SCENARIO-BASED MODELLING: Storytelling our way to success. 1

“The soft stuff is always the hard stuff.”

Unknown.

Whoever said ‘the soft stuff is the hard stuff’ was right.  In fact, Douglas R. Conant, coauthor of TouchPoints: Creating Powerful Leadership Connections in the Smallest of Moments, when talking about an excerpt from The 3rd Alternative: Solving Life’s Most Difficult Problems, by Stephen R. Covey, goes on to note:

“In my 35-year corporate journey and my 60-year life journey, I have consistently found that the thorniest problems I face each day are soft stuff — problems of intention, understanding, communication, and interpersonal effectiveness — not hard stuff such as return on investment and other quantitative challenges. Inevitably, I have found myself needing to step back from the problem, listen more carefully, and frame the conflict more thoughtfully, while still finding a way to advance the corporate agenda empathetically. Most of the time, interestingly, this has led to a more promising path forward and a better relationship, which in turn has made the next conflict easier to deal with.”

Douglas R. Conant.

Conant is talking about the most pressing problem in modern organisations – making sense of stuff.

Sense Making

Companies today are awash with data.  Big data.  Small data.  Sharp data.  Fuzzy data.  Indeed, there are myriad software companies offering niche and bespoke software to help manage and analyse data.  Data, however is only one-dimensional.  To make sense of inforamtion is, essentially, to turn it into knowledge. To do this we need to contextualise it within the frameworks of our own understanding.  This is a phenomenally important point in sense-making; the notion of understanding something within the parameters of our own metal frameworks and it is something that most people can immediately recognise within their every day work.

Contextualisation

Take, for instance, the building of a bridge.  The mental framework by which an accountant understands risks in building the bridge is uniquely different from the way an engineer understands the risks or indeed how a lawyer sees those very same risks.  Each was educated differently and the mental models they all use to conceptualise the same risks (for example)  leads to different understandings.  Knowledge has broad utility – it is polyvalent – but it needs to be contextualised before it can be caplitalised.

Knowledge has broad utility – it is polyvalent – but it needs to be contextualised before it can be caplitalised.

For instance, take again the same risk of a structural weakness within the new bridge.  The accountant will understand it as a financial problem, the engineer will understand it as a design issue and the lawyer will see some form of liability and warranty issue.  Ontologically, the ‘thing’ is the same but its context is different.  However, in order to make decisions based on their understanding, each person builds a ‘mental model’ to re-contextualise this new knowledge (with some additional information).

There is a problem.

Just like when we all learned to add fractions when we were 8, we have to have a ‘common denominator’ when we add models together.  I call this calibration, i.e. the art and science of creating a common denominator among models in order to combine and make sense of them.

Calibration

Why do we need to calibrate?  Because trying to analyse vast amounts of the same type of information only increases information overload.  It is a key tenent of Knowledge Management that increasing variation decreases overload.

It is a key tenent of Knowledge Management that increasing variation decreases overload.

We know this to be intuitively correct.  We know that staring at reams and reams of data on a spreadsheet will not lead to an epiphany.  The clouds will not part and the trumpets will not blare and no shepherd in the sky will point the right way.  Overload and confusion occurs when one has too much of the same kind of information.  Making sense of something requires more variety.  In fact, overload only increases puzzlement due to the amount of uncertainty and imprecision in the data.  This, in turn, leads to greater deliberation which then leads to increased emotional arousal.  The ensuing ‘management hysteria’ is all too easily recognisable.  It leads to much more cost growth as senior management spend time and energy trying to make sense of a problem and it also leads to further strategic risk and lost opportunity as these same people don’t do their own jobs whilst trying to make sense of it.

De-Mystifying

In order to make sense, therefore, we need to aggregate and analyse disparate, calibrated models.  In other words, we need to look at the information from a variety of different perspectives through a variety of lenses.  The notion that IT companies would have us believe, that we can simply pour a load of wild data into a big tech hopper and have it spit out answers like some modern Delphic oracle is absurd.

The notion that IT companies would have us believe, that we can simply pour a load of wild data into a big tech hopper and have it spit out answers like some modern Delphic oracle is absurd.

Information still needs a lot of structural similarity if it’s to be calibrated and analysed by both technology and our own brains.

The diagram below gives an outline as to how this is done but it is only part of the equation.  Once the data is analysed and valid inferences are made then we still are only partially on our way to better understanding.  We still need those inferences to be contextualised and explained back to us in order for the answers to crystalise.  For example, in our model of a bridge, we may make valid inferences of engineering problems based on a detailed analysis of the schedule and the Earned Value but we still don’t know it that’s correct.

Storytelling

As an accountant or lawyer, therefore, in order to make sense of the technical risks we need the engineers to play back our inferences in our own language.  The easiest way to do this is through storytelling.  Storytelling is a new take on an old phenomenon.  It is the rediscovery of possibly the oldest practice of knowledge management – a practice which has come to the fore out of necessity and due to the abysmal failure of IT in this field.

Scenario-Based Model Development copy

Using our diagram above in our fictitious example, we can see how the Legal and Finance teams, armed with new analysis-based  information, seek to understand how the programme may be recovered.   They themselves have nowhere near enough contextual information or technical understanding of either the makeup or execution of such a complex programme but they do know it isn’t going according to plan.

So, with new analysis they engage the Project Managers in a series of detailed conversations whereby the technical experts tell their ‘stories’ of how they intend to right-side the ailing project.

Notice the key differentiator between a bedtime story and a business story – DETAIL!  Asking a broad generalised question typically elicits a stormy response.  Being non-specific is either adversarial or leaves too much room to evade the question altogether.  Engaging in specific narratives around particular scenarios (backed up by their S-curves) forces the managers to contextualise the right information in the right way.

From an organisational perspective, specific scenario-based storytelling forces manages into a positive, inquistive and non-adversarial narrative on how they are going to make things work without having to painfully translate technical data.  Done right, scenario based modelling is an ideal way to squeeze the most out of human capital without massive IT spends.

 

 

 

 

 

Measuring Legal Exposure Reply

Mind the gapThe function of a contract is to cover legal exposure.  It does not, by and large, govern the relations between parties.  Those are already established by the community and contracts merely document well established facts.  The way the parties will behave will already be a an established reflection of their education, training and previous business experience.  It is naïve to think, for instance, that a contract will be used by engineers to help manage the construction of a building.  On the contrary, the contract will present a myriad of hurdles, obstacles, impasse and problems as the workers try to get on and do their job – build.  It is a truism to say then that almost all litigation is a function of poor contract management rather than poor contract design.  Indeed, I have never met a client who had either fully read OR fully understood the contracts they were in.

A contract, rather, seeks to cover the inevitable areas of risk when two parties necessarily compromise to enter into an agreement. as my father used to say, ‘there are two parties to a contract – the screwor and the screwee.  One party is always disadvantaged.  The lesser party needs to cover their legal exposure and the greater party needs to ensure that not so much risk flows down that the lesser party is overloaded with risk, making the contract unworkable. Picture1Legal exposure is derived from financial risk.  Contracts will generally cover most financial exposure.  However, in Westminster-based systems much of the law of contract is still based in Equity.  Usually, there is still some degree of exposure that remains.  A party can only be forced to  indemnify so much; can only warrant so much and not beyond the reality of the arrangement.legal exposure

Most contracts, however, do not measure the legal exposure a party faces.  Most contracts stick with the standard blanket coverage formula, i.e. zero exposure.  This approach is unhelpful and in many cases counter-productive, because namely:

  • Phantom Exposure.  contract negotiations become unnecessarily bogged down over non-existent risk.  Arguing for 100% coverage when the risk is well covered already is just chasing phantom risk.
  • Lazy.  Quite frankly, the body of knowledge which exists in each sector, the sophistication of clients and the modern quantitative tools which exist to make contracting easier give no excuse for legal laziness.

Measuring legal exposure is both qualitative and quantitative.  Firstly, deriving financial risk is a mathematical function.  Secondly, as exposure is derived from the limitations of contractual coverage then legal exposure is a function of qualitative assessments.

My own method uses a threefold approach, namely:

  1. sensitivity analysis to measure financial risk, and then
  2. three separate qualitative measurements to define whether an element is a legal risk, then
  3. a legal assessment to determine if the remaining elements are covered (i.e. measure the exposure) and to what degree.

All of this is done as a collaborative process around a single bubble chart (shown below).  As is shown in the chart,

  • the bubble size (Z ‘axis’) relates directly to the mathematical analysis of financial sensitivity.
  • the X-axis is a qualitative scoring designed to assess the relative complexity of each item of volatility.
  • the Y-Axis is another qualitative scoring to determine just how close the item is to the project team, i.e. can they actually do something about it?  The less a team can influence a risk the more such risk needs to be pushed upwards so that the corporate functions of a business (Legal, Finance) can act upon it with centralised authority,
  • the colouring, lastly, deals with the notion of immediacy, i.e. prioritisation.

In this way, if a risk is both very complex and not able to be influenced by the project team (i.e. cannot be mitigated) then it, most likely, needs to be dealt with by the Legal function as there will be no way to otherwise influence it when the risk is realised.

Risk-Based Bubble Chart to engender cross-functional collaboration

Once legal risk is conceptually isolated in the upper-right quadrant of the bubble chart then lawyers may make a qualitative determination as to the amount of legal exposure.  For instance, a builder may warrant the quality of workmanship on a specific structure and cover it with insurance.  Legal may determine that there is virtually no statistical evidence that such risk is likely to be realised.  Therefore, the existing premiums easily cover the risk highlighted in the chart.

Alternately, the chart may have defined financial risk beyond, say, the indemnities provided by a firm’s subcontractors.  In such a case insurance or contractual renegotiation may be necessary.  It is important to know that in such circumstances it is precisely targeted cross-functional management energy that is being expended to determine, define and collaboratively deal with specific  financial risks.  Indeed, there is little more any business could hope for.

Hidden Costs in ICT Outsourcing Contracts Reply

hidden-costs

Why are IT outsourcing contracts almost always delivered over-budget and over-schedule?  Why do IT outsourcing contracts almost always fail to achieve their planned value? How come IT contracts seem to be afflicted with this curse more than any other area?

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The common answer is that (i) the requirements change,  and (ii) that handovers from the pre-contractual phase to in-service management are always done poorly.  These are both true although hardly explain the complexity of the situation.  If requirements change were an issue then freezing requirements would solve it – it doesn’t.  The complexity of large ICT projects is derived directly from the fact that not all the requirements are even knowable from the outset.  This high level of unknown-unknowns, coupled with the inherent interdependence of business and system requirements, means that requirements creep is not only likely but inevitable.  Secondly, (ii) handover issues should be able to be solved by unpicking the architecture and going back to the issue points.  This too is never so simple.  My own research has shown that the problem is not in the handover but that the subtleties and complexities of the project architecture is not usually pulled through into the management and delivery structures.  Simply put, it is one thing to design an elegant IT architecture.  It is another thing entirely to design it to be managed well over a number of years.  Such management requires a range of new elements and concepts that never exist in architectural design.

The primary factor contributing to excessive cost (including from schedule overrun) is poor financial modelling.  Simply put, the hidden costs were never uncovered in the first place.  Most cost models are developed by finance teams and uncover the hard costs of the project.  There are, overall however, a total of 3 cost areas which must be addressed in order to determine the true cost of it outsourcing. 

True Cost of IT

1.  Hard costs.  This is the easy stuff to count; the tangibles.  These are the standard costs, the costs of licensing, hardware, software etc.  It is not just the obvious but also includes change management (communications and training).  The Purchasor of the services should be very careful to build the most comprehensive cost model based on a detailed breakdown of the project structure, ensuring that all the relevant teams input costing details as appropriate.

2.  Soft Costs.  The construction industry, for instance, has been building things for over 10,000 years.  With this level of maturity one would imagine that soft costs would be well understood.  They are not.  With project costs in an extremely mature sector often spiralling out of proportion it is easy to see that this might also afflict the technology sector which is wildly different almost from year to year. 

Soft costs deal with the stuff that is difficult to cost; the intangibles:  The cost of information as well as process and transaction costs.  These costs are largely determined by the ratio of revenue (or budget in terms of government departments) against the Sales, General & Administration costs, i.e. the value of the use of information towards the business.  Note that this information is not already counted in the cost-of-goods-sold for specific transactions.

Soft costs go to the very heart of how a business/government department manages its information.  Are processes performed by workers on high pay-bands?  Are workflows long and convoluted?  The answers to these questions have an exponential effect on the cost of doing business in an information-centric organisation.  Indeed, even though the cost of computing hardware is decreasing, the real cost of information work – labour – is increasing.  This is not just a function of indexed costs but also the advent of increasing accreditation and institutionalisation in the knowledge worker community.  Firstly, there is greater tertiary education for knowledge work which has hitherto been unaccounted for or part of an external function.  The rise of the Business Analyst, the Enterprise Architect (and a plethora of other “architects”) all serve to drive delivery costs much higher.  Not only are the costs of this labour increasing but the labour is now institutionalised, i.e. its place and value is not questioned – despite the data showing there seems to be limited economic value added through these services (i.e. no great improvement in industry delivery costs).

3.  Project Costs.  Projects are never delivered according to plan.  Requirements are interpreted differently, the cohesion of the stakeholder team can adversely impact the management of the project, even the sheer size and complexity of the project can baffle and bewilder the most competent of teams.  Supply chain visibility, complicated security implementations and difficult management structures all add to project friction and management drag.  There are many more factors which may have an adverse or favourable effect on the cost of performing projects. 

IT Transition Cost Graph

In the Defence community, Ph.D student Ricardo Valerdi created a cost model – COSYSMO – which isolated 14 separate factors peculiar to systems engineering projects  and gave these factors cost coefficients in a cost model.  Ultimately, each factor may be scored and the scoring then determines the effort multiplier, usually a number between approximately 0.6 and 1.8.  Naturally, when all factors are taken into account the overall effect on the contract price is significant. 

More importantly, for IT implementations, the “project” is not short.  IT outsourcing projects are generally split into 2 phases:  Transition and Transformation.  Transition involves what outsourcers call “shift-and-lift” or the removal of the data centres from the customer site and rear-basing or disposal of the hardware which allows the company to realise significant cost savings on office space. 

During the second phase – Transformation – the business seeks to realise the financial benefits of outsourcing.  Here, a myriad of small projects are set about in order to change the way a business operates and thereby realise the cost benefits of computer-based work, i.e. faster processes from a reduced headcount and better processes which are performed by workers on a lower pay-band. 

IT outsourcing  is not just about the boxes and wires.  It involves all the systems, hard and soft, the people, processes and data which enable the business to derive value from its information.  Just finding all of these moving parts is a difficult task let alone throwing the whole bag of machinery over the fence to an outsourcing provider.   To continue the metaphor, if the linkages between the Purchasor and the Vendor are not maintained then the business will not work.  More importantly, certain elements will need to be rebuilt on the Purchasor’s side of this metaphorical fence, thus only serving to increase costs overall.  The financial modelling which takes into account all of these people, processes and systems must, therefore, be exceptional if an outsourcing deal is to survive.

Qld Govt On Track to lose Billions Through Poor Outsourcing Reply

In a recent article in online technology ezine Delimiter – “Qld Health Preps Huge IT Outsourcing Deals” – Renai LeMay points out that the Qld government will need to spend an unadjusted $7.4 billion over the next 5 years in order to replace and upgrade 90% of its outdated ICT portfolio.

The question is whether it has learnt from the Qld Health outsourcing debacle with IBM and will it move forward with its best foot?  It is unlikely, given that HSIA seems thrust into the contracting process too early with too little.  With the pace seemed to be set by the Costello audit, the HSIA is now engaging in early vendor ‘discussions’ (IBM notably excluded) without even a detailed set of business requirements, system parameters and financial boundaries.

In letting vendors shape the early development of these outsourcing contracts the government is on track to lose billions.  This will happen for 3 primary reasons:

  1. Service Management will be overlooked – The failure of virtually all contracts is not in the structure but the management.  Although most experienced litigators have gasped at contracts (usually government) which seemed to have been designed to fail (largely due to something bordering on corruption or undue influence), most are not so designed.  Outsourcing contracts, more than any other, require detailed attention to the management of the service.  Ultimately, the difficulty lies in the paradigm shift from network support to service management.  In other words, the personnel in charge of servicing are now in charge of service management.  In most cases, these jobs are made redundant as the vendor takes them over (unlike TUPE laws in the UK).  Consequently, the knowledge is lost.  Purchasors can protect themselves against service decline by making the vendor buy key personnel.  Better yet, Purchasors should transition these key roles from performing the work to managing the service/contract.
  2. Deals will be too long – Vendors will push longer outsourcing contract lifecycles.  Although, prima facie, there is  nothing long with a long contract it is imperative that such contracts are designed to be managed, i.e. the focus is on the delivery and management Schedules and not the boilerplate of the Operational clauses.
  3. Tech bundles will lack modularity – Qld government loves to re-organise.  After each government their is always a paradigm shift in the Machinery of Government (MOG).  Departments shift and with them so do budgets and internal processes.  These are generally managed within departmental parameters with necessary roles and functions often going unfunded and unfilled for entire cycles of  government.  To reinforce Renai LeMay’s point, it goes without saying, therefore, that the government needs to develop a modular, multi-bundle architecture wherein departments can buy and sell service credits between themselves without limiting the overall strategic cost savings.

In summ, there are numerous ways in which Qld government can guard against the inevitability of cost overruns and poor, overly simplistic outsourcing contracts.  On the other hand, the vendor which offers these first will have a significant advantage.  in many cases, the difficulty will be in convincing QGCPO that novel and innovative contracting vehicles are there for the benefit of the Purchasor and not just vendor voodoo. 

Benefits-Led Contracting: no immediate future for outcome based agreements Reply

The IACCM rightly points out that key supplier relationships underpinned by robust and comprehensible contracts are essential to the implementation of significant strategic change.  Their research identifies a 9.2% impact on bottom line from contract weakness.  Top 5 causes being:

  •      Disagreement over contract scope,
  •      Weaknesses in contract change management,
  •      Performance failures due to over commitment,
  •      Performance issues due to disagreement over what was committed,
  •      Inappropriate contract structures or responsibilities.

Two things are given in this mess:  (i) Firstly, that contractual structures are weak and inappropriate to deal with high levels of operational complexity and technical risk, and (ii) secondly, that legal means of enforcement are cumbersome, expensive and ineffective.

That business is ready to solve this legal problem by contracting for outcomes is (a) nonsense and (b) missing the point.  Business is already dealing with the operational and technical risk of large and complex contracts.  Business is already structuring many of its agreements to deal with outcomes.  Large prime contracts,  alliance contracts and performance-based contracts are already commonplace in PFI/PPP and Defence sector deals.  That neither are wholly efficient or effective is for another time.  It is, however, for the legal community to devise more sophisticated ways of contracting in order to solve their side of the problem.

Picture1

PEOPLE ARE THE KEY

The primary reason for not being able to contract for outcomes is that the vendor doesn’t own the people.  This is critical because without the ability to control and intervene in the delivery of work the risk increases exponentially.  Consequently, the risk premium paid for outcome-based contracts will either make them (a) prohibitively expensive, or (b) impossible to perform (within parameters).  So, a business which offers you an outcome-based contract is either having you on or just about to charge you the earth.

 

 

Sometimes the best defense is deletion – CSO Online – Security and Risk Reply

Sometimes the best defense is deletion – CSO Online – Security and Risk.

data mining. big dataThe point is prescient.  In these early days of Big Data awareness the battle between information management v. store now/analyse later can obfuscate other issues:  Cost and Necessity.

ONE BIG POT

Is there really the practical technology that an organisation can actually move away from structured databases and just stick all its information into one big ‘pot’, to be mined for gold nuggets at a later date?

Storing information (as opposed to just letting stuff pile up) is a costly business and the decision to store information usually comes from people on higher pay bands.  The decision of where to locate is often a manual decision which not only has a significant management overhead of its own but also involves co-ordination from other high pay bands.

THE COMPLEXITY OF INFORMATION

Picture1

Add to this dilemma the complexities of  ‘legal hold’ on material and the identification of ‘discoverable’ items.  Suddenly information management looks a lot harder and the siren song of Big Data seems a lot more alluring.  The problem is that information that is not valuable to some is valuable to others.  Who is qualified to make that decision?  Should all information be held given that it will likely have some enterprise value?  The battle is between cost and necessity:

  1. Cost:  Deciding what to keep and what to get rid of takes management time and effort that costs money.  The problem is that it is neither cost effective nor good policy to to push hold/delete decision making down to the lowest clerical level. The secret is to have those decisions made by more senior case-workers but only within their limited remit.
  2. Necessity:  The secret is to categorise management information to determine necessity.  Use a workflow to cascade and delegate (not to avoid) work.  As it moves it accumulates metadata.  No metadata means no necessity and therefore it should be disposed of automatically (eschewing arguments of regulatory compliance).

THE ANSWER

The answer is to automate the deletion of information (other than ‘Legal Hold’).  Once a document/question has reached the end of the workflow without accumulating any metadata then the information should be disposed of automatically.  Case-Workers make the decisions to act on the document/question and metadata is attached by more clerical staff (on lower pay bands) as the item moves through the workflow.  If no metadata is attached it can be assumed that the item is not important and is therefore disposed of.  Cost is minimised by letting case-workers make decisions of relevance within their own sphere of expertise without the additional management overhead for de-confliction/meetings etc.   In this way, the enterprise makes a collective decision of importance and stores the information accordingly thus answering the issue of necessity.

Managing data risk: APRA issues draft practice guide – Lexology Reply

Managing data risk: APRA issues draft practice guide – Lexology.

In their article on data security protection Helen Clarke and Melissa Burrill (Corrs Chambers Westgarth) set out an admirable approach to legal protections for data security.  However, their advice breaks the first rule of data security – if you don’t control it, you can’t secure it.  Fundamentally, businesses need to hold their secure information close, or have active measures to secure it, if they are to avoid data security breaches.  In the end, the threat of legal sanction will not stop criminal action by third parties.

The chart below shows the most high-profile data security breaches for 2012.  Clearly, the breaches do not reflect the strength of potential legal action or the drafting of data protection clauses.  No amount of due diligence would have assisted these companies’ clients as the breaches were not due to lax security procedures.

Contracts and legal sanction are only useful to deliver damages and enforce restitution to cover immediate financial losses.  They will not cover loss to brand equity or market share.

The only way to truly secure information is to manage it in-house.  If businesses wish to manage secret or confidential data in a cloud then they should store it encrypted and hold the keys themselves.  Alternatively, they can link databases and hold unencrypted information in the cloud but the actual names of clients can be held locally.

If businesses wish to remain wilfully blind (or take calculated risks) and outsource the storage of secret information then they should think about building in operational sanctions such as the moving, encrypting or the realignment of data against accounts to ensure their is no monetary loss for clients.

  • security breaches. 2012

The Law of Mobility: The legal implications of BYOD 2

BYOD

The legal ramifications of moves towards corporate Bring-Your-Own-Device policies extend far beyond simple issues of IT security and the legal discovery issues of locally held commercial data.  The biggest challenge facing the commercial world is how far businesses will have to go in regulating the online life of an employee.

Most companies have a dusty old clause in their employee contracts which states that there is no privacy in the use of firm equipment.  Recent proposed legislative amendments in the US and cases in Canada (R. v. Cole, 2012 SCC 53) clearly show that the use of social media on corporate platforms is (a) increasingly permissible  and (b) restricted from company access.  More importantly, it highlights how corporate and personal data are being blended together in a socio-corporate online collage.

Previously, companies and government departments have been able to ignore personal cries for BYOD due to: (i)  enterprise security concerns, (ii) legal risks around e-Discovery (iii) a perception of limited utility in social media and (iv) cost pressures relating to IT support costs.  However, now:

BYOD,McKinsey.Graph

  1. Enterprise security is no longer an excuse.  Increases in corporate cloud-based applications and desktop virtualisation mean that limited data is stored or cached on local devices.  In addition, any security breaches can be isolated to a certain user profile.  In the end, Bradley Manning and Wikileaks highlight the fact that there is little that will stop a disgruntled employee if they are intent on data theft.  Heavily layered, holistic security is the only answer.
  2. Mobile connectivity and enterprise workflows reduce local data storage.  Previously, compliance requirements for eDiscovery have limited the ability to store data locally.  However, mobile coverage is now better and  costs have reduced for 3/4G  and wifi acess.  Coupled with cloud/virtual apps and the ability to sign-in/sign-out documents from company portals means that firms can reap the benefits of extended and flexible working along with greater Discovery compliance.
  3. The benefits of social media have extended the boundaries and time of the corporate workplace.  Corporate blogging has now, apparently, increased to 38% with two-thirds of companies having a social media presence (beyond the 50% level in 2009).  Social media not only provides additional channels for marketing but it also increases both external and internal customer/stakeholder engagement (and such engagement extends both beyond the doors and timeframes of the office).
  4. Multi-Device support does not require bigger IT departments.  In fact, support is far more user-friendly (e.g. Salesforce.com, MS 365 etc) and has not resulted in burgeoning IT departments.  Companies can specify what devices they do support and outsource platform support to infrastructure providers.

The fact of the matter is that companies and government departments must move to BYOD sooner rather than later.  In a recent article, Elizabeth Johnson of law firm Poyner Spruill LLP notes that in the US:

  • 87% of people confirm that they use personal devices at work.
  • 48% of companies state that they will not allow it.
  • 57% of the same companies acknowledge that employees do it anyway.
  • 72% check email on their personal devices.
  • 42% check email on personal devices even when sick.

In fact, many US college students claim that they would accept lower pay for the flexibility to use personal devices at work.  Whatever the case the creeping cloud of BYOD will take hold, if only due to the cost benefits of not having to pay for new devices enabled by better enterprise apps and improved enterprise security.

I would posit that much of blame for limited uptake can be laid on the fact that organisations are simply unwilling to deal with the additional layer of complexity.  BYOD lies at the nexus point of enterprise trust:  their data in your hands.  How far are companies willing to let go of their information in order to reduce costs and increase productivity?  Will the law protect commercial interests in data rather just IP? Or computer based personal records?  In the case of Phonedog v Kravitz the employers (Phonedog) set up the Twitter account “@PhoneDog_Noah”, which the employee used “to disseminate information and promote PhoneDog’s services.”  During his employment, Kravitz’s Twitter account attracted approximately 17,000 followers.  When he left he kept using it and gained another 10,000 followers.  Phonedog claimed that the account was theirs and sued for damages.  The court was satisfied that an economic interest was established and that harm was done.

In brief, the answer is that companies need to define the touchpoints where their data meets the social sphere.  If businesses are to reap the benefits of increased customer/stakeholder management through wider adoption of emerging social software platforms, enabled by BYOD then they need to deal with the added complexity at the nexus point of security, legal and information management.

 

How will enterprise Architecture Reduce Legal Costs? Reply

In mid 2009 I received an e-mail from Mark Hurd, then CEO of Hewlett Packard.  This wasn’t unusual because I was at EDS UK and we all got an e-mail from our new CEO.  He wanted to explain that over and above the 26,000 people he was already getting rid of in the new enterprise there would be further reductions.

Why?

He went on to write that earnings were down 20% so his investors wanted to know when he was getting rid of another 20% of his workforce.  He went on to add that he was resisting their advice as it would hurt us on the rebound.

Clever Mark.

The point of the story is how one determines, precisely and effectively, what are the right parts of your cost structures are the ones to get rid of?  Typical commercial reasoning suggests that the best cost structures to cut are: headcounts, marketing, training, procurement and travel.  These are the easiest but you don’t have to be Lou Gerstner to realise that you shouldn’t cut marketing or travel in a downturn.  Pick up any edition of HBR and you’ll know that you need to focus on core business and cut the rest.

So how do we find core business and what on earth does it have to do with my legal costs?

Have you ever done a push-up?  What muscles do you think are used? Chest? Yep. Triceps? Oh yeah.  What about anterior deltoid? What about the supraspinatus or the infraspinatus or the teres minor? What about the teres major and the suprascapularis? These are all synergistic muscles in the push up that help hold your shoulder girdle stable and stop you toppling over to one side.  Likewise with business.  There are an enormous number of synergistic activities which assist core processes.

Don’t worry we’re getting to the bit about legal costs.

Your core business will be the fundamental raison d’être of your company.  For instance.  You might think that you own a network outsourcing company but when you ask yourself why your company really exists and what it seeks to really achieve, you might find the answer being that it transforms the customer relations of client companies? Now you need to determine what are all the essential processes which support transformation (which we’ll look at another time)After that one must discover the dependent, people, information, systems and infrastructure for these processes.

That’s the easy bit.

Now you need to architect it into some form of commercial reality and make it happen.  Once this beautiful strategy is executed in a new and improved operating model you will be left with a pile of paper which enshrines the agreements you have made with partners to make this reality.  Contracts – and they don’t come cheap.

Did you notice a theme?  I talked thereabove about the seamless architectural process which blends to bring synergy to the design and form of your new business.  The realistic amongst us will know there is always a great crash as the momentum behind any deal brings it into contact with the immovable object of the law.  The beautiful deal we created is then mangled through lawyers until what we wanted is barely recognisable.

What if this horrid legal process was an integrated part of the architectural process?  What if our business architects, our technicians and deal-makers were all joined in a common, collaborative architectural process which derived legal clauses directly from the technical and commercial detail of the deal?  Wouldn’t the contract then become a dynamic and fluid document which formed part of the management of the program?  Wouldn’t the contract(s) be lean, precise and swift to negotiate and put in play?

Welcome to Citadel, where enterprise architecture meets the law.

The Architectural Enterprise: financially lead capability development Reply

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There is one truism in the world of enterprise architecture, namely:  do not focus on developing the architecture first.  In other words, enterprises should focus on developing capability and not architecture.  Focusing on architecture can only ever gild the lilly. To focus on architecture first is to focus on systems first and not value.  To focus on architecture first is to focus on structures first rather than functions.

Enterprise architecture programs have received poor reviews in the past few years and most even struggle to leave the comfortable boundaries of the all-too-familiar systems rationalisation through data model interoperability.

Architecture, however, should not be the focus.  The focus should be value and the means to achieve this should be through organisational capability.

This bog is Part I in how to develop a comprehensive enterprise architecture program within an organisation, namely:  developing a capability portfolio.

STEP 1:  Value.

The best way to define value in an organisation or department is through variance analysis (so long as this is performed well and to at least 3 degrees of depth) in the relevant business unit.  In the Architectural Enterprise (the fictional enterprise built and run on EA guidelines) the specific variance would be referred to an Architectural Council to ensure that the variance was cross-referenced for dependencies and all the ‘noise’ was stripped away, i.e. personnel as opposed to role issues. The architectural team can now focus on supporting the process, service delivery or value activities.

Alliteratively, if the EA program needs to start more stealthily, then the ICT department may begin by cost-modelling the ICT budget.  The financial model needs to include 3-point estimates for all relevant costs.  Importantly, the higher bound is what the organisation does pay, the middle bound is what they should pay, and the lower bound (the 10% CI) is what they could pay.  This forces the team to not only to prep the model with uncertainty (for later simulation) but also to make sure that realistic stretch targets are imposed for projected cost reductions.

Once the model is run through a deep sensitivity analysis the team can then strip out all non-capability cost drivers, such as internal transfers, tax liabilities, interest and depreciation etc.

STEP 2:  Capability.

What is left are the most sensitive capability cost drivers.  The team now needs to make sure they focus on what is valuable and not just what is sensitive.  This is critical to ensure that the team doesn’t focus on low impact back-office ICT enabled capability but rather on high-impact, high-value operational capability.  The key is to ensure that an accurate value chain is used.

The best way to achieve an accurate value chain is to (a) develop a generic value chain based on industry baselines and then, (b) refine it using the firm’s consolidated financial returns.  The team should work with a management accountant to allocate costs amongst the various primary and supporting functions.  This will highlight exactly where the firm (i) derives its primary value, and (ii) along which lines it is differentiated.

Once the team understands these financial value-drivers and competitive subtleties they can now calibrate the capability-cost drivers with the value chain.

STEP 3:  Architecture.

Once the team has a short list of sensitive areas which are both architecturally weak and financially valuable they can then set about increasing the capability within defined parameters.

To do this, the team needs to create a parameterised architecture.  The architectural model has two facets: (a) it has capability components enabling it to encompass the dependencies of the area the team is focusing on, and (b) the capability components have attached values.

Determining values for model is oftentimes difficult.  Not all components of capability have easily defined financial parameters.  What value does the team place on information?  on processes? on services or even on task functions in certain roles?  Although this will be the subject of another blog the intangible aspects of capability must all affect the 100% of financial value.  For instance, a Role filled to 80% (due to shortfalls in the person filling the role) will not necessarily mean that the capability runs at 80%.  For a good set of capability coefficients the team can use the COSYSMO model elements. These coefficients allow the team to see how the overall cost is varied by differences in organisational capability.

Once the architectural model is built the team can adjust the parameters so that they achieve both the cost that they could deliver whilst making sure that they are also increasing overall capability, i.e. process output, software integration, role utilisation etc.

Whereas standard cost reduction programs reduce cost without accounting for the wider capability sensitivities, this methodology is able to model a capability financially yet cognisant of how intangible aspects support its overall enterprise value.

IN SUMM

Through this method the team is not only able to identify the areas requiring attention but they are also able to ensure that that costs are reduced without compromising overall business capability.  Moreover, the team will be able to do this whilst engaging with both the technical and the financial teams.

Most importantly, by focusing on capability and not architecture the organisation can hone in on not just on the hot-spots – because their will be too many to count – but on the valuable hot-spots.