Archive for the ‘Google’ Tag

The Internet of Things is here

We are entering the age of the “Internet of Things,” where sensors, computers and devices are connected in a self-managing ecosystem. At home, this could mean your alarm clock communicating with your coffee maker or your thermostat communicating with your window blinds. In business, this could mean your barcode scanners communicating with your suppliers or your assembly lines communicating with to your repairmen.

In other words, the Internet of Things automates an entire activity, such as building management, medical diagnostics, logistics or manufacturing.

For example, Apple has developed an Internet of Things ecosystem that enables various devices to communicate with each other with the express goal of one day “owning the living room.” Google is also aiming to enter the space by developing driverless cars and increasingly sophisticated remote home monitoring systems.

Some of the technological drivers behind The Internet of Things include: the rise of affordable, high-performance computing, the availability of inexpensive and accurate sensors, widespread access to high-speed wifi, the emergence of sophisticated algorithms and the ability to tie everything together through software interfaces.

The Internet of Things affords tremendous opportunities for increasing productivity, inventing new services and freeing up human capital to re-focus efforts on strategic rather than menial initiatives. Firms that are first movers in the space and that are able to develop the right business models will not only resolve big customer problems and cut costs but also recast the markets in which they operate.

In short: The Internet of Things is coming to every market that has been — or can be — digitized.

Case Study: Sahara Force India Formula One

Competing in the Formula One circuit is one of the most challenging and technologically advanced undertakings in the world. Increasingly, advantage goes to the team that can better leverage insight drawn from data generated in practice and during races to execute real-time enhancements to the car and provide critical information to the driver.

That’s why Sahara Force India partnered with Univa, a cloud-technology vendor, to create an integrated, closed-loop platform of sensor feedback, advanced data collection and analysis and on-the-fly hardware and software optimization.

“Sahara Force India is second-to-none in pushing boundaries to achieve speed, innovation and capability,” says Gary Tyreman, chief executive of Univa. “Leveraging the Internet of Things enables SFI to reduce development engineering time and money, and take in-race performance to levels which once were considered impossible.”

Here’s how it works: The Sahara Force India analytics team monitors and models car performance in race conditions, generating more than one terabyte of data over the course of a typical race. Trackside engineers and the driver then use insight derived from this influx of information to adjust things such as brake sensitivity and suspension, thereby improving car performance and informing seasonal development plans.

This raises an important point. The Internet of Things requires more than an investment in connectivity-enabled hardware and software. It also requires developing the human knowhow to manage, draw insight from and optimize the system based on the data that’s being captured.

How you can benefit from the Internet of Things

For many firms, the Internet of Things poses a significant threat due to its disruptive nature. For others, it stands as a significant opportunity to outflank the competition. But regardless of how each firm reacts to the rise of the Internet of Things, the fact remains: every company will be affected. This is because the need to serve customers better, faster, with greater ease and at a lower cost will invariably spur Internet of Things investments and strategies.

With that in mind, here are five things you should consider before implementing an Internet of Things strategy:

  1. List the current and emerging needs of customers, suppliers and distributors that your firm is not currently equipped to provide.
  2. Identify how an Internet of Things offering might address those issues and generate value within your enterprise and market. For example, you may want to improve your understanding of customer behaviour in order to improve service.
  3. Think more broadly about an Internet of Things offering than bottom line impact. How could it position your firm for future competitiveness?
  4. Consider your potential Internet of Things offering in terms of its key components: software, hardware and people. Can you leverage existing resources to cut costs?
  5. Analyze how your organization would need to be restructured in order to deliver a successful Internet of Things offering.

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

Internet of Things offering than bottom line impact. How could it position your firm for future competitiveness?

Consider your potential Internet of Things offering in terms of its key components: software, hardware and people. Can you leverage existing resources to cut costs?
Analyze how your organization would need to be restructured in order to deliver a successful Internet of Things offering.

Advertisements

9 steps to faster change

Changing the behavior of staff and partners is critical to business success; yet as much as 70% of change management initiatives fail. It would not be an understatement to say that poor change competencies have ominous consequences for a firm’s ability to remain competitive and financially strong.  Failure need not be a forgone conclusion.  Managers can improve their chances of success by heeding the latest research in behavioral psychology and emerging best practices.

Below are nine proven change management guidelines, based on our 20+ years of consulting plus thought leadership by Morten Hansen, a management professor at Berkeley, INSEAD:

1.  Keep things simple

Focus on changing one behavior at a time. When a company or individual has 10 priorities, it might as well have none. Research on multi-tasking indicates that people are more productive when they focus on one task at a time.  Moreover, when you want to modify more than one behavior, sequence the changes.

2.  Make goals actionable

Demanding vague or unrealistic change is ineffective and often de-motivating.  According to research on goal setting, targets need to be concrete and measurable to be attainable. The same goes with behavior. For example, “listen actively” is vague and not measurable. On the other hand, “paraphrase what others said and check for accuracy” is concrete and measurable. To ensure compliance, we ask employees to document the desired behavior and sign it as a pledge.

3.  Tell a compelling story, repeatedly

Regularly communicate a single, inspiring story across the organization. This “narrative” should resonate with a person’s brain (i.e. what’s good for them and the company) and their heart (i.e. its emotional or spiritual appeal).  Use stories, metaphors, pictures, and physical objects to paint a challenging image of “where we are now” and a better vision of “where we want to be.”

4.  Be practical

According to Diffusion theory, embracing a new behavior typically follows a diffusion curve — early adopters, safe followers, latecomers and malcontents. Managers need not try to change everyone all at once, just the key adopters/influencers who will prod cautious employees towards compliance. To begin, leaders should enlist a few early adopters to embrace the change.  Then, managers should find and convince the influencers, who will do their magic within their organizational networks.  These influencers are often not senior managers but people with many informal connections and lots of sway and credibility.Advertisement

5.  Activate the peers

According to Social Comparison theory, people look to those in their immediate circle for guidance for what are acceptable behaviors. Peers can set expectations, shame us or provide positive role models. We typically recommend companies establish change agents throughout the organization and encourage them to set expectations and respectfully put pressure on their co-workers. Companies can also utilize Gamification, an innovative and fun way to drive change compliance through employee game playing.

6.  Leverage leadership

All too often, change initiatives come up short when employees disengage after not seeing their managers “walk the walk.” In our change management efforts, we recommend that all leaders be consistently engaged through narrative development and implementation as well as modelling good behavior.  Of course, the leadership must proactively support the change effort by rewarding good behavior and censuring non-compliance.

7.  Tweak the management system

In many cases, organizational policies (e.g., performance measures, compensation schemes, etc.) are barriers to change.  Managers should identify and remove these potential roadblocks in advance of launching any change initiatives. As well, managers should promote good behavior by changing the hiring, promotion and firing criteria.  Be mindful, says Dan Pink in his book Drive, that extrinsic rewards (e.g., pay increases) only work when you try to change non-creative behaviors.

8.  Change the situation

Behavioral Decision theory says that adjusting the situation around a person can trigger change. As an example, Google’s aim was to promote healthier eating among their employees. Using the cue that people tend to grab what they see first, the company stationed the salad bar in front of the room. Google promotes behavioral change, not by telling them directly (eat salad!), but indirectly, by shaping their choices.

9.  Don’t neglect coaching

Many change initiatives require the individual to take on new skills or behaviors that are alien to them.     Especially difficult are behaviors with a high tacit component (e.g., listening better). In these cases, using sticks and carrots will not always work or be appropriate. To ensure sufficient change momentum, firms should provide teaching and coaching facilitation as needed.

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

Best practice innovation? Google vs Apple

Companies looking to ignite their innovation engines have two admirable models to emulate: Google and Apple.  Both firms have used innovation to become wildly successful market leaders. Their cutting-edge innovation strategies infuse all facets of their business, from product functionality and operational practices to business model design. At the same time, Google and Apple epitomize two different approaches of fostering and implementing innovation. 

Google

Google’s vision is about using the power of internet technology to enable business, operational and product innovation.  Inspired by its own experience as a lean Silicon Valley start-up, Google’s model relies on bright and passionate minds, rapid experimentation and immediate market feedback to develop innovations. New products and features are quickly introduced online, refined and then re-launched.  At any one time, there could be dozens of innovation projects under way, many of which could be disruptive in nature such as its self-driving car.

Unwilling to rest on its laurels, the company’s mandate is to continuously improve its search, advertising marketplace, e-mail and other services, based on how people use its offerings.  Google’s approach could best be described as bottom-up: customers become partners in product design and operational enhancements through their immediate testing and feedback of new innovations.

The key components of this strategy are employee experimentation, data-driven decision-making, online testing and networked communications. Powerful web tools bring the market inside the firm, enabling crowd-sourced collaboration as well as the rapid prototyping of product ideas.  Furthermore, many employees must commit a certain amount of time to germinating new ideas and creative problem-solving.

Google truly understand Internet economics – rapid software testing, powerful network effects and low cost product distribution – so it can expend relatively modest amounts of time, money and risk to launch new projects. This innovation model is ideal for the development of Web-based products as well as the creation of blue ocean markets like Internet software, online commerce and mobile applications.   

Apple

Apple pursues a very different innovation strategy.  Though networked communications and marketplace experiments add useful information, breakthrough ideas and the fortitude to sustain them come from passionate individuals, not committees or thousands of beta testers. As compared to Google, Apple’s innovation model is more edited, intuitive and top-down.  “There is nothing democratic about innovation,” says Paul Saffo, a veteran technology forecaster  in Silicon Valley. “It is always an elite activity, whether by a recognized or unrecognized elite.” The customer plays a minor role in the early stages of innovation. When asked what market research went into the company’s elegant product designs, Steve Jobs had a standard answer: none. “It’s not the consumers’ job to know what they want.” 

Apple’s more directed approach is also a function of the business that it’s in. Apple’s physical world is far different from Google’s realm of Internet software, where writing a few lines of new code can change a product instantly. Apple must consider a multi-year technology and supply chain roadmap for its products, with new models expected regularly from its zealous users.   Furthermore, the careful melding of hardware with software – a vital differentiator for Apple’s products – is a challenge with multidisciplinary systems design that must be orchestrated by a firm, guiding hand. 

Much of Apple’s impetus for innovation comes from the legacy of Steve Jobs as well as the senior leadership he recruited.  Their job is to harvest a variety of Apple’s information-gathering networks for ideas and inspiration.  As such, top managers need be excellent synthesizers of information ranging from popular culture to semiconductor design.

On average, Apple looks to innovation to deliver product and operational home runs.  The Company tends to put considerable resources and thinking behind a few big ideas and then implement them with excellence and fanfare.  Other vital functions such as product supply, marketing and customer service play a critical role in ensuring new innovations are fully exploited.

Which approach works best?

It depends on how you measure success and shareholder value.  The better question may be:  is there one best approach to innovation?  My experience advising firms with their innovation strategy suggests that combining the best and most practical aspects of each approach will yield the best results. According to Saffo, fostering innovation requires “an odd blend of certainty and intellectual rigour and openness to new information and new ways of thinking” In other words, it should be a blend of top-down guidance and bottom-up discovery mixed with a dash of open innovation tactics.

Open innovation sesame

Both organizations have not been shy leveraging external sources of innovation.  Apple discovered its point-and-click mouse and graphical on-screen icons (which later became the standard for the personal computer industry) in 1979 at Xerox.  In 2010, Apple purchased Siri, a small Silicon Valley start-up, for its talking iPhone question-answering application.  Siri was originally a program funded by the Pentagon. In 2009, Google launched its Google Ventures program, a comprehensive open innovation platform.  Google Ventures includes a start-up university and innovation lab – places where entrepreneurs can develop their products, collaborate and tap into Google employees.

Though Apple and Google may pursue very different paths to innovation, they do share many innovation-enabling attributes such as a nurturing culture and management system.  Moreover, the gap between their two models may be shrinking somewhat. Recently, Google moved toward a top-down approach by culling a diverse collection of more than two dozen projects. Steve Jobs’ replacement, operational expert Tim Cook, will almost by default be more of a bottom-up leader than his predecessor. Ultimately, both models may end up converging.

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

When business opposites attract

In business as in personal relationships, opposites do attract. Companies possessing different markets, capabilities, technologies and products (MCTP), which on the surface bear little resemblance, can share some “thematic” similarities (i.e. synergies) which can open up intriguing business opportunities.  These opportunities could range from leapfrogging into new markets and preempting competitive threats to leveraging complementary product technology or augmenting internal capabilities.   Very often, thematic similarities are missed by industry experts who view MCTP through traditional analytical frameworks or by the barriers imposed by management systems. To outflank competition, managers would be wise to recalibrate their product and strategic planning methods to include thematic analysis. 

In a recent edition of the MIT Sloan Management Review, Professors Michael Gilbert and Martin Hoegl outlined the importance of a dissimilarity-based planning framework.   According to the authors, most managers implicitly use a conventional taxonomic paradigm to understand their competitive position.  A taxonomic way of thinking looks at the degree by which a company, product or technology is similar (i.e. complementary, congruent or synergistic) based on how many features or characteristics they share in common. Taxonomic similarity underpins many popular management classifications including the Standard Industry Classification (SIC) codes – which defines industry boundaries – and the International Patent Classification system – which categorizes different types of patents.

Many firms understand that they may be overlooking opportunities and threats by only using a taxonomic style of business analysis.  With the help of advanced innovation techniques and cognitive psychology, managers now have a new approach – thematic similarity – to uncover strategic opportunities. Thematic similarity is about how two disparate characteristics functionally interact within the same event to create synergistic value. 

Thematic similarity looks beyond surface taxonomy similarity of with how things do interact to how things could interact. Thematically similar companies, products and technologies tend to be taxonomically dissimilar. For example, GPS technology and automobiles perform different roles but are thematically congruent within the driving experience.   Done properly, thematic analysis can be a powerful tool for addressing customer needs, improving operational performance and enhancing competitive position.     

Understanding MTCP at the thematic level is not always easy.  Most strategists are not trained or encouraged to think thematically.  Compelling opportunities are often hidden and difficult to weave together.  As a result, finding and exploiting thematic opportunities can often take some time. For example, it took smart phone manufacturers (Apple’s iPhone to be exact) 6 years to integrate 2 location-focused technologies, GPS and digital cameras, into their products.

There have been many examples of winning dissimilarity strategies,  two of which include: 

Intel purchases McAfee

Most industry pundits were baffled by chip giant Intel’s 2010 $7.7B acquisition of McAfee, a leader in anti-virus software.  Both firms compete in two dissimilar markets with two different strategies etc. While being taxonomically dissimilar, these firm’s MTCP enjoyed a high level of thematic similarity.  Intel claims that acquiring McAfee will dramatically enhance its presence in the mobile wireless space, a rapidly growing market of internet-connected devices that increasingly is being driven by security concerns and requirements.

Launch of Google Maps for Mobile

At first glance, Google Voice Search and GPS technologies have little in common from a taxonomic perspective.  However, in the context of cell phone usage both these tools provide significant value for someone looking for a Starbucks or checking movie listings in their hometown.  Google understood this thematic similarity and launched Google Maps forMobile in 2008.  This product has enjoyed strong user reviews and has helped boost advertising revenues.

How do you enable thematic thinking in your organization?

1.  Follow your mission and vision

A powerful mission and vision can inspire thematic thinking. If you don’t have one, develop and communicate an inspiring yet pithy credo that focuses on the customer yet places no artificial boundaries around how you serve them.

2.  Unleash the staff

Employees need the time and tools to think thematically.  Highly innovative firms like Google and 3M stipulate that each employee spend a designated amount of their time on blue-sky strategic thinking and problem-solving.   To unlock thematic thinking, companies can leverage proven innovation tools like simulations, brainstorming and thematic-driven training

3.  Bring in new blood

New perspectives can challenge analytical dogma and catalyze thematic analysis.  Institute recruiting policies that actively search outside the industry and foster employee diversity.  Internally, rotate people through different departments – especially sales, service and product development – so they are able to see the business through multiple lenses.

4.  Remove organization barriers

In many cases, management systems, structures and processes reinforce traditional thought patterns and habits. Organizations should look to align thematic approaches with a firm’s incentives, processes, and strategic planning methodologies.  Measures could involve including R&D experts in strategy development, involving external consultants in planning exercises or bringing customers directly into the product development process.

A thematic-based planning framework can deliver breakthrough business strategy and product innovation.  This approach, however, will have important implications on how companies deliver on customer needs, design their internal systems, leverage technology, and pursue M&A deals.  The first phase begins with the leadership team setting ambitious goals, rethinking their business and understanding what their customers truly want.

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

Breakthrough with business model innovation

Many companies find themselves in situations where following the ‘same old strategy’ has little chance of reigniting growth.  Realistic CEOs will quickly come to the realization that when the going gets really tough, the tough innovate their business model.  Business model innovation is a high reward/high risk move that is normally preceded by a financial crisis, the emergence of a compelling market opportunity, or a fatal decline in competitive position. 

Some of the World’s most successful companies – IBM, Amazon, Apple and Google etc – have gained a sustainable competitive advantage and industry-leading shareholder returns by moving boldly away from their traditional business models.  To successfully navigate a shift, leadership needs a true picture of their current prospects, a vision for the future and the perseverance and courage to shepherd major change.

BMI is a fancy term to describe company-wide innovation around i) the value delivered to customers and ii) the operating model to deliver that value.  As compared to incremental product and operational innovation, BMI is a more encompassing and complex form of innovation.  It impacts the core beliefs around the business and market.  For example:    

  1. Do the targeted customer segments have unmet or emerging needs?
  2. What is the ideal product/service mix to satisfy these needs and maximize revenue?
  3. What is the most profitable operational model to deliver this value? 

Disruption is coming

Many factors can contribute to an environment where a company would seriously consider revamping its business model.  Markets can become commoditized, resulting in zero profitability for most of its players; a firm’s cost position can become untenable; a technological breakthrough can provide opportunities to serve users in a completely new and powerful fashion or;  a new regulation creates the potential for the industry structure to change.  Bold and visionary leaders who are prepared to make major moves can reap considerable benefits.

Superior returns are attainable

Properly designed and executed, BMI is a proven business-building strategy.  Research from the consultancy BCG has shown that total shareholder returns versus peers for BMI was five times higher than product or process innovation (8.5% vs 1.7%) over a 3 year period and over 55% higher (2.7% vs 1.7%) over a 10 year period. In many cases, BMI practitioners have leapfrogged competition and carved out new market space.   

Your move

Companies often pursue BMI for defensive reasons.  In many cases, however, leaders may choose this strategy in order to change the rules of the game.   BCG studied the implementation of BMI in a variety of industries.  Below are 3 success stories:

1.  Beating Back Competition

In an effort to compete with a successful low-cost airline, Virgin Blue, Qantas launched a new, ultra low cost airline, Jetstar.   Structured as a separate division with a business model designed from the ground up, Jetstar was effective in blunting Virgin Blue’s share growth while providing consumers with a unique and customizable flying experience.   

2.  Reigniting growth

By 2001, Apple’s proprietary and closed approach to hardware and software development had relegated the company’s PCs to niche shares.  By leveraging its unique and compelling core capabilities and brand, Apple was able to create entirely new categories of consumer electronics and smartphones through the iPod and iPhone platforms.  As well, Apple used its proprietary advantages and outsider status to establish the de facto standard for fee-based music downloading, a model that had evaded the music industry for years.

3.  Extending the business model

Ikea discovered, through its experience launching stores in Russia, that the land value surrounding its new outlets would appreciate markedly following a store opening.  The company decided to capitalize on this happenstance by leveraging its brand and real estate competencies to develop adjacent malls.  Ikea’s new division, Mega Mall, now makes more profit on building and managing malls than it does through its retail division.

Making BMI work

Organizations considering BMI need to ensure they have the capability to design, plan and implement a major transformation.  The challenge of pulling this off must not be underestimated.  Experience is usually scarce as firms do not often retool their businesses.  Moreover, BMI is typically undertaken in times of internal stress, limited resources and competitive pressure. For company’s considering BMI, they would be well served  to use a proven approach to transformation.  Our firm deploys this simplified 4-step process:

Know thyself

  • How urgent is the need for change?
  • What are our strengths and weaknesses?
  • Are there any assets that can be extended beyond the core business? 

Uncover opportunities

  • What gaps exist between the current value proposition and delivery model, and industry trends, underserved customers needs/preferences and relative industry competitiveness?
  • What new offering, value proposition and operating model can address the gaps?
  • How do you generate high margin revenues?

Align

  • How do you reorder the value chain?
  • What resources – capital, talent, assets, information – are needed?
  • What is the impact on the organizational structure and culture?

Implement

  • How do you mobilize the organization to change?
  • How do you deal with barriers and risks such as customer retention?

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

Cyberwar is here but are corporations prepared?

A recent article in Foreign Policy magazine is a wake up call for companies who are unaware of a cyberwar being waged right under their noses.  According to the author Joel Brenner, a retired intelligence official from the U.S. National Security Agency, criminals, hackers and terrorist groups are using the internet to target a variety of industries including IT, financial services, defence and electronics.  These attacks are launched for a variety of reasons including financial gain, IP theft, political disruption or merely just for kicks.  Cyber risks are rising so managers will need to understand and accept this reality and better prepare their organizations for inevitable disruptions.

So far, cyberwar has claimed many victims, some public but many private.  Most risks fall into two general areas:  information & IP security threats and operational risks

Information & IP security threats

Most weeks features disclosures of electronic fraud and massive data heists. For example, Sony’s PlayStation Network was hacked (apparently through its Amazon Cloud infrastructure), compromising the personal information of more than 100M customers.  In another case, cyber thieves stole $9M in just a few hours by breaking into an international bank, creating counterfeit credit balances and looting ATMs across 4 countries.  There is nowhere to hide from these threats. According to Brenner, “international gangs spread malicious code that conscripts unwitting computers into zombie armies of hundreds of thousands of similarly enslaved machines.”

Cyberwar pays.    It is often cheaper and easier to steal IP than it is to painstakingly develop it.   Brenner sees corporate espionage by both competitors and foreign intelligence services (or their surrogates) increasing. For understandable reasons around maintaining confidence and not admitting vulnerabilities, government officials are reluctant to speak openly on specifics while victims will rarely admit they have been targeted. Yet, two companies have gone public.  Google acknowledged that a 2009 Chinese government cyber attack was about stealing their market-leading source code.  Brenner asserts that thousands of other U.S. and Western firms were targeted by the same Chinese attack.  In another case, Oracle publicly admitted and successfully sued SAP for stealing some of its software. 

Operational threats

Virtually every company’s operations are susceptible to national infrastructure and supply chains disruptions.  Operational vulnerability has been illuminated by the impact of the Stuxnet computer virus on the Iranian nuclear program.  Having been introduced remotely or embedded in the firmware of the industrial control systems, Stuxnet caused the uranium centrifuges to go haywire, resulting in a major setback to the program.   While good news for world peace, this case exposed the harsh reality that operational espionage is a major threat to highly automated and capital intensive operations.  While it is believed only a top-notch intelligence agency could have developed the virus,  the code itself is now public increasing the possibility of copy cat attacks.   For every Western organizations, the national and trans-national infrastructure is the nexus of vulnerability. Attackers have numerous soft targets including the electricity grid, air traffic control, energy pipelines, water and sewage systems and railroad switches.  These systems are mostly electronically controlled and networked.  If an intruder can break into the right server electronically, he/she can remotely shut down production, redirect goods to the wrong location, and even unlock shipping doors – while leaving no record of ever having been there.

Western companies face a wide variety of cyber threats from all corners of the globe and within their own societies.  According to Brenner, seized al Qaeda computers have contained details of U.S. industrial control systems. A variety of terrorist groups have plotted attacks on the Australian and British electricity grids over the past 8 years. Countless numbers of individual hackers and small gangs regularly look to penetrate poorly defended IT infrastructures.  In fact, criminals can easily rent cyber weapons online, called “botnets,” to attack web sites.

How can managers deal with the onset of cyberwar?

  1. Acknowledge that their firms face serious operational vulnerability in an inter-dependent and wired world.   Organizations need an objective and realistic assessment of which assets, data and IP can and should be protected.  Moreover, managers must look back through their supply chains and equipment suppliers to understand the full impact of cyber disruption.
  2. Accept that risks cannot be eliminated, only managed.  As operators of over 80% of the IT infrastructure, it is the private sector who owns this vulnerability;  they can’t depend on a distracted, heavily indebted government to save them. Furthermore, companies must reconsider their primary focus on efficiency and invest more in operational redundancies in key areas such as business continuity measures, IT & communications support and data storage.    
  3. Understand that technology is only one, albeit the most obvious, aspect of the cyberwar challenge. Unless technology risk mitigation is integrated with people, process and operational elements, firms run the risk of not closing every window of vulnerability.

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

The danger of common sense

A recently published book by sociologist Duncan Watts, ambitiously titled:  Everything is Obvious Once You Know the Answer:  How Common Sense Fails Us may turn more than a few executive heads.  This thought-provoking book challenges the universal belief that management decisions based on common sense – rooted in best practices, hunches and experiences – often lead to the best outcomes.  According to the book, the reality ends up being quite different.  Relying too much on common sense often leads well-intentioned and intelligent people to make poor strategic and tactical decisions in areas such as capital investments, product introductions, new market entry and advertising decisions.

Watt’s supposition is that people give too much credence to their prior and accumulated experiences, history in general and what they perceive as best practices when making decisions.  According to the research, a person’s common sense is faulty for a number of reasons:  it contains intrinsic bias; it is based on unproven or wrong assumptions and; it is too difficult to deduce clear-cut conclusions and action steps from an environment that is overly complex or unclear. 

Most people are hard-wired to depend on common sense on a daily basis. Once they recognize the outcome of a decision, all humans are biologically and psychologically programmed to rationalize why it has occurred.  This rationalization causes the individual to begin constructing their own paradigm of common sense which in turn is used to make decisions. 

Relying on common sense for decisions or to make predictions has dangerous implications.  For one thing, reality is usually very different from what was first imagined.  The future is quite complex and rarely reflects the same conditions that earlier decisions were based on.  As a result, it is highly unlikely positive outcomes will repeat themselves if the individual relies solely on history.  In my consulting experience,  the higher degree of uncertainty around a decision or potential outcome, the more likely senior executives will rely on subjective criteria like common sense or best practices as a basis for decision making.

If managers can not rely on common sense to guide them, how are they to make important decisions? 

Encourage contrariness

Organizations need to actively seek out contrary opinions and analysis, whether from internal or external sources, when facing key business choices.  To minimize bias and address informational blind spots, external experts should report directly to the management team or CEO.  Famously, the CIA undertook an external “Team B” analysis of the Soviet Union in the 1970s in order to better understand the nuclear threats facing the U.S.   

Shorten the action-reaction loop

Faster and more extensive customer and partner feedback reduces the need for companies to rely on subjective rationalizations like common sense.  Importantly, new technologies and tools such as CRM and social media can help by limiting uncertainty and delivering critical information to the decision makers.

Experiment

Dynamic companies like Google and Capital One often run quick and dirty pilot programs in order to gain concrete market data, gage the environment & competition and challenge internally held assumptions.

Put common sense in context

Experience and other intuitive factors can play an important role in making routine and mundane decisions where the likelihood and risks of failure are low.  Where the decision is strategic or involves sizable capital outlays, a more objective, fact-based approach would be best.

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

 

Are you ready for Cloud Computing?

Over the past few years, few technologies have been hyped as Cloud Computing.  According to the pundits and early adopters, CC is transforming the face of corporate IT at the same time as delivering compelling business value.  Simply put, CC is a suite of enterprise-level technologies that enables organizations to draw their computing power and data from a separate and centrally managed pool of compute resources including servers and software licenses. CC has a compelling basket of benefits for firms of all sizes in all industries.  Company’s can significantly reduce IT operating costs and increase server utilization.  Additionally, CC can enable a more agile and scalable computing infrastructure that better aligns IT to business requirements, including reducing new product time to market.  Importantly, CC allows firms to focus on its core mission of delivering goods and servicing customers while outsourcing a big chunk of their IT (read: fixed costs and headaches) to experts.   

Currently, there are many business functions delivered through a cloud, from CRM (salesforce.com) to messaging and collaboration (Google Apps) and high performance computing (Amazon Web Services). Not surprisingly, all the IT heavyweights including IBM, HP, and Microsoft have committed billions of dollars to marketing a plethora of products and services.    No wonder Gartner, an IT research consultancy, named CC the second most important technology focus area for 2010. 

Yet, CC has received a couple of black eyes recently arising from security breaches at Amazon and Sony that impacted millions of users.  And, there remain important challenges to fully exploiting CC’s potential.  Not all first generation initiatives have met expectations.

Given its young age, it is not surprising that CC carries a variety of definitions and connotations.  For the sake of clarity, I use the US Department of Commerce’s National Institute of Standards and Testing definition.  NIST defines 5 characteristics of cloud computing:

  • On-demand, self-service computing – allows business units to secure the resources they need without going through internal IT for servers and licenses;
  • Broad network access – enables application to be deployed in ways the business operates such as mobile and multi-device;
  • Rapid resource elasticity – provides for quick resource scalability or downsizing depending on computing needs;
  • Compute resource pooling – enables computing resources to be pooled to serve multiple consumers;
  • Measured service – allows IT usage to be measured like a utility and charged back to users according to demand.

How do managers determine whether this technology is right for their business?  Our firm has developed a quick and dirty checklist to test a company’s cloud readiness: 

  1. Are your revenue-driving business applications hampered by inadequate computing power?
  2. Would significantly quicker resource availability enable you to reduce time to value with new products and key operational initiatives? 
  3. Are your operating units and managers always fighting for more IT resources?  
  4. Is your business environment characterized by unexpected surges in demand? 
  5. Is IT redundancy an important risk mitigation strategy? 
  6. Do new or short duration business projects have difficulty “making the cut” for IT priority? 
  7. Are server, software license and data center costs rapidly out-pacing profit growth? 
  8. Are you frustrated with the flexibility and responsiveness of your enterprise IT infrastructure?

If you answered yes to only 4 of the above questions, your business is being seriously impacted by IT constraints and higher than necessary operating, hardware and software costs.  A compelling business case for CC exists and a pilot program should be investigated as soon as possible.

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

Failing Smart Drives Innovation

When it comes to launching innovative products or programs, failure is one word few executives want to be associated with.  But in reality, failure can be a significant catalyst for innovation.  The key lies in how the organization treats the failure and then learns from it.  Benefiting from failure is more than a cliché; there is solid academic thinking and corporate experience that backs it up.

Baba Shiv, a Professor at the Stanford Graduate School of Business, conducted research at how people deal with failure.  According to Shiv, all organizations consist of two types of people.  The type 1 mindset is fearful of making mistakes and is risk-averse.  They associate failure with shame and pain. Most individuals within corporations display type 1 thinking. In a firm dominated by type 1 personalities, innovation is generally nothing more than incremental change. Conversely, the type 2 mindset is fearful of missing out on opportunities. For them, failure is not viewed as bad; it can actually be helpful. From so-called “failures” emerge those “aha!” moments of insight that propels forward the innovative process and leads to breakthrough change.  

Outside of overhauling the employee base, how can companies make the shift towards a type 2 mindset?

Use rapid prototyping

One approach to overcoming risk-averse behaviors is to engage teams in rapid prototyping – a process whereby brainstormed ideas are quickly developed into a physical model or a mock-up of a solution. Moving rapidly from concept to something more concrete allows individuals to visualize the outcome of their ideas as well as more richly engage customers or other parts of organization.  Since few prototypes end up as the final solution, rapid prototyping teaches that failure is actually a vital part of the process and not a negative outcome. This rethink helps the brain associate “failure” with more positive emotions and propels forward the course of innovation.

Rapid prototyping is a powerful tool but it has its challenges.  For example, individuals may become wedded to certain prototypes and be reluctant to jettison them.  Moreover, working through multiple iterations can end up being an exhaustive practice.

Provide a license to fail

Companies like P&G, 3M and Google expect and often want poor concepts to fail as quickly as possible. Their management systems are designed to filter out poor or unrealistic ideas while providing additional resources to support higher potential concepts.   These firms also create an innovation culture based on trust, open communication and critical thinking.  They do not penalize failure but expects individuals and the firm to learn from it.  Understanding that breakthroughs are often unexpected, environments like this allow and incentivize scientists and line of business managers to reset their assumptions around the concept or technology, either reframing its appeal or helping it be leveraged to other solutions. 

Institute Desperation

A powerful yet reluctantly deployed strategy towards institutionalizing type 2 thinking is to implant a sense of “desperation.” The two most common ways to trigger desperation is by cutting resources or reducing lead times.  When an atmosphere of desperation is created, individuals are forced to be more innovative to achieve their goals.  In other words, necessity becomes the mother of invention. In one example, Anheuser-Busch InBev successfully uses desperation by reducing advertising budgets to drive media effectiveness and efficiency. Following a period of desperation, the team is spurred to look at new, less expensive ways of communicating its message. 

In most companies, managers use strategies that are opposite to desperation, such as inspiration, incentives and incubators, to stimulate innovation. Conceptually, this approach makes sense but it often doesn’t work in practice. While innovation is often stimulated, its path usually ends at the desk of a risk-averse type 1 manager. Furthermore, fostering desperation can be a risky endeavor.  Individuals may never come up with the desired solution or results.  As well, a sense of scarcity can incite internal strife.

It is time organizations relooked at their approach to innovation. The sooner firms realize that failure is not bad, the quicker they will be on their way to breakthrough innovation.

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

Getting Cloud Computing right

Few technologies have received as much hype in the past couple of years as Cloud Computing. Virtually every major IT provider such as Amazon, Google, HP, Intel and IBM is now aggressively promoting their new CC services. Despite the excitement, business adoption has been slow for mission-critical production applications within traditional large IT buyers like financial services, healthcare and manufacturing.

Simply defined, CC is a range of enterprise-level technologies that enable organizations to draw their computing power and data from a centrally managed internal or external pool of compute resources including servers and software licenses.  Acting like an electrical utility, a Cloud can supply users (Companies, operating units and individuals) computing resources as needed, when needed.  In an ideal situation, CC enables organizations to reduce or defer the purchase cost of expensive hardware and software assets, accelerate application performance at peak load periods and drive up overall IT utilization – which for most firms languishes at around 25% of potential capacity.  Importantly, CC also enables companies to move to a more flexible, scalable and efficient IT pay per usage model also known as Software-as-a-Service (SaaS).

CC and its predecessor Grid computing have been around for over 20 years.  If the Cloud is going to move beyond niche applications into the mainstream of business computing, it will need to overcome some important adoption challenges, as follows: 

Standards confusion

Although slowly emerging, there are still a plethora of competing standards that inhibit a quick and low risk adoption of CC.  For example, there are competing standards in the critical areas of IT infrastructure components, security, identity and system interfaces.  CIOs need to ensure their CC adoption plans and technologies are readily aligned with standards as they are set, even if they do not represent the best technology at this moment.  One simple step would be to follow the Open Data Center Alliance, an independent consortium comprised of leading global IT managers who seek to provide a unified vision for long-term data center requirements.

Organizational challenges

CC adoption continues to be stymied by (often hidden) organizational barriers such as who controls IT resources and how is IT linked to business priorities.  Furthermore, ongoing concerns around computing resource availability, external cloud viability and data privacy often make CC a difficult to sell to the business unit owners.  Because of its revolutionary nature, organizations must treat CC like it would any other transformational project.  This requires using change management methodologies, right sizing the organizational structure to reflect new mandates & roles and using pilot projects to build internal support and generate key learnings.  Gary Tyreman, CEO of Univa a leading Cloud Computing provider, says:  “While Cloud looks like an easy way out, one needs to begin by connecting the project to a strategic imperative, orderly define a starting point, identify low hanging fruit and create the white space for the team to make this happen.”

Market confusion

Given its short history, its no surprise that there is considerable market uncertainly and bewilderment over what is CC, how are solutions best deployed and who really can deliver on its promise.  In fact, almost every IT provider of consequence now promotes a CC and SaaS capability. This market clutter has created an adoption barrier for many firms. Despite this clutter, there are more than enough success stories for firm’s study.  “There is now a compelling business case for the Cloud and enough proven case studies across many industries to speed implementation and reduce business risk,” says Tyreman.    

Lack of IT transparency

Many CIOs lack sufficient visibility into their IT infrastructure and operating units to understand which business applications and cost centers represent the best opportunities to deploy CC.  One of the most important first steps to moving to the Cloud is to understand what IT assets firms have, how they are used and where is the cost (hardware, software and operating). 

Given its transformational value and record to date, CC is on the cusp of crossing the adoption chasm in 2011.  Although they need to do their homework, CIO’s should look deeper into how CC can reduce their cost and improve business performance.

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