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar EnergyMatter Information Product Y EnergyInformation Pre-industryHuman, animalHuman MechanizationMachineHuman AutomationMachineComputer IoT BigData Mobility Networks Electro-mechanics Pneumatics Electronics Informatics Smart Industry Industrie 4.0 Industrie du Futur 5

IT transformation Challenges Requirement management ◦ Business Values, Priorities; Leverage new technologies IT planning ◦ Large projects, continuous incremental delivery Deal with heterogeneity ◦ Legacy new technologies, partial migration, interoperability, MDM, Promote standardization or leverage local initiatives ◦ IT efficiency or creative diversity Up to date representation of ◦ Industrial system, IT asset IT delivery performance management ◦ Link IT operations to enterprise success ◦ Set priorities, budgets J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar6

VSM 1,2,3 Operations VSM 5,4 Policy, Global transformation VSM 4 IT Transformation (recursion) Local IT Transformation (recursion) 3. Local realizations Strategy, Goal Resource allocation Global IT Transformation 2.3 Deployment 2. IT planning monitoring 2.2 Development 2.1 Technology - platform Operations Supported by IT 5. Industrial system model 4. IT assets and configurations 1. Requirement management Technology awareness Business requirements, Corrective maintenance Performance J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar7

Agenda IT transformation Enterprise control Performance management Use case J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar8

Complexity J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar Very complex Complex Environment Suppliers, Customers, Contractors, Partners IRS, Regulations Natural, Social environment Market, Politics, Macroeconomics Employees, shareholders Bankers, Insurers Enterprise HR, Marketing, R&D, Engineering, IT Sales, Sourcing Finance, Communication Planning, Production, Logistics ??? Make money Goal 9

C2/C3 C3/C2 C1/C2 C2/C1 Complexity control J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar Environment Operations Management Law of Requisite Variety (W.R. Ashby) : Variety of the controlling system >= Variety of the controlled system Variety = number of possible states = f(complexity) C1 C2 C3 Amplifier Filter C1 >> C2 >> C3 10

Take a Country J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar 11

How to control such a complex system? Direct control Organize Decide Enforce… Behaviour control Influence Encourage Exite…. J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar Performance management is one way for controlling behaviour beside: Competition Advertisement, Propaganda, Brainwashing Threat, False flag Concealment Leaked secrets Corruption … 12

Increase complexity, collective intelligence J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar C4 > C3 > C2 > C1 Direct control Environment Management Organize Decide Enforce Deterministic Goal C2 C4 C1 Operations C3 Elevate Operations complexity C5 > C3 Operations + C3’ Effective action 13 Behaviour control Minds Opportunistic C2’ C5 Influence Encourage Excite C’2  C2

2.Coordination 1.Operations Enterprise control representation 5.Policy 3.Delivery & monitoring 4.Transformation HR, Engineering IT, Contracts, R&D Finances Organization Marketing Communication … J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar Environment en.wikipedia.org/wiki/Viable_system_model Strategic directives Resource Allocation and arbitration Requirement Projects Direct control Behaviour control SalesDesignSource MakeDeliver Recursion 14

Agenda IT transformation Enterprise control Performance management Use case J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar15

SS12SS21 SS1SS2 SS0 SS22SS11 Complex system control Behaviour control Direct control J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar 16

Local aspects: Behaviour propagation in sub-systems J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar SS1 ExcitationReaction ExcitationReaction SS11 SS0 SS2 KPIs Reach performance target with available means Delivery & monitoring Operations & coordination Fast loop Induce others’ transformation to improve local performance Slow loop Transform itself to improve local performance PolicyTransformation Excitation Reaction 17

Global aspects: Overall Interactional Effectiveness J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar Focus all enterprise functions on a global indicator Seeking mission fulfilment SalesDesignSourceMakeDeliver OIE R * S * Q * OVA/OOE Speed (Working Capital Need) Quality Overall Value Added Overall Operating Expenses Social Responsibility Innovation 18

IT Transformation Enterprise Policy IT Delivery & monitoring Transformation, Delivery & monitoring Coordination Operations Global aspects: Overall Interactional Effectiveness J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar SQOVAOOER Performance SalesDesignSourceMakeDeliver Change requests Transformation OIE R * S * Q * OVA/OOE Speed (Working Capital Need) Quality Overall Value Added Overall Operating Expenses Social Responsibility Innovation 19

Delivery & monitoring Coordination Operations Policy Transformation Dynamic performance management J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar A ctuality C apability P otentiality Feasible performance target With the current resources Current performance measure The reachable, desirable target (transformation investment) Critical for long term survival Latent Performance Long term strategic gap Conditions survival C/P Organizational Performance A/P en.wikipedia.org/wiki/Viable_system_model Operational Performance A/C Short term efficiency Ability to leverage available resources 20

Click to edit the outline text format  Second Outline Level Third Outline Level  Fourth Outline Level Fifth Outline Level Sixth Outline Level Seventh Outline LevelModifier les styles du texte du masque ◦ Deuxième niveau ◦ Troisième niveau  Quatrième niveau  Cinquième niveau Example We produce an average of 600 products a week Our equipment has a full capacity of 20 products per hour We operate 8 hours a day, 5 days a week We have 2 equivalent machines that cannot be operated simultaneously Actuality Capability Potentiality Operational P. (A/C) Latent P. (C/P) Organ. P. (A/P) J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar (20*8*5) 6720 (20*24*7*2 75% 12% 9% 21

IT budgeting Many formulas for guesstimating IT ROI and functional / projects budgets ◦ IT in industry hardly delivers tangible value, difficult to prove after implementation OIE focuses IT on critical requirements Potentiality = backlog of critical requirements Capability = selected priority requirements for given resources C/P = IT Latency for serving strategic objective ◦ Informed financial arbitration J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar22

Conflict resolution Conflicts -> uneasiness, discomfort, complaints PM as a likely cause, ◦ Compromises effective contribution to fulfil enterprise objectives ◦ Due to failed assumptions about local performance relevance Need for continuous monitoring of arising conflicts ◦ and KPIs’ relevance J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar23

Agenda IT transformation Enterprise control Performance management Use case J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar24

Context R&D department of a large company ( 2000 researchers) Deployment of ELN software Issues ◦ Slow and costly delivery of complex experimentation templates ◦ Sensitive relationships Business / IT / Software provider ◦ Researchers goals (IP protection) conflicts with project goal (leveraging shared knowledge) Example for a simplistic metrics showing the bottom-up chain of responsibilities and flawed assumptions J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar25

Objective J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar Increase Overall Added Value Group Policy R&D IT Policy & transformation Leverage Information technology Implement ELN Contractor IT Delivery, coordination and operations Group transformation Boost Innovation Numerous, effective inventions Educated guess… Resource allocation Improve experimentation productivity Share knowledge Standardize experimentation Improve research productivity R&D Policy & transformation Educated guess… Resource allocation Fast, cost effective ELN Deployment Resource allocation Fast, cost effective ELN Deployment 26

R&D IT delivery & monitoring User coverage KPI and responsibilities J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar Group Policy & transformation R&D Policy & transformation R&D IT Policy & transformation Contractor operations (VSM recursion) Actuality Capability Operational 65% Potentiality Latency 380 Organisational 36%23% Potentiality Latency 2000 Organisational 19% 4% Directives to R&D R&D budget Directives to IT IT budget ELN delivery budget Poor performance. Will this target actually help boosting innovation? Numerous, effective inventions Fast, cost effective ELN Deployment 27

ELN full deployment justification Conflict resolution J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar Standardize experimentationShare knowledge Promote research sharing Numerous, effective inventions Improve experimentation productivity Data rather process oriented Researchers requirements Protect individual IP Experimentation freedom Enable creativity en.wikipedia.org/wiki/Evaporating_Cloud 28

Conclusion IT continuous transformation ◦ Support enterprise ongoing transformation ◦ Leverage new technologies IT performance management is an essential component in this process ◦ To focus efforts on enterprise goal / objectives ◦ To set IT budgets Better understanding through system approach ◦ Complexity management, Behaviour control ◦ Overall Interactional Effectiveness ◦ Responsibility, Conflict resolution J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar29

Questions? J. Vieille - Performance managment for digital transformation - Second 4P Factory online Seminar Transformation Performance Behaviour OIE S QOVAOOE R Responsibility Conflicts 30