Archive for August, 2012|Monthly archive page

Organizing for cloud computing

Many organizations we work with are diving head first into the latest IT game changer, cloud computing.  While a comprehensive technical and financial analysis is usually undertaken, few companies thoroughly consider the organizational implications of this strategic move. They do this at their own peril.  We have seen cloud computing implementations go astray when the wrong structures, processes and practices compromised the right technical solution.  Managers would be wise to consider whether their organizations are cloud-supportive before re-architecting their infrastructures.

In a traditional IT model, technicians, hardware and software are tied to specific geographies, departments and business units.  In most cases, this model fails to maximize operational flexibility and IT asset utilization.  A CC architecture, on the other hand, centralizes and virtualizes IT resources, making them available to all users when needed as needed. The result is greater operational agility, lower costs and higher IT scalability.  This fundamental change in the way IT is treated has major implications on a firm’s organizational system and culture.  For example, who controls virtualized IT resources and priorities in an ‘on demand’ environment? How do companies execute projects when assets and capabilities are decoupled from a physical location? And, what work practices are better suited for a more transactional and fluid CC environment? 

If they are to maximize the benefits of CC, business leaders must rethink how their enterprises are organized and run. Based on our consulting experience, we know the following areas are a good place to start:

Focus on tasks, not structure

CC’s rapid IT provisioning enables companies to be more flexible and agile, for example, in deploying new applications faster or responding quicker to market needs. However, many firms have rigid structures and processes that were developed in the era of static IT resourcing.  This traditional model is too limiting to effectively exploit the benefits of CC.  To be cloud-ready, managers should experiment with other organizational approaches that are more synergistic with the way CC works.   For example, an adaptive, SWOT-team structure and working style can more quickly respond to new priorities and deploy the resources and expertise needed to deliver on the business need.  The film industry is a good example of this kind of adaptive system; a wide variety of people and capabilities come together quickly at different points in the production process to execute on a creative concept and plan.  At completion, the people and resources go back to a central business unit or are dispersed onto other projects. 

Form follows function

In a traditional IT model, resources are usually structurally (if not mentally) “siloed” and linked to specific functions via non-standard workflows (i.e. processes)  Putting IT resources in the cloud decouples them from the constraints of a physical location, allowing them to be managed more centrally and deployed virtually.  As such, CC can help bring about the formation of a true Shared Service Organization, a structure that delivers key business benefits. For example, a capable SSO is essential to enabling the adaptive business system mentioned above – assuming good workflows are in place. However, Gary Tyreman, CEO of Univa, a leading supplier of Cloud Computing solutions, cautions that “to realize value, an organization must integrate its cloud-powered IT services into existing workflows.  Where those workflows are broken or non-existent, they need to be fixed and defined.”  Secondly, a SSO brings significant value including lower administrative costs, increased management control & standardization, and the possibility for greater organizational learning.  Finally, having a SSO allows IT managers to focus more on pushing the business forward as opposed to hoarding resources and building fiefdoms.

Collaboration breaks down barriers

The common business environment – hierarchical roles, non-standard processes, and department-based metrics – encourages employee practices that are ill-suited to the dynamic nature of CC. To best leverage the cloud’s capabilities, employees need to change how they work.  To begin with, the leadership must foster increased collaboration and alignment within the firm as well as with external vendors.  Examples of the changes required, include:  better aligning IT teams and vendors to overall business objectives (versus more parochial departmental goals); encouraging end-to-end project collaboration (versus point-in-process support); and placing greater importance on team and individual skills enhancement (to drive best practice adoption).  To make these changes stick, leaders will first need to get two things right in their management system.  One, project accountability should live with the business sponsor. Two, responsibility and authority must reside with the SSO leadership.

According to Tyreman, “For most companies, moving to the cloud is more an organizational challenge than a technical problem.”  Fully tapping CC’s potential will require enterprises to recast their structures, processes and management systems where appropriate. Though this may not be easy, it need not be scary. Companies that are open-minded, practical, and flexible will create the right organizational environment to fully leverage the Cloud.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

Another view: Strategy vs Implementation

This article is another in our series of guest posts by thought leaders.  Enjoy. Mitchell

There is a question currently circulating around that shouldn’t be and it is, “What is more important, strategy or its implementation?”

In the last 10 years the implementation of strategy has established itself as a field in its own right and since Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charanwas published, 2004 and Bricks to Bridges – Make Your Strategy Come Alive by myself, 2005, every year there has been a steady increase in the number of books being published on the subject.

A main reason strategy implementation has become a field in its own right is because of the high rate of strategy implementation failure. The statistic that nine out of 10 implementations fail, (which we published in 2002) has become a rallying call among leaders to change the way they have been approaching implementation. Today leaders know that applying traditional change management to execution does not work. It takes a conscious effort focusing on eight areas to achieve excellence in execution. The eight areas are:

Eight Areas of Excellence in Execution.

1. People   It is not leadership that implements strategy but people

2. Biz Case    The emotional and numerical rational for adopting the strategy

3. Communication   People can only adopt a strategy if they know about it and understand it

4. Measurement      Change your strategy, change your measures

5. Culture     You must change the day-to-day activities of your staff members and have a culture that support and fosters change

6. Process     There must be synergy between what you say you are going to do- the strategy and what you are doing – the process       

7. Reinforcement    You must reinforce the expected behaviors so that they are continuously repeated

8. Review    The weakest of the eight points among leaders – you must constantly review to make sure the right actions are being taken to deliver the right results

For the last 12 years we have researched strategy implementation and some of our key findings are:

  • Leaders habitually underestimate the challenge of strategy implementation
  • Leaders are taught how to plan not how to execute
  • Leaders frequently return to their offices after creating the strategy and left on their own to work out how to implement it
  • Successful implementation, though not rocket science, does take discipline and structure. It is about doing many right things
  • Many organizations end up back to business as usual within 12 months of launching a new strategy!
  • Implementation never goes according to plan
  • Implementation is a business differentiator.

In Mitchell’s July 18th blog “Strategy or execution?” he argued that he is also seeing a swing towards execution when there should not be. It is interesting to compare Mitchell’s experience based out of Canada and my own based out of Singapore. Our conclusion is the same. The current movement towards execution will slow down and within a couple of years there will be no discussion on which is more important, as both are required for success.

As Mitchell highlighted with his Southwest Airlines examples, they have outperformed their competition not only because they have a strongly defined strategy but also because they are excellent in execution.

A good strategy means that it is not only crafted well but implemented well. When an organization can achieve this the pay off is tremendous. With nine out of 10 organizations failing to successfully implement their strategy, it means for the one in 10 who gets it right that they have a very powerful business differentiator build into the organization’s DNA. Organizations like McDonalds and Ikea demonstrate this point. Both have shown above average returns through the last troubled five years. Even though McDonalds have competitors offering identical products, its ability to execute its strategy under the former stewardship of Jim Skinner, who is credited with turning around company over last eight years, made the difference. McDonalds was one of only two US companies that ended 2008 with an increase in its stock price. It achieve high performance by understanding its 58 million customers a day and customizing its menu to local tastes such as porridge for breakfast in the UK, soup in Portugal and chili in Asia.

Ikea has a business model that everyone knows but no one has been able to successfully copy. Why not, because Ikea executes the model better than anyone else.

A leader today must have the skills to both craft and execute strategy and over the next few years, universities and organizations will be offering courses on both. For example, Oracle includes a course on strategy implementation on its latest leadership development program in Asia Pacific, called “Leading to Win” and Singapore Management University offers a module on implementation as part of its executive training. Both of these examples provide what is so often missing in implementation, a framework. The framework guides leaders on what needs to be done to execute the strategy and identifies the right actions for individuals to take.

Leaders were taught how to plan in university but not how to execute. That is starting to change and as it does the debate between what is more important, strategy or its implementation, will quickly become obsolete, as it should.

Robin Speculand is Chief Executive of Bridges Business Consultancy Int and bestselling author. His latest book is Beyond Strategy – The Leader’s Role in Successful Implementation. His work begins once clients have crafted their strategy and ready to begin the implementation journey. Robin is a masterful event facilitator and an engaging keynote speaker. Visit www.strategyimplementationblog.com

For more information on Mitchell Osak’s strategy thought leadership and consulting services, please visit the Quanta Consulting Inc. web site.

Gold medal partnerships

These days, many companies are looking to build their brands, target new customers and launch new services using marketing sponsorships, outsourcing arrangements or business development alliances.  To do this, managers need to master partnership management with complementary firms, government agencies and non-government organizations.   Identifying the need for a partnership, however, is easier said than making one work. A myriad of issues can complicate key business relationships, including poor communication, misaligned objectives between the organizations, and weak integration between the entities.  

Our firm has identified a number of best practices around designing and implementing winning partnerships.  To illustrate these, we will look at two very different examples:  1) the Olympics and; 2) the software industry.

The Olympic Games

Recently, strategy+business magazine looked at the Olympics Games as a model for effective partnership management.  To successfully pull off the games, the International Olympic Committee must orchestrate a tightly choreographed dance of hundreds of sponsors, broadcasters and service firms. The IOC and its corporate partners have developed a world-class partnering model, based on the successful completion of many games (now including London) as well as a few painful experiences (think Montreal 1976).  Some of the IOC’s key learnings include:  

  1. Prioritize the brands

To maximize the value of the marketing sponsorships, all parties need to work closely to uphold the rules around brand usage and exclusivity.  Furthermore, corporate partners will drive better results when they have a clearly defined and powerfully articulated brand message that intersects the needs and desires of all stakeholders.

  1. Cultivate a few key relationships

Better outcomes are achieved by having fewer, deeper and longer term business relationships as opposed to more numerous, shorter term, and more superficial arrangements.  This ‘less is more’ strategy triggers each partner to invest more resources, capital and effort against longer term goals and to work more diligently through teething pains.

  1. Anticipate political pressure

The involvement of the public sector or a NGO usually brings some form of subtle (or not so subtle) political pressure that could run contrary to the financial interests of all players.  Managers should be aware of potential risks when structuring partnership deals and develop contingency plans to handle unexpected problems or political interference.

Software Industry

My firm was engaged to help a software company resurrect a stalled business development alliance with a global IT services firm.  Initially, the client thought they had the key ingredients – great technology and strong personal rapport at senior levels – for a winning relationship. We quickly discovered, however, through internal research that the partnership needed a structural, process and cultural tune-up to realize its potential. Three key lessons emerged:

  1. Align around common goals

At the outset, it is crucial that all players agree on what a successful partnership looks like, how it is evaluated and where their marketing and operational strategies converge to produce a mutually beneficial relationship. Not surprisingly, alliances based on similar long-term objectives & values, a ‘win-win’ deal and a ‘partnership mind set’ have a much greater chance of flourishing.

  1. Establish troubleshooting mechanisms

When disparate organizations come together, there is a good chance that modest disagreements and latent misperceptions could rapidly escalate to derail program implementation.  It is vital to deploy a high-level, cross-organization steering group that can quickly resolve issues before they can jeopardize the entire alliance. Moreover, this senior team can also support ongoing priority-setting and resource allocation.

  1. Foster intra-preneurialism

Rock solid contracts and detailed plans can not deal with all the demands and snafus that come with executing partnerships.  It is up to the ‘people in the trenches’ to make partnerships burgeon.  These vital individuals are most effective when they can act like intra-preneurs i.e. internal entrepreneurs.  To encourage these behaviors, key managers need a high level of empowerment, sufficient resources, and the opportunity to communicate extensively with their counterparts.

Some final and poignant thoughts come from John Boynton, Chief Marketing Officer, of Rogers Communications Inc. “Rogers prefers bigger partnerships. Bigger to us is a deeper, longer term, more integrated relationship. You know when you have a done a good job when you can’t tell who in the room is from which side. Getting one partnership or sponsorship to work on as many levels as possible provides a better return.”  To a prominent sponsor like Rogers, great partnerships are based on strong customer appeal.  “A lot of sponsorships don’t make sense to customers”, says Boynton, “because the target audience doesn’t line up in the “sweet spot”, or that companies choose the sponsorship based on profile or personal interests. Having a very tight overlap with the sweet spot and ensuring the sponsorship addresses the target customer’s “passion” are the keys.”

Despite the best intentions, many business partnerships will ultimately fail.   They need not.  Managers can follow a variety of marketing and organizational best practices to improve their odds of long term success.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.

The perils of offshoring

For North American companies looking to stay competitive, outsourcing some or all of their back-office business operations to India has achieved the status of dogma. However, in the past couple of years poor outcomes, changing cost dynamics and continued cultural challenges have swung the value and performance advantage back to North American providers in many cases.

The times they are a-changin’

Firms migrated operations to India to save money, focus on their core competencies, and move way from a fixed cost structure.  Today, faith in offshoring must be tempered by reason.  In the last few years, India’s significant advantages have yielded to some harsh economic realities.   New cost dynamics and the reality of doing business halfway around the world with a very different culture have reduced the attraction of offshoring many operations, particularly those in knowledge intensive industries.

India’s fading appeal

Four key developments, unlikely to dim in the medium term, are contributing to offshoring’s declining appeal:

Shrinking wage differentials

India’s primary advantage, low labour costs, has been steadily declining.  According to the U.S. Bureau of Labor Statistics, India’s average per-hour cost advantage in 2010 had shrunk to only 6-7 times U.S. rates versus 11 times the rate in 2001. This shrinking differential traces to a combination of Indian wage inflation and North American wage moderation.   If present trends continue, this gap could shrink to five times the U.S. rate by 2014.

Pervasive cultural challenges

India remains a culturally challenging place to do business; a situation unlikely to change in the medium term.  The differences–language, cultural mores, business practices–generate high indirect costs by introducing complexity, miscommunication and risk.  Furthermore, persistently high labour turnover in all Indian firms complicates attempts to close this ‘cultural gap’.

Higher than expected administrative costs

When they began outsourcing, firms understood there would be transaction costs — travel, communication, compliance and relationship management.  What virtually every company has experienced are administrative costs typically three times higher than their estimates and all tracing back to geographic and cultural challenges.  In some cases, these costs can make up close to 20% of the total project cost.

Increased business risk

Today, effective risk management (e.g., protecting intellectual property and sensitive data, business continuity) is a strategic prerequisite for many companies.  Lingering doubts remain that sensitive data and intellectual property sent over to India (or any other emerging economy) is as secure as it would be in North America.  Not surprisingly, some government regulations continue to prevent certain types of IP and sensitive data from leaving North America.  Furthermore, India remains in the center of one of the world’s most dangerous regions, with instability on all of her borders and inside to boot.

Case in point: IT services

IT services provide a good illustration of the challenges of offshoring. For the past 10 years, CIOs and professional services firms have enthusiastically offshored to India large swathes of their IT work in order to reap the advantages of lower wages and round-the-clock development.

In many cases, however, the promise has not kept up with reality.  India no longer possesses the same IT cost advantage versus innovative Canadian firms.  Alex Rodov, managing partner of North America’s largest dedicated software testing firm, QA Consultants, contends that “Canadian IT labour rates on average are no more than 20% higher than India’s.  After you factor in the high administrative costs, lack of visibility and hassle of doing business around the world, then our delivered costs are roughly equivalent.”  Secondly, India’s workers continue to suffer from poor productivity.  Despite working in modern facilities, most Indian IT workers (including recent grads) lack basic technical skills and rudimentary English language proficiency.  In fact, the Wall Street Journal has reported that 75% of India’s technical graduates are unemployable by their IT sector.

Finally, the integrated structure favoured by most Indian software enterprises — firms develop and test their own code — poses real quality and delivery risks. “This [model] often leads to poor outcomes.  Testing should never be done by the same firm and people writing the code,” says Rodov, “as they lack objectivity and independence.  Furthermore, when a project runs late or is over-budget, the same Indian firm will prioritize development, often cutting corners with vital testing operations.”

For many business operations the pendulum is beginning to swing back to North America. Many companies have done the math and now realize that some local providers can deliver better value and lower risk versus an offshore Indian solution. A forthcoming article looks will look at how innovative North American firms are beating the offshorers at their own game.

For more information on our services and work, please visit the Quanta Consulting Inc. web site.