The Digital Competitive Advantage Of Organizations

Positioning strategically IT within the Enterprise is at the heart of many CIOs concerns. In these turbulent times, it is not uncommon to see  IT relegated to its sole cost element. Conversely strong signals exist to prepare companies for growth. Here is the opportunity for CIOs to reap the benefits of  the situation and identify the Digital Competitive Advantage for their organizations.

Making a board to acknowledge the value of IT has always been a difficult exercise for CIOs. Current economic pressures and global uncertainty makes it even harder. The current cash flow focus challenge any investment with a short term view, exposing potentially the company to future risks. Conversely we need to admit that this systematic questioning of where we spend has value and lead to the critical Quest of : “What are these Strategic/Core Resources we should be protecting?”

Time To Change

For many reasons, most of IT organizations elude this question and focus on the cost/quality of service ratio. It is now time to challenge our approach and offer our business different perspectives. “What are our core IT resources that will provide sustainable competitive advantage? ” – “What type of resources should we leverage: Organizational, Process, Technology” – “How do we define Core?” These questions should be fully integrated in the screening process of any IT related investment process and spend analysis.

Defining Core/Strategic Resources

It fits with the “Resource Based View of the Firm” introduced by Wernerfelt B. in 1984 and how Valuable, Rare, Inimitable and Organized (VRIO) a resource can be. A core resource should answer all of these criteria.

A resource is Valuable if it helps the organization meet an external threat or exploit an opportunity. Rare if it is not widely possessed by other competitors. Inimitable if it is difficult for another firm to acquire it or a substitute something else in its. place. Organized if the firm is able to actually use it.

What is it about IT?

Most IT organizations have articulated their strategy (see “Is There Such Thing as IT Strategy Anymore?“)around the value IT witch fulfill the first criteria of (V)RIO, but let the others on the side. Value is driven at the pace of economics, and objectives like efficiency, quality, customer responsiveness, and innovation are inevitably calibrate on the expected Return on Investment. However criteria like Rare & Inimitable required a focus on long term.

The Digital Competitive Advantage (DCA)

DCA is the ability of organization to grow and exploit the IT resources that fulfill the CRIO criteria. Think about your next strategic workshop and identify what part of your IT culture, leadership, solution portfolio, reputation, organizational expertise make you deliver this Digital Competitive Advantage and make your business outperform the competition.

Pattern Based Strategy: A new Hype?

Pattern Based Strategy is new framework launched by Gartner to pro actively seek, model and adapt to leading indicators that form patterns in the market place.

We must admit that Gartner has been very creative lately to create new hype: Cloud computing, Enterprise architecture, and now Pattern based strategy. Beyond the promotion itself, we can see an emerging demand to reassure the business community to anticipate what tomorrow could be.

Predictive Business Intelligence is one element in the equation, but a fundamental shift in the way organization are planning need to happen, and it could be done by integrating the necessary variability of risk whilst establishing a path for growth. An approach by scenario is suggested by Gartner to accommodate this uncertainty.

Will BI market be the sole winner of this trend or will we assist to the birth of a more fundamental change in the way organization are managed?

You can see a video here of Peter Sondergaard (SVP Research). If you are interested on the subject find below some additional resources on the subject:

- “Gartner Identifies Four Disciplines of Pattern-Based Strategy“

- “Gartner Says Companies Must Implement a Pattern-Based Strategy to Increase Competitive Advantage“

You can read a post that I wrote early this year that was suggesting a similar approach:

… Last but not least, reactivity has been pushed  as a strategic enabler for growth, and if the vendors are quickly adapting, internal IT might have issue to address this need. While being reactive is certainly a good thing, being proactive is even better. IT has focused for decade on monitoring system that support the business. Why not changing the concept and establish a Business monitoring. There is tone of information present in systems today that are not exploited and could be the basis for pro-active analysis. Developping this competency within the organization memory could create tremendous value for organizations.

Looking forward for your comments.

Access Gartner Market Researches For Free

Gartner is the leading information technology research and advisory company. They

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publish well known reports such as Market Scope and Magic Quadrants. Here is a simple way at no cost for you to get these documents.

When technology providers are mentioned in these famous reports they pay a right to reprint and allow people or companies that let their contact information to access the publication. Gartner is providing a hosted environment for these suppliers and their related customers to obtain their researches.

The Hint

The IP address of this site is http://mediaproducts.gartner.com/reprints. I found out for instance the “Magic Quadrant for IT Project and Portfolio Management” (2 June 2009) @ http://mediaproducts.gartner.com/reprints/ca/article3/article3.html.

The Tip

Looking at this URL, it was tempting to test if by increasing or decreasing the article number, I could access other reports. And guess what it works. You can use this technique and replace “ca” by “bmc” or “oracle” for instance.

Other like “Microsoft” and “sas” are important consumer of Gartner and they have volume like “http://mediaproducts.gartner.com/reprints/microsoft/vol6/article15/article15.html” or ”http://mediaproducts.gartner.com/reprints/sas/vol5/article15/article15.html”.

Don’t forget to have a look at the great comments and let me know what you found.

Investment Strategy: Seed or Leverage

I always felt that the way companies are looking at their investment portfolio was somewhat missing perspectives. Focusing their needs on the current year, without any red flag mechanism (See “Confronting the Brutal Facts“) showing the limit of their investment strategy.

There is a good practice that could enable Enterprise to understand when the tipping point is reached, and when return on investments could only decrease.

Whilst investing in new performance businesses are either using past investments to grow further their return (“Leverage”) or either setting up a new platform on which future investments can easily deliver incremental benefits (“Seed”). The S-Curve theory concurs to this approach. (See “The dark Art of IT investment“)

For example following the implementation of an integrated package (such as an ERP); which will streamline the processes and improve data management, a quality department can then tackle with uniform management dashboards across business units which will trigger additional benefits. Investment in such ERP platform (“Seed”) enabled a future investment in quality dashboard (“Leverage”).

Whilst considering a balanced investment strategy, leaders should focus on which part of their investments is related to “seed” future performance and which part is to reap benefits and leverage. “Seed” investments should always be measured and control over a long period, and challenged by  new opportunities that could deliver better incremental benefits.

During your next annual plan try this practice by identifying “Seed” and “Leverage” investments related to new performance. You might get signals that might change your approach of investment.

Enterprise Investment Portfolio (Part 1) – Improving Performance

Looking at  Internal Investments as a portfolio put in perspective the way Enterprises are internally investing in changes considering risk and opportunity at a global level rather than at project level.

The following classification of investment (introduced in  “How to fight “Business Urban Legends”) follows this approach: 1- Improving Performance 2- Sustaining the current Performance 3 – Survival & Adaptation to context

Improving Performance

THINK PORTFOLIO OF VALUES: Chris Potts, a well-known corporate strategist, suggested to approach the performance of portfolio as a set of values rather than the cumulative NPV (Net Present Value)generated by individual projects (I recommend his book “FruITion: Creating the Ultimate Corporate Strategy for Information Technology“) . Using this approach, arbitration of investments is appropriately Aligned With The Overall Company Strategy. Each organization can define its own strategic measurements dashboard and consider it as a validation point whilst investing in changes. Concepts such as “Balanced Scorecard” are perfectly adaptated to this.

THINK RISKS & OPPORTUNITIES : Back to the proposed classification, “Improving Performance” investments are specific in nature as they challenge the way an Enterprise is generating value. Processes, organizations and technologies will need to be overhauled to reach a better level of performance. These changes creates Risks, that need to be mitigated, & Opportunities, that need to be exploited in the future.

THINK UNCERTAINTY OF RETURN: Another uncertainty to consider is linked to reaching or not the level of performance expected by the investment at a specific time. This has to be managed according to the “risk profile” of the company. Two classes of variables are usually responsible for this situation: The Execution Alea (Initiative on time, on cost, performance expectation fullfilled etc…) and the Context Alea (Expected Market growth, variation of the competitive landscape, regulatory environment, Industry Economics etc…).

LET SEE HOW IT WORKS: Let’s have now a closer look at the footprint of this type of investment, and how other categories might be impacted. For example we could consider improving our market reach by investing in expanding international dealer/distributor agreements, restructuring a division by industry, implementing a Customer Analytic System, developing promotional materials in different languages. All of this make sense and priorities will have to be established.

Most of the time companies are looking at the amount to invest, when they can expect a return and what are the risk (Execution Risk) and make their decision. This is rather a limited view of economical decision as it push them to choose the shortest term return – hence minimizing the risk. In addition when designing the investment, it is common to only integrate the one time cost of the initiative and new recurring costs they might incurred.

By using the suggested approach, organizations should look at the Impact of such grow and :

- Understand the necessary adjustments to sustain, in the future, such level of performance. For instance, how our back-office is going to handle an increase level of orders, or talking with people that are not English native.

- Understand that new practice adjustment will need to take place; for instance doing business with dealer abroad might required specific regulatory and market expertise that an organization does not have today.

- Understand that implementing a quick IT package could generate redundancy of data which could further create inconsistency and negative productivity impact.

Conversely,

- understanding that dealers or industry associations might be interested by getting some analytics and paying for this could generate a future stream of revenues if we are investing in the right infrastructure.

- Understanding that investing in the comprehension of market network, and industry network work could lead to earlier leads and thrive the company branding.

SO WHAT? All of this is common sense, when a Disciplined Approach is used and we are looking the Value Created Globally not project by project; it becomes rather evident,  that analyzing investment thru the cumulative list of expected returns from individual initiatives could lead to an increased Risk and missed Opportunities.

I hope you enjoyed this first section.

How to fight “Business Urban Legends” – Integrate Investment Portfolio to BI

Business Urban Legends are everywhere and sit at the heart of each investment decision. Interestingly enough, companies claim their unique needs, culture and business models which make them different from the competition; yet they are prone to follow generic public statements (investment in central ERP has no ROI for instance) in the very heart of their strategy.

This could lead us to think that overall investments for a business are not managed properly, and companies prefer to apply others (the ones that are different from them) principles & lessons learned to overhaul their strategic assets.

If understanding what the competition is doing and what has been the result is always useful, it is different to a apply systematic process when it comes to understand the return on our own investments which goes beyond the usage of discounted cash flow methods.

It is not unusual to see businesses spending an incredible amount of time and energy to justify an investment; yet when it comes to control its final performance, no consistent effort is existing. There is here, at my opinion, two major flaws in the process: 1 – The lack of continuity in the investment discipline thru the entire life-cycle, and 2 – The focus on return project by project. (see “Integrate IT in the Company’s Portfolio“

This approach leads companies to rely on “Business Urban Legends” which could be existing within the company itself.

In this post, I suggest to use a disciplined approach which could allow company to optimize their investments based upon the capability of their strategic resources not on beliefs . The decision of “where to invest” should be dedicated by the strategy and is not part of this exercise.

If we are looking at the overall structure of business investments, we could consider investing in:

1- Improving Performance & Growth

2- Sustaining the current Performance & Protecting market share

3 – Survival & Adaptation to context

We can observe that these proposed categories are highly integrated. For instance “Improving Performance” will required to absorbe this new value in the “Sustaining”. Conversely not investing in “Sustaining” will at a point of time required to invest in “survival”.

The interest of this classification is that it pushes organizations to approach investment with a minimum discipline and develop awareness regarding their potential impact (Risk & Opportunity).

Optimizing an investment portfolio will become a matter of managing the risk & opportunity generated by investments and  external context (Market, Economics, Social), based on strategic priorities.  If it sounds simple, the execution of this principle is becoming extremely complex without having in place a living knowledge repository for investment. If the basic attributes could be tracked on a simple excel spreadsheet like: investment amount, expected return, break even; the understanding of risk & opportunity required a much broader set of attributes to answer questions such as:

- “What could be the premium cost to leverage an investment, and what is the cost of exercising this option?”

- “What is the overall profile of a past investment and what remaining potential value I can get from it, and at what price?” (See “CIOs, Manage your S-Curve“)

-”What is my exposition to risk?(See “The Dark Art of IT Investment“)

This is where BI solutions could help structure and extract relevant metrics to guide an organization toward the optimization of its investment portfolio. Today most of the companies are relying on market generic statements or beliefs for investments, but implementing a strong discipline and leveraging BI technologies, will enable them to lead their own destiny.

I will develop this model in future posts and elaborate a complete example on how it can be applied in a real case.

The Great Project Manager (Final Episode) – Building Momentum

Several years ago, I have the chance to read Jim Collins’ book – “Good to Great” (G2G), that has changed the way I was approaching performance in Project Management. I suggest to share with you my learnings in applying the different concepts raised in this book into the management of Strategic Projects.

The 5 key idea sets of G2G are: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

The flywheel image captures the overall feel of what it was like inside the companies as they went from good to great. No matter how dramatic the end result, the good to great transformations never happen in one fell swoop. There was no single defining action, no grand program, no one killer innovation, no solitary lucky break, no wrenching revolution. Good to great comes about by a cumulative process – step by step, action by action, decision by decision, turn by turn of the flywheel – that adds up to sustained and spectacular results.

Here we are, this is the final episode of the serie “The Great Project Manager”. This flywheel’s  concept was for me certainly the most insightful of all and has truly changed the way I approach change in Project Management.

PM are often confronted with initiatives that truly challenge the established consensus, and impose an organization to change.  Most of the time, we call for change agents & dedicated program to help people transitioning to the target practices. But overall the experience of PM regarding changes are always challenging and you never seem to learn enough to have one flawless process that guaranty success.

According to Jim Collin’s study, good to great companies build momentum; step by step they are improving, and they do not seem to manage changes at all: it just happen. I understand how provocative this statement can be. However I personally discovered the power of such proposition whilst facing large strategic projects; and I have identified two principles that I try to enforce when dealing with such initiative.

1 – Building momentum starts with “Rules of engagement”. After having identify the right persons in the bus, it is important to set up some ground rules that will enable the team to work appropriately. Some example could be: “Meetings start and finish on time”, “Minutes are validated by the group, and always available”, “On a weekly basis an hour meeting is organized, seeking improvements to the way the team operates” etc… Although these measures will not deliver instant greatness, they are here to establish its foundation. Week after week the team will improve and deliver consistent results based on these principles.

2 – Rules of Engagement should enable targeted changes: You need to build inside your project the foundation for the changes you want to implement. If in the targeted model:

- People need to communicate virtually, use your project to infuse this type of change.

- Centralization of backoffice is required, embed progressively a similar approach in your project.

- Marketing need to be more proactive to customer expectation make them the champion of project improvements.

By applying these principles,  teams develop greatness overthe life of critical projects and adaptions to change are easier. Having said that we must recognize as professor George E. P. Box, “All models are wrong; some models are useful”. My proposal here is not to revolution the way we manage change in project, but rather to built on interesting findings to ease some of the pains we may be facing when dealing with changes.

That’s all folks. I really hope you enjoyed this serie of posts (The Great Project Manager”) as I did. I would like to thank you all for the encouragements, direct feedback and comments I received which helped me to finalize it in a reasonable time-frame.

Find the previous episodes here: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

The Great Project Manager (Part4) – Disciplined Thoughts

Several years ago, I have the chance to read Jim Collins’ book – “Good to Great” (G2G), that has changed the way I was approaching performance in Project Management. I suggest to share with you my learnings in applying the different concepts raised in this book into the management of Strategic Projects.

The 5 key idea sets of G2G are: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

A Hedgehog Concept is a simple, crystalline concept that flows from deep understanding about the intersection of the following three circles:

1 – What are you deeply passionate about. The good to great companies focused on those activities that ignited their passion. The idea here is not to stimulate passion but to discover what make you passionate.

2 -What you can be the best in the world at (and, equally important, what you cannot be the best in the world at). This discerning standard goes far beyond core competence. Just because you possess a core competence doesn’t necessarily mean you can be the best in the world at it. Conversely, what you can be the best at might not even be something in which you are currently engaged.

3 – What drives your economical engine. All the good to great companies attained piercing insight into how to most effectively generate sustained and robust cash flow and profitability. In particular, they discovered the simple denominator – profit per x – that had the greatest impact on their economics. (It would be cash flow per x in the social sector.)

One of the key findings of J. Collins in the analysis of this comcept is that “it took four years in average for the Good to Great companies to get a Hedgehog Concept”. It will be foolish in our case trying to figure out how to apply this concept to a specific project. However we might approach it thru the Project Manager Carreer.

Although Project Management is often considered as a unique and coherent discipline, multiple profiles of project managers exist. We observe individuals thriving in a specific industry (Telecom, Public sector etc…), in a specific discipline (Buidling, logistic, Information technology etc..), in a specific nature of project (small and straight forward versus large and complex). It appears that successful PMs tend to identify along their carrer the ideal association of several project characteristics, in which they will excel (finding therefore their own Hedgehog Concept)

Passion At Work

I’m always baffled by the level of excitement of great project managers whilst they are talking about their current endeavor. They have the art of laying it down in a way that you are immediately willing to join them and be part of the team. We can feel them fully engaged and committed on the highest level to the success of the initiative. This is what we called Passion. I’m sure you remember this guy/girl coming with a big smile on his/her face talking hours on a subject that you didn’t suspect it might interest someone, but you are still listening every words said. This person have found the perfect work, where he/she can ignite his/her passion on a daily basis.  Looking at your own career do you picture projects that provide you with this level of excitement and commitment? By finding the common traits of these projects you might understand what you are deeply passionate about.

Damned they know what they are talking about…

Great Project Managers are highly knowledgeable in the industry/discipline/area they work in. In addition they develop few skills to the highest possible level and use them  on their daily challenges. It could be communication, analytical, conceptual skills. This critical association of knowledge and skill make them appear as a reference in the community. Understanding what they could be the best at, did not happen overnight but result in a true search of excellence in their profession for years.

Economics as a conscequence

Great Project Managers have a strong reputation. The attractiveness of their demonstrated value proposition make them highly priced and continuously demanded. Trying to figure out what is true economical engine of a great PM, could be difficult as it highly depends on the structure is working in. However we might suspect, that gathering experience in a field they are passionate about and are considered as the bests in the world, economics could be “Annual Profit Growth”.

As a conclusion, understanding your own Hedgehog Concept (consisting of the intersection of the three circles), might take years of introspection but surely is the path to greatness for Project Managers.

The Great Project Manager Serie: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

The Great Project Manager (Part3) – Confronting The Brutal Facts

Several years ago, I have the chance to read Jim Collins’ book – “Good to Great” (G2G), that has changed the way I was approaching performance in Project Management. I suggest to share with you my learnings in applying the different concepts raised in this book into the management of Strategic Projects.

The 5 key idea sets of G2G are: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

All good-to-great companies began the process of finding a path to greatness by confronting the brutal facts of their current reality. Creating a climate where the truth is heard involves four basic practices:

1 – Lead with questions, not answers.

2 – Engage in dialogue and debate, not coercion.

3 – Conduct autopsies, without blame.

4 – Build red flag mechanisms that turn information into information that can not be ignored.

We have all practiced project steering committee, where present executives like to see this nice dashboard green colored, and ear “The project is on target”. Great project managers are distressful of their success, they worry when things are going well. Confronting the brutal facts of the reality, even in front of an executive board is what makes the difference. No need to be alarmist, but being optimistic is the road to failure. J. Collins talked about the stockdale paradox, “Never confuse unwaivering absolute faith, and the discipline to begin with confronting the brutal facts”. Great project managers are convinced of success but are continuously looking for unplanned events that could challenge it.

“Red Flags” are catalatic mechanisms that vest information with power. This is certainly the best tool to drive progress consistent with the values and purpose of a project. J. Collins gives an example he used with his students. Any student during the year, can raise his hand and share a critical comment on the content of the course, the quality of the teaching, a recommendation…. When happening the course will stop and the student will speak freely. He or she can do it once in the year. This simple mechanism helped Jim to face reality by earing real time feedback from his students.

Let see how it could work in Project Management. Every projects start with what we call a “Project Management Plan” which includes project plan, risk mgt plan, quality assurance plan, communication plan etc…. The number of processes and procedures described in these documents can rapidely make the project highly administrative. The appropriate usage of red flags could avoid this, and promote a climate of truth.  Here are some suggestions:

• Any project member can ask for an unplanned meeting with all people required (only once in the project life time by member)
• The customer can not paid one day of consulting if they are not satisfied with one workshop (limit must be set upfront and agreed with the service vendor)
  
• We can imagine the same mechanism but this time the consultant asks to be paid an additional day (for instance, people not available or unprepared)

The important aspect of red flag is that the project team stays focus on what they value, and anything in the course of the project that challenge these principles and values, need to be identified and emmerge as a critical problem to solve.

All in all, a project is a place where denial can appear at any point of time. It is important that project manager promotes a culture of freedom of speech and standard mechanisms to avoid this drawback.

The Great Project Manager Serie: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

The Great Project Manager (Part2) – First Who Then What

Several years ago, I have the chance to read Jim Collins’ book – “Good to Great” (G2G), that has changed the way I was approaching performance in Project Management. I suggest to share with you my learnings in applying the different concepts raised in this book into the management of Strategic Projects.

TThe 5 key idea sets of G2G are: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.

This post is the second part of the Serie “The Great Project Manager”. Part 1 – Level 5 Leadership is available here.

First Who Then What. Get the right people on the bus, get the wrong people off the bus, get the right people in the right seat.

First Who is not the way most of the project teams are operating today. Usually the What is defined upfront with more or less details and the Who becomes a consequence of it. What Jim Collins is suggesting is to reverse this common sequence of events, and establish from the start who will be in and who will out. Of course a main purpose must be defined, such as project objectives, prior to the Who.

Projects are often under a lot of uncertainty. It might be the likelihood of the proposal, the people commitment, the market and the derived value proposition of the project, or external and unplanned events (political climate).  The best way to prepare for this uncertainty, and what you can not possibly predict is to focus first on the who.

This tenet is certainly the most challenging of all, as it requires the project manager to intervene in company politics. The first question that he or she must answer with the top management is “Am I the right person on this bus” – Do I share the same values -  do I feel holding a responsibility for what I’m going to do – am I or could I become the best person in the company to manage this project, is the top management team is expecting a Level 5 leadership.  If you feel comfortable with all these questions, you might be the right person. The importance here is that you keep your freedom of choice.

The second part will be to cascade these questions to the persons you will have on the project team. And this where internal politics can take place. However if you have gone thru the first step process (for yourself), this path should be facilitated.

Most of energy & time of Project Managers should be to identify the best people and get them in the bus. And most importantly get the wrong people off the bus. Whatever the time used to make this happen, the decision must be enforced as soon as you detect such person. As you have the right people on your project, they should be self-motivated and self-disciplined, which will considerably decrease the need to manage them. Trying to motivate or manage people is a waste of time, it should be automatically address if your are focusing first on the Who.

This question of Who applied as well to external parties such as services or product vendors. They should be selected based on the same principles. A deep discussion during the RFP or RFQ process should be engaged on the core values and purpose.

Along the way, you might find that a person well suited for a position in the project might be short, and the seat is becoming too big for him or her. It is again where great project managers dedicate themselves to identify the right path. Either reduce the size of the seat or reassign this person on an another seat.

Great project Managers know that the question of Who is on the bus (first) is what makes a project successful, and is a best way to manage uncertainty inherent to strategic projects.

The Great Project Manager Serie: Level 5 Leadership – First Who, then What – Confront the brutal facts – Hedgehog Concept – The Flywheel and the Doom Loop.