Living in a Post Troux Transformation World

Learn to work towards organizational transformation

One of the most anticipated highs in any transformation is when you begin to capture the value of the project. A major focus of my work has been working with large and complex organizations to develop an organizational capability to transformation. This capability is intended to enable the organization to meet an ongoing need to change the organization in order to meet rapidly evolving external and internal forces including disruptive technologies, compliance and regulatory requirements, evolving stakeholder requirements and other forces pulling on the organization. Simply put, the pace of organizational change has accelerated and successful organizations need to be able to meet the challenges presented by these changes in an efficient and effective manner in order to perform at a high level. For commercial entities there is a significant sustainable competitive advantage to be gained by developing an ability to rapidly transition the organization in order to meet new strategic objectives, leverage game changing technology, and capitalize on opportunities presented in the market.

 In order to develop this capability, it is necessary for the executives involved to develop real insight across major enterprise portfolios and their inter-relationships. For clients leveraging the Troux platform to realize their transformation capability many will choose to focus on specific areas like their application portfolio or enterprise standards in order to get as much value from possible from the development of this transformational capability. These items represent the low hanging fruit available to most organizations, allowing them to immediately leverage new insight to pull cost from the organization. This can help senior executives see the value in such programs by demonstrating an immediate return on investment. This enables the organization to begin to gain the insight it will need to manage future transformations, while gaining the buy in of senior executives who might otherwise be more hesitant to invest in longer running strategic programs devoted to the development of robust enterprise architecture, enterprise portfolio management or other organizational transformation related capabilities.

 As reports light up and opportunities are prioritized for action there is a real sense of satisfaction, because this is the moment when the investment begins to deliver on its promise. However, if the organization is serious about ensuring the maximum value from its investment and developing a true transformational capability instead of simply a project centered on slice in time cost savings they won’t stop there. In fact, well prior to the first report lighting up the organization should be looking at what life will be like AT (After Troux). The fact is that if you don’t change the habits that got you into this situation you will find yourself back in the position that prompted the initial investment. Without an ongoing ability to understand how information, technology and other assets support your business you simply cannot expect to be an agile high performing organization. Lack of insight makes governing and executing in an efficient and effective manner nearly impossible and results in an overly complex, cumbersome and costly value chain that is a drag on operational performance despite a large price tag.

 The bottom line is that you have to change the way you make decisions in order to get the most out of your transformational investment. The new information and insights provided by a focused effort around a specific portfolio, like applications, may enable IT executives to make clear decisions in specific areas of the enterprise portfolio and get to a return on investment in the near term. In the longer term, organizations need re-engineer the business processes they use for planning and decision making if they are to fully capture the value of this type of insight across the broader organization. The often significant return on investment that is realized by organizations investing in the narrower types of projects that are typically used to jumpstart a transformational program are only possible because the system that is in place within the organization wasn’t capable of maintaining an optimal balance within the portfolio. In order to prevent a recurrence of the factors that led to such great opportunities for savings the organization needs to be determined to develop new processes. These processes will enable the right information to take the right path through the organization and ensure that decision makers have the information they need to make decisions in a timely manner.

 Opportunities for ongoing improvement to the decision making process based on the availability of this new information to decision makers need to be examined. This is how the organization gets to the real ongoing value of having an organizational transformation capability rather than a cost savings project.

 Efficient, effective, and agile operations based on real insight have to become the normal mode of operations and this is only possible by explicitly focusing on changing the way decisions are made. This needs to be a multi-faceted effort that includes looking at existing stakeholders, decision making processes, analytic components and the informational inputs used to inform them and re-engineering them in light of the new capabilities Troux brings with regard to enabling decision making. A concerted effort needs to be made to define business process touch points across the organization, key informational exchanges, and the real information requirements of decision makers. This should include planning to automate informational flows from the various systems that contain critical planning information into the Troux environment in order to enable ongoing analysis that leverages high quality data that is readily available. This effort is all about developing a world class decision making environment that includes all of the information needed to support business decisions and strategic execution. One of the major factors governing the degree to which the organization will maximize its return on investment is the degree to which it is able to facilitate adoption of the new capability to make decisions. In order to ensure the broadest possible adoption, the organization needs to effectively communicate the value of the information to executives, managers and decision makers as well as embedding high value decision making processes into real workflow based governance that ensures the proper management and consumption of information across the organization.

Thanks as always for reading my blog, I hope you will join the conversation by commenting on this post.

If you liked this post, please consider subscribing to this blog and following me on twitter @jmillsapps. I regularly give talks via webinar and speak at events and other engagements. If you are interested in finding out where to see me next please look at the my events page on this blog. If you would interested in having me speak at your event please contact me at events@joshmillsapps.com.

If you are interested in consulting services please go to MB&A Online to learn more.

Why do I need to “Transform” my organization?

Are strange forces at work driving change in your organization?

Why do I need to transform the organization? Wouldn’t a little tweak here or there be good enough? I like to use the term organizational transformation because I think it more clearly portrays the shift in thinking and execution required to effect real change within an organization. The pace of change within an organization and outside of it is driving the need for more comprehensive shifts in business processes, technology, and resource allocation in order to meet changing requirements; all the while maintaining efficiency and effectiveness. It is this combination of an increasing change of pace, as well as the need to be able to respond to this change more rapidly and efficiently that is driving the need for organizations to have organizational transformation as a key capability. The logic is simple.  If the pace of change is increasing, then high performing organizations should be good at managing the change that is required to execute.

As you scan your organization today you may see the results of poorly executed change. In fact, one of the biggest drivers of cost in your IT department may be the accumulation of one-off solutions needed to meet individual requirements.

One Example Driving the Need for Organizational Transformation (OT)

Over the years, one need after another has driven the piece meal assembly of policies, processes, and technology without anybody really thinking about the big picture or what the addition of that one more thing means for the organization as a whole. The proliferation of business applications in many organizations, in order to meet specific needs like customer relationship management (CRM), enterprise planning, and business unit specific applications, have created a complex mess in many organizations. The implications of this mess ripple across the organization.  This starts with the business users who struggle with overly complex procedures that require the entry of information into many different applications that all have different looks and feels, etc. In addition, these silo applications each hold some portion of the critical information necessary to running the business and making decisions. More costs have probably been accrued in attempting to stich together this information from various applications. In the end you have the complex, costly to support, and poor performing mesh that is inflexible, difficult to maintain, and is ripe with opportunities for technical, security, and other risks due to the lack of planning, execution and management.

So why do I need to have a capability to support organizational transformation? The organizational transformation capability affects every aspect of your business. I’ve provided some examples below:

Setting Strategy becomes difficult because there is a lack of clarity with regard to whether or not shifts are attainable, what the costs of the shift will be, and what the scope of the change management effort will entail.

Managing External Influences becomes reactionary, as the organization is rarely able to devise holistic responses to external challenges because there is little cross-functional understanding within the organization.

Performance Management becomes problematic because the linkage between metrics and the organizational components driving those values becomes harder to discern. If the inter-relationships between processes, technology, and value aren’t clear in the beginning, they certainly don’t get clearer over time and through change.

Human resource management becomes more complex and more expensive as the need to maintain many sets of specialized skillsets drives up the cost to maintain and support myriad applications.

Vendor management becomes more complex as you are forced to maintain more individual relationships, contracts, and service level agreements as part of a piece meal approach to change.

Technology management becomes difficult, as the interwoven and intertwined mesh of technologies all require upkeep on distinct schedules, pose their own security risks, and procurement issues.

Security management is inherently more complex as technologies proliferate, business processes lack clarity; governance is hoped for but not embedded. (See embedded governance post).

Risk Management is almost impossible as the value chain that is used to deliver end stakeholder value looks more like a bucket-o-stuff than a well thought out solution. This complex mess may have numerous risks that never become apparent until it is too late.

Conclusion

You need an organizational transformation capability because it allows you to change your organization while maintaining insight from the as-is through the desired to-be. It will enable you to know whether the strategy you want to implement is possible, in what time frame, and at what cost. Without this level of insight you are managing by looking in the review mirror. You are hoping that your estimates regarding the future are correct because of experiences you’ve had in the past and gut feelings based on managerial experience. I’m not downplaying this insight. I know that I have made many decisions without perfect information because they simply had to be made, I have also spent many nights worrying about the implications of things I didn’t know on the outcomes of the decisions I’ve made. For companies that exist in highly competitive environments and with the budgets shrinking in the public sector, there simply is not room anymore for the type of seat of the pants executive navigation that was once possible. Margins for error have shrunk with smaller budgets and narrower margins. Businesses that are able to understand the components of their organization that are critical to change develop a successful organizational transformation methodology. They can then integrate that process and information into their strategies and execution, and those are the organizations that are going to be tomorrow’s high performing organizations. I’d love to hear from you regarding your thoughts on managing organizational change. I will write soon on what I believe are critical areas of insight but I’d be very curious to hear what you feel is critical.

Thanks as always for reading my blog, I hope you will join the conversation by commenting on this post.

If you liked this post, please consider subscribing to this blog and following me on twitter @jmillsapps. I regularly give talks via webinar and speak at events and other engagements. If you are interested in finding out where to see me next please look at the my events page on this blog. If you would interested in having me speak at your event please contact me at events@joshmillsapps.com.

If you are interested in consulting services please go to MB&A Online to learn more.

5 skill areas needed to transform your organization

Don’t miss the mark, develop the right skills

Change happens every day both inside the organization and outside the organization. I’ve talked quite a bit about the fact that I believe this change is happening at a faster pace than we have ever seen and that this is driving high performing organizations to look for ways to develop organizational transformation capabilities. As someone who has spent a lot of time talking to the stakeholders within organizations, I have seen a lot of soul searching around what it really takes to pull off organizational transformation. Enabling an organization to regularly be able to move from a current state to some future state that is better suited to meet evolving stakeholder requirements, changing compliance criteria, disruptive technologies and other forces that drive the need for organizational change is tough stuff.

I believe that there are really five key areas that organizations should be focused on developing in order to deliver a truly world class ability to enable change:

Leadership: I fall firmly in the camp of folks that believe leadership skills can be developed and that focusing on this area of development can pay real dividends for organizations that are willing to invest in it. I also do not believe that leadership skills are something that an organization should only focus on at the executive level. The fact is that as organizations become flatter and more agile leadership skills have become more important than ever even at much lower levels of the organization than have previously been focused on. This also ensures that people who are thrust into leadership roles have some skills when that occurs and aren’t learning on the fly (and failing) until they figure it out.

Transformational methodology: If you buy into the fact that understanding and executing on change within the organization should be a primary capability, then you will need to find something that can function as a repeatable process focused on helping you identify areas that require change and then execute that change. Properly executed enterprise architecture should fulfill this role. Focused on understanding the strategic direction, resources, processes, assets and operating environment of the organization this function should rightly be the focus of managing the information driving change and providing real input into both planning for change and executing on it.

Risk: More change means more risk. Organizations are almost always focused on the simple execution of change and not on the implications with regard to risk for the business. Rapidly implementing an online application may help you shave costs, meet customer requirements, or improve productivity. It may also introduce risks that need to be mitigated. Risk management skills need to be embedded within your transformation team in order to ensure that someone is thinking about the dark side of transformation.

Security: See risk. Change always has security implications. The downside of your new found agility means having more discussions around the security implications of that change and so having skills in this area are critical for transformation teams. Leaving security out as an afterthought means inviting last minute changes of the worst kind. Find out up front what the implications of your actions are for security and you may be able to tailor your solution more easily in the early stages or even alter the scope to ensure your solution is viable.

Personal Productivity: You may be surprised to see this on the list, but I think it is a major oversight to think that everyone is functioning at the same high level with regard to organizational, presentation, speaking, writing, negotiation and other critical core skills. None of the rest of your transformation team’s domain expertise matters if their insights cannot be communicated to the outside world. I have often heard the counter argument that “we” don’t hire people without those core skills. I’m sure that is the intent but usually when someone is being recruited as a java developer, accountant, or other functional area specialist at the beginning of their career the focus is on their domain expertise. This stays the same through much of an individual’s career with advancement mostly tied to domain expertise – not these skills. When thrust into senior roles where these skills are required because getting the job done requires the ability to get others to see their point of view, etc. they fail. Do not make this mistake when you begin working to develop your transformation team.

Conclusion

In this I have tried to lay out some core areas of focus as you work to develop your transformational capabilities. I’ve tried to stay at a fairly high level, while still providing some insight into the types of backgrounds you may want for folks on your team as well as areas where you may want to focus on as you pursue your organizational development objectives. The above is not meant to be an all-inclusive list and in fact I invite your feedback. What have you done to prepare your organization for change?

Thanks as always for reading my blog, I hope you will join the conversation by commenting on this post.

If you liked this post, please consider subscribing to this blog and following me on twitter @jmillsapps. I regularly give talks via webinar and speak at events and other engagements. If you are interested in finding out where to see me next please look at the my events page on this blog. If you would interested in having me speak at your event please contact me at events@joshmillsapps.com.

If you are interested in consulting services please go to MB&A Online to learn more.

Reduce the gray area in organizational change

Organizational transformation is a hot topic right now. Transformation comes in many forms.  It can be anything from major business process re-engineering, to dealing with disruptive technologies, to the more typical transformation required to maintain an effective organization in an ever changing business environment. Every day executives evaluate where they want to take the organization and the path from where they are now, to where they want to be almost always involves some type of change. Understanding the implications of decisions and how change ripples across the organization, as well as developing a core capability to support ongoing projects is required in order to maintain a high performing organization.

Over the last few decades it seems as though the pace of change has dramatically increased. Innovation and the level of connectedness and collaboration have made this change feel like a snowball running down a steep hill gaining in size and speed.  New entrants to the market place, rapidly changing customer trends, and ever evolving compliance requirements have further complicated the organizational operating environment. The collective outcome has been that in order to be effective, organizations have to become masters in the art of organizational transformation.

The increase in the pace of change and the importance of organizational agility in the face of this change, has led to the development of a series of trends in organizational training and thinking around best practice. From ITIL, to PMBOK, to the various Enterprise Architecture methodologies; executives, managers, technical staff and knowledge workers are all looking for a means to deal with the change. Large complex organizations have a significant hurdle in their path to transformation that results in large swaths of the organization across functional areas (IT, Finance, etc) to have a great deal of gray area associated with them and no real integrated understanding. This gray area may include significant risks that are unaccounted for and obscure significant improvement opportunities. In order to achieve the type of agility and insight into the organization to facilitate change, there must be a concerted focus on the thin layer of information that really drives decision-making. Having the ability to make these decisions is only useful if you can then act on the information to meet evolving requirements. This is where focusing on core transformational skills including planning, communicating, productivity and negotiation skills required to achieve value for the organization come into play. Leading change should be an integrated effort that includes domain expertise across many areas, the ability to execute individually and in teams, as well as dedicated systems that help inform and support change within the organization.

Thanks as always for reading my blog, I hope you will join the conversation by commenting on this post.

If you liked this post, please consider subscribing to this blog and following me on twitter @jmillsapps. I regularly give talks via webinar and speak at events and other engagements. If you are interested in finding out where to see me next please look at the my events page on this blog. If you would interested in having me speak at your event please contact me at events@joshmillsapps.com.

If you are interested in consulting services please go to MB&A Online to learn more.

Organizational Transformation and Mentoring

Get a hand from a mentor

Developing the capability to execute on organizational transformation efforts is something I’ve spoken on at great length in my writing, speaking, and with clients. I’ve also talked of my belief that you can prepare your organization to thrive in the midst of change by focusing your organizational development efforts on the skills and abilities that apply to this capability. Mentoring is another way that organizations can help facilitate this type of professional growth for staff. One of the great drivers of value for mentoring is that it usually spans a longer period of time than traditional corporate training and educational offerings. It is often more responsive to specific needs and tailored because of the personal nature of the interaction. I have discussed in my previous post, “Mentors: Identifying & Leveraging Mentors,” the qualities which make a great mentor for you. In this post I’ll be more focused on the main forms of mentoring; essentially paid and unpaid, and the positives and negatives associated with both.

Unpaid mentoring

Unpaid mentoring is the type that most people will have had experience with over the course of their careers. If you have been fortunate enough to have a senior staff member, family friend, or other person provide you with advice and insight that is focused on improving you and helping you to succeed in achieving your goals, you’ve had a mentoring experience. The greatest part about the unpaid mentor experience is that often they are driven out of a very genuine concern for you as an individual. They can be an outgrowth from, or lead to life long relationships that greatly enhance your personal development and professional growth. On the negative side, the quality of the advice provided by unpaid mentors may very greatly because this is not something they have developed as a professional service. Availability may also be an issue because the mentoring needs to occur during times in which the mentor is free, which may or may not coincide with your timing and need for advice.

Paid Mentoring

Paid mentoring is more rare and usually reserved for more senior executives. Sometimes mentoring will be included as part of training or educational packages, as a mechanism for ensuring that participants are able to leverage what was learned in class on behalf of the organization. I am a great believer in this type of pairing in terms of getting value from training dollars. This usually leads to a greater training ROI because the mentor can help the you put your training to use in your context, but this is usually not long term enough to foster professional growth over the long term. Paid mentoring, or coaching that is of the more traditional nature, can be an enormous benefit to individuals working within an organization because they are looking specifically at how to support and enhance your professional development. They are generally more available given that they are being paid to support your requirements and you often have the opportunity to more specifically tailor the characteristics you are looking for in a paid mentor than you would in an unpaid situation. I want to focus on this last characteristic because it is important. One of the single greatest advantages to paid mentoring is the ability to choose from a much larger mentor pool and get someone who specifically meets your needs. This may mean domain expertise relevant to your field, executive experience in environments like the one you are working in or similar career arcs to what you are hoping to follow. On the negative side, all of this choice and the generally high quality of the product comes with what is usually a hefty price tag. Full time executive coaches may charge by the hour or provide packages on a quarterly or other time unit basis that roughly ties back to contact hours plus research.

Conclusion

As expressed in my earlier post on mentors, “Mentors: Identifying & Leveraging Mentors,” I am a real believer in mentoring as a means of professional development. Depending on where you are in the organization and how your organization approaches organizational development, you may or may not have access to paid mentoring. If not, it may still be worth looking into paid mentoring on your own as there is real power in having access to someone who is an expert in your field, has fought the battles you have yet to fight, and who may be able to provide real insight into how to maximize your potential. For all the same reasons you should always be on the lookout for unpaid mentoring opportunities. I have always been amazed at the willingness of so many people to play a real role in guiding people forward in their careers without any compensation beyond the satisfaction that comes with working to help someone else move their career forward. As someone who has personally benefited from the willingness of others to give freely of their time to move my career forward, I think everyone should be receptive to opportunities to receive mentoring. I also enjoy playing the mentoring role to others where I have had the opportunity and I try to accommodate this to the degree I’m able because I have received so much from so many over the years.

Thanks as always for reading my blog, I hope you will join the conversation by commenting on this post.

If you liked this post, please consider subscribing to this blog and following me on twitter @jmillsapps. I regularly give talks via webinar and speak at events and other engagements. If you are interested in finding out where to see me next please look at the my events page on this blog. If you would interested in having me speak at your event please contact me at events@joshmillsapps.com.

If you are interested in consulting services please go to MB&A Online to learn more.

The election is just another opportunity for organizational transformation

The election is sort of the ultimate organizational transformation event. Every few years we come together as a nation and decide who is going to manage the business of our country. Once the dust settles and the choices are made, it is time to rally around the chosen leadership and move forward. Harboring bitter feelings from the competition as the organization, or in this case the nation, moves forward is seriously counter-productive. On a much smaller scale, the results of office politics play out in our lives all of the time. Executives, team members, and managers are in constant competition not only with other organizations, but also with other members of the organization for recognition, upward mobility, and power. Just as in our national and local politics, too often the bad blood resulting from this competition spills over into the period after the decision has been made. This is often to the detriment of all of the parties involved and it certainly does not benefit the organization in question. There are three critical actions a new leader can take after being chosen to prevent the politics of the competition from spoiling the choice that has been made and the performance of the organization going forward:

1.      Reach out to the losers – in organizational politics with fewer clearly chosen candidates, this may not be as obvious as in our political process. Do not under estimate the power of making a personal connection with those who also may have been vying for the position in which you now sit. The fact that they were under consideration for the same role makes them relevant stakeholders for you, no matter what your personal opinion is of them.

2.      Embrace compromise – building on the last point it may be helpful to find a place of common ground with your competition and embrace it publically and in short order. This validation of some aspect of your competition makes their interaction with you more palatable to those who backed them, and eases your ability to build effective coalitions and make progress towards making the organization perform.

3.      Stay focused on the organization – you may have had to focus on “your” approach in order to win the position to get an opportunity to transform the organization. Once you have the position, it is time to refocus on the organization. One of the best things you can do is forget your previous “positions” and ensure that you are not still fighting the fight that got you the position. Once you have it, the best way to lose it is to keep fighting the fight to get it rather than focusing on whatever the best way forward is for the organization, regardless of previous positioning. 

As we put this year’s election behind us, I hope our political leadership will take the approach I’ve outlined above and do what is best for the nation. In a similar vein, if you want to make the most of your opportunity for organizational transformation or a new position, please remember that if you truly want the organization to succeed you will stay focused on its requirements and not your own.+

Thanks as always for reading my blog, I hope you will join the conversation by commenting on this post.

If you liked this post, please consider subscribing to this blog and following me on twitter @jmillsapps. I regularly give talks via webinar and speak at events and other engagements. If you are interested in finding out where to see me next please look at the my events page on this blog. If you would interested in having me speak at your event please contact me at events@joshmillsapps.com.

If you are interested in consulting services please go to MB&A Online to learn more.

3 ways to ensure your transformation ends with a ROI

As an executive that is looking to transform his organization, it is easy to get caught up in the excitement of a particular methodology, technology or performance improvement initiative. There is often a sense of exhilaration as the possibility of applying the methodology you’ve been reading about, hearing about, or training on to transform your organization. I know, having been at the beginning of this journey a few times, that the excitement of doing something different and the possibility of what the future can hold can be strong stuff, to the point where the focus on the effort is all consuming. This enthusiasm can be the source of energy that helps drive a transformation program through to completion, or it can also result in over engineering, excessive devotion to a particular approach or methodology and push the program into failure. This can be a major obstacle in getting to the return on investment that a particular methodology or approach promises. One thing the wide spread availability of best practice information and process improvement methodologies has done is whet the appetite of executives that want to reap the rewards of these best practices and transformational methodologies. This has triggered an explosion of growth within the training, conference and speaking industries, that has not necessarily been accompanied with a commensurate improvement in the performance of the organizations following these approaches. I follow three rules for getting the most of any transformational activity:
1. Be honest about readiness

Whether it’s a book you read, speaker you listened to, or a conference you attended, what you took away is generally based on one person or group’s experience or success applying a particular method or technique. Before diving into a transformation effort or making estimates about what your ROI might be, make sure you take into account your own unique circumstances. Do you have executive buy in? Do you have staff with experience in this area? Will you be able to provide the resourcing required to see the effort through while maintaining your existing service levels? Will you be able to source the training, consulting staff, etc. necessary to get you to value? What is your organization’s history with regard to implementing changes of this scale? Be honest at the beginning.
2. Be thin and incremental

Most transformational activities that I have seen fail in the implementation of the approach or best practice, don’t fail because the best practice or approach itself was flawed. Often this has to do with a failure to scope the activities or anticipate the real level of effort. I think most organizations would benefit from drawing their to-be view of the world and then focusing on incrementing the path to it, in a way that there are no huge leaps of faith in those increments. It is much easier to do this if you keep your initial vision as small as possible. Remember that what you are undertaking involves changing the way your organization works and thinks, and that this takes time and effort. Keep your increments small in order to provide yourself with checkpoints along the way. Getting to small wins will help you achieve your larger goals. Choosing to implement the smallest vision of the transformation effort that ends in value will ensure that you actually get to value.
3. Stay focused on value

One of the greatest temptations as you enter into a transformation program, is becoming consumed with process to the detriment of enterprise value. Transformational activities often involve the building of new skills and learning new things. It is easy to get carried away and lose the original focus of the project, which probably included a return on investment. It takes real discipline not to become consumed with an approach and the rigid implementation of every aspect of that approach. Every time you begin to add scope, develop further granularity, or add another level of decomposition or analysis, make sure you ask yourself the value question. Remember that the success of the effort will not be graded by how complete the implementation was, but rather on the value gained by the organization.If you follow the three simple rules above you may not win any awards for how complete your implementation is for a specific methodology or approach, but you can be assured that you will gain some value for your organization. This approach doesn’t just work for large transformation efforts. I try to ask myself these questions about my individual tasking and calendar items every day. Do I really need to completely re-organize my filing system or will I get more value by just filing the one thing I need. Sometimes you do need to allocate the resources to complete a major transformation, but I have found that more often than not I can get more real value much quicker by focusing on smaller increments and smaller goals.


Joshua Millsapps
Senior Partner, Millsapps, Ballinger & Associates
Twitter: @jmillsapps

Thanks as always for reading my blog, I hope you will join the conversation by commenting on this post.

If you liked this post, please consider subscribing to this blog and following me on twitter @jmillsapps. I regularly give talks via webinar and speak at events and other engagements. If you are interested in finding out where to see me next please look at the my events page on this blog. If you would interested in having me speak at your event please contact me at events@joshmillsapps.com.

If you are interested in consulting services please go to MB&A Online to learn more.

Can you talk to the business in business terms?

I wrote last week on the importance of running your IT organization like a business and what I got back was that I had fallen into the classic trap of providing advice on what to do, but no insight into how to do it. This week I’m going to try to fix that by talking directly to how you can talk to the impact your IT organization has on some of the classic business measures without forgetting that these are being seen through the lens of the IT organization. In the following section I have identified some important talking points IT executives should use when framing their impact to the organization. For each major business driver I have identified a few questions you should ask yourself and then identified a few ways that you can express how your organization can frame its impact on these important business focused measurements. So put your business hat on and change your IT centric mindset.

How do you talk to the business?


Growth

Growth is the lifeblood of most business discussions and finding ways to frame the IT organizations impact on growth is critical if you are going to forge a lasting partnership with the business. Growth comes in two flavors top line meaning adding to the company’s overall sales and revenues and bottom line essentially the company’s income after all of the expenses have been deducted from revenues. One of the reasons that the technology portion of Corporate Marketing Officer budgets has been steadily growing over the last few years is because of how much impact technology has on top line growth. The impact of social/new media, big data and analytics on sales and top line growth has made technology part of the executive discussion when avenues for new growth are being discussed. Unfortunately, these initiatives are often done as one-offs rather than as a comprehensive plan. Understanding the interplay between an analysis of existing customer data, trends within your organizations social presence and planned technology investments ensures that the IT organization is able to support top line growth without putting additional pressures on the bottom line. Growing the bottom line can occur by growing revenues while holding expenses constant as a function of revenues or in an ideal world reducing those expenses so that the bottom line grows faster than revenues. Technology can help here by reducing the costs associated with the delivery of the business capabilities necessary to support top line growth. Technology is critical to support growth based on the 90/10, 80/20, 70/30 investment concept as well.  By spending 90% of its IT dollars for legacy operations and only 10% for improvement or future operations most organization’s are unable to keep up with organizational needs.  At 80% legacy, 20% improvement/re-capitalization most organizations are treading water.  At 70/30 or 60/40, depending on risk tolerance and the industry sector, is an organization that should be improving its posture relative to the market and industry. These are rules of thumb of course, and not hard and fast but they should prompt the right type of thinking. How the IT organization gets to that more innovative mix may include a mix of new investment and cost savings and the removal of redundancy from the existing investment mix to reduce spend and legacy investment.

What you should ask yourself

Is our technology aligned to our strategy?
Is our technology helping us reduce the cost to deliver business capabilities?
How does technology support our growth strategy?
Is our technology organization investing to meet the growth strategy of the company?

Framing IT’s Support of the Business

Develop the mapping of strategy to the technology that supports it.
Express your IT portfolio to ensure that growth and innovation are identified.

Risk

Risk includes the prospect and impact of uncertainties including those caused by both events and those tied to a lack of information. Recent events within our economy have highlighted the impact risk can have on a company and the economy as a whole, and most company’s are looking for ways to reduce risk both by better understanding their operating environment as well as by mitigating the outcomes of adverse risk related events. Within the technology organization a real opportunity exists to highlight enterprise risk that may otherwise go unnoticed. In this day and age, technology organizations span and support almost every aspect of the business. They support business processes, data collection, manage information exchange, understand who has access to what information and have opportunity to see the enterprise in a more holistic fashion than most individual business units. This cross cutting view, if leveraged, not only provides enormous opportunity to improve performance but also helps to understand systemic risk. The problem is that IT alone is often a few steps short of taking the holistic understanding of the businesses technology environment and using it to help the organization reduce its exposure to adverse risk. What is the real cost of downtime, security breach, etc.? What are the effects that ripple across the system? In an era of enhanced data sharing across business applications and a focus on analysis the same innovations driving top line growth may bring with them new risks. IT organizations need to be aware of and ensure they can adequately address the business risk buried within the technology.

What you should ask yourself

Do you understand which technologies support business capabilities and their risks?
Do you understand the risk profile of your IT investments?
Do you understand the risk profile of your IT organization?

Framing IT’s Support of the Business

Develop an enterprise risk map incorporating both IT and business risk so that concentrations of business and IT risk that cluster together are understood holistically.

Consumer Trends

Evolving consumer behaviors, expectations and desirements are driving purchasing behaviors and successful companies are able to keep abreast with this more rapid pace of change. The world of information has fundamentally changed and with it so has doing business. The saying that “Bad news travels fast” has never been truer, in an age where Twitter and Facebook make real time product evaluation a reality. The up side is that there has also never been so many ways to get close to, interact with and understand customers and potential customers. The level of pre, post and in sale opportunities for technology savvy companies is growing daily and companies that are able to stay better in synch with their customers will have a sustainable competitive advantage. Helping the business understand how you are developing your technology organization to better understand and interact with the customer and how you will use this to drive sales makes technology relevant to the business. Master Data Management doesn’t matter to business people unless they can understand why having access to specific information (customer sales) data can be helpful across multiple departments, systems and organizations.

What you should ask

How is our technology helping us understand our customers?
Is our technology able to meet evolving customer needs?
Are we getting enough information about our customers?
Is our technology helping us influence our customers?

Framing IT’s Support of the Business

Develop a mapping of evolving customer requirements, the businesses efforts to meet these requirements and the paths by which IT is supporting those efforts. Hint: Think multi-level. (Social Media, Big Data, MDM, etc)

Supply Chain Management

This includes the management of all of the businesses, activities, materials and information required to deliver from the various points of origin for raw materials to the value being delivered to the end customer. The modern supply chain is global in scope and includes a vast sea of participants all playing some small or large role in delivering the end value enjoyed by and purchased by the customer. This chain enables some pretty incredible cost savings to be passed on to consumers or taken by companies as profit. The combination of the supply chains breadth in spanning the distance from raw materials to the end customer, and complexity due to its many participants, events, and processes; the supply chain can be a place where major transformation of the bottom line occurs. Even small changes in the friction between moving parts can create enormous changes to the bottom line and in some cases improve the top line by improving time to market. Despite the enormous opportunity for cost savings, efficiency gains and increased profitability, the scope and complexity of the activity nearly ensure that the technology organization could be further improving the performance in this area.

What you should ask

Have we identified areas of improvement within our supply chain?
Where are the areas of “friction” within the supply chain?
Do we understand the supply chain well enough to drive down costs?

Framing IT’s Support of the Business

Overlay the complex and dynamic supply and demand network with the technologies and investments supporting these efforts. Highlight pain points.

Selling, General and Administrative Expense (SG&A)

SG&A includes expenses directly linked to the sales of individual product as well as indirect expenses allocated proportionally to sales and administrative costs like those reflected in the technology budget. A myriad of opportunities exist here for the technology organization to reduce the expenses by reducing the costs to deliver technology services. There is also a real opportunity for the technology organization to lead the reduction in cost in other areas within the organization that contribute to SG&A by understanding the major business processes surrounding and embedded within cost centers and working to implement technologies that can reduce the cost of doing business.

What you should ask

Where are the business processes that could benefit most from technology/modernization?
Where are the opportunities to reduce existing IT costs by moving to the cloud, outsourcing, etc. in order to reduce the cost to deliver capability?
Am I using the optimal technology mix to deliver my organizations capabilities?

Framing IT’s Support of the Business

Within your investment portfolio identify the projects that will specifically go to reducing overhead.
Display the process by which the IT organization works to discover and modernize business processes in order to reduce overhead including those results.

Time to market

Time to market is the gap in time between organization having the idea for a product and delivering it. The technology organization should be able to close this gap over time by fostering collaboration; increasing organizational agility and helping the organization make sense of market data in order to put more organizational focus behind ideas that are right for the market.

What you should ask

How does the technology organization support collaboration?
How easy is it for the organization to exchange data?
Does the organization have well defined and re-usable services available?
Is the technology organization capable of supporting experimentation by the business (POCs)?
How hard is it for the business to start a technology project?

Framing IT’s Support of the Business

Plot IT investments on a timeline and include the business initiative spawning the investment along with business initiatives made after the investment in order to better present to the business the ongoing value of past investments to future operations. The idea is to convey the idea of re-use and reduced time to market.

Technology investments

Technology investments are made with one purpose to recognize a gain in profits or benefits from the acquired technology. However many organizations have trouble making discreet business cases for investments in technology that are not directly tied to a specific project or program. Investments in technology strategy, planning, security, and even ongoing operations become a gray area as their distance from the customer grows. Many organizations struggle to get investments that IT executive “know” are necessary because they cannot describe the organizational return in a manner that resonates with business executives. Similarly, executives struggle for funding for “glue” initiatives that enable the exchange of information between applications, constrain technology purchasing decisions, or impose hard to define enterprise value over easier to quantify project value.

What you should ask

Do we have a repeatable process for developing an understanding of what the business will get from the technology?
Are we identifying and pursuing the technologies and solutions that will have a high ROI?
Is the business defined well enough to show how technology supports the different facets of the organization?

Framing IT’s Support of the Business

Graphically display the value of the infrastructure investments necessary to support the “projects” of the organization. In many organizations executives are less likely to question project type investments that have easily calculated ROIs but balk at the cost of the underlying capabilities and their costs. When these costs are simply allocated across units and projects as a slice or tax they are more likely to be characterized as excessive. Hint: This works better if your projects total area in the representation is larger than the projects.

Competitive landscape

The competitive landscape for most companies is rapidly evolving with factors including competitive rivalry, suppliers, customers, and new entrants and products. Each can play a unique role in reshaping industry dynamics and the interplay between the factors can make discerning the root causes of contributing factors difficult to understand at the same time that the reality of the change is greatly effecting the bottom line. Technology can play an enormous role in changing the competitive landscape by helping the organization directly attack a factor that is an obstacle for it within the competitive landscape. An example might be reducing switching costs for new customers by handling the movement of their data or reducing the bargaining power of suppliers by having better insight into material costs or enhancing your ability to work with more suppliers.

What you should ask

Have we identified the role technology can play in influencing the competitive landscape?
How does our technology support competitive advantage?
What technologies do our competitors use to gain advantage?
What technologies do our customers use that are changing the competitive landscape?
What technologies will change our relationship with our suppliers?

Framing IT’s Support of the Business

Lay out a matrix with competitors and capabilities that result in competitive advantage. Next, score yourself against each competitor. This can be a good way of understanding how your technology is helping you win in some areas and may fall short in others.
Joshua Millsapps
Senior Partner, Millsapps, Ballinger & Associates
Twitter: @jmillsapps

Thanks as always for reading my blog, I hope you will join the conversation by commenting on this post.

If you liked this post, please consider subscribing to this blog and following me on twitter @jmillsapps. I regularly give talks via webinar and speak at events and other engagements. If you are interested in finding out where to see me next please look at the my events page on this blog. If you would interested in having me speak at your event please contact me at events@joshmillsapps.com.

If you are interested in consulting services please go to MB&A Online to learn more.

Run your IT organization like a business

The current economic climate has put a particular emphasis on the efficiency and effectiveness of organizational projects and IT portfolios. Programs and projects that are unable to demonstrate a reasonable return on investment are being punished, and in many cases rightfully so. Unfortunately or fortunately, depending on your particular vantage point, management’s axe is falling on those whose outcome is not well defined, whose numbers don’t add up, or worse who simply have no numbers. As a firm believer in having well defined outcomes, business cases and aligning change initiatives, programs, projects and other organizational resources to strategy.  I think that this is probably a good thing. In the short term however, both evaluators and those being evaluated will need to work together to ensure that the unfortunate consequences of this new focus on the outcomes, alignment and return on investment are protected and advocated for by people with similar requirements and “desirements”. This will only work if those same people have comparable abilities to “market” their interests. This can be a serious problem for the organization as a whole if management doesn’t recognize that there may be a gap between perceived value and real value. One of the things that is fairly widely accepted in the business world is that you should be careful what you measure because what you measure will get done. The renewed focus on accountability and return on investment across many organizations is essentially a renewed emphasis on measuring based on these yardsticks. I believe that in the long run this will have enormous benefit for organizations that stick with it and evolve their project and portfolio management efforts in coordination with an overarching performance management program. In the short run it may cause enterprise problems by punishing organizations, programs and projects that are delivering results but aren’t able to enunciate their value. IT executives take note; this may be a major problem for you sooner rather than later. Most business executives are fluent in the business case and live and breathe return on investment, they may also have more access to experienced sales and marketing professionals. IT executives generally don’t have that same expertise on staff, or in their personal background. This is compounded by a real gap in understanding – how what they do actually does impact the business.
How well can you present the benefit the business gets from your resources? How much did it help them? What were the outcomes that resulted? Executives that aren’t able to answer these questions are going to lose the budget battles in tight economic times, they are also going to lose control of their portfolios over time to outside vendors that can better enunciate their value proposition. I’m not advocating that IT executives develop their own marketing department, but I do think that there are some real lessons that need to be learned by IT in order to ensure that their efforts are appreciated and that the organization as a whole gets the value it is supposed to from their technology organization. The following 3 steps will help the IT executive better communicate the value to the business.
Step One: Establish ongoing relationships and remember to take credit. This can be as simple as developing a systematic approach to gathering the fruits of your success in order to reflect some of that glory back to your unit as a key enabler. Did your team help bring on a critical new application that increased sales? Go to the business unit and get the numbers. Did you make some course corrections during the delivery to tailor the application for the business? Get a quote from someone. Think of it as an internal press release to help generate more business (funding) for your IT department. More importantly make gathering this type of feedback a part of every project’s execution. One of the biggest things most IT shops need to come to grips with in this new era is that they are no longer operating as monopolies within their organizations. The proliferation of options and changing expectations of stakeholders means that you are now in competition with a wide range of vendors for wallet share within your own organization. Those vendors will have marketing and sales teams, you need to counter this by building your internal communications practice, developing business side advocates and taking advantage of your domain expertise. I want to be very clear – I’m not advocating for a territorial IT department that pushes back on initiatives just because they use outside vendors. I’m suggesting that we are entering an era when internal IT departments can lose budget to outside vendors based on a lack of marketing rather than a lack of competitive offerings. I think this competitive environment is good in the long term and probably means that we will see successful internal IT departments that are much more tightly integrated with the business than ever before, because those that don’t will see their influence and footprint erode substantially as outside vendors that are willing to work closely with the business win more and more wallet share. Remember that you need to reach out to the business units regularly. Not just to let them know when the network is down but to let them know what you are doing to help support their initiatives and to provide opportunities for feedback.
Step Two: Establish a set of criteria for success that you can tie to the value proposition and the organizations values. Many of the measurements we are accustomed to in IT – from uptime to help ticket resolution – don’t clearly tie back to the bottom line. They are probably good to do, for example it is probably good for the corporate website to be up and running at all times, but what does that mean for the business? How many visitors does your site get? What do you know about those visitors? What percentage of your corporate revenue is dependent on the supply chain system running in your datacenters? If you process 65,000 transactions a month that account for 1/2 the corporate revenues related to a specific line of business and every outage of more than 2 minutes costs you thousands or tens of thousands of dollars, it provides context for “overhead” expenditures. Does the line of business you are supporting really understand what they are getting for their dollars if you are working on a fee basis? I spend a lot of time with business side executives that don’t understand what they are getting for the 7 million they spend every year on IT. The story IT tells has to be tied to the story of the business and its success, clearly aligned to the success of the business. If you can’t tell that story then something is probably wrong not just in how you are marketing yourself to the organization but in how you are executing your programs. You should be able to clearly work backwards from the strategic approaches of the business to best understand how each is enhanced by your technology offerings. If you aren’t sure how your programs are critical to executing the business you can be sure that the business is wondering the same and eventually that wonder will culminate in budget cutting or re-allocation. If your organization has a clear strategy coming from executive leadership, it is worth taking the time to align your internal strategies to that top-level strategy. Similarly for performance indicators, taking the time to align these ensures that you can clearly talk to how your efforts support the business.
Step Three: Start thinking like you are in business to support the business. This means developing the in house skill to develop business cases, strategic communications and relationships. Again, I’m not suggesting that you need to go out and get a sales and marketing staff, but the IT staff has to start thinking about things that used to be “business” stuff. Developing business side relationships are critical and will improve your performance over time. Spending time cultivating those relationships will not only ensure you have an advocate at budget time, but will ensure that you are responsive and are deserving of that advocacy. Don’t think of it as a sales job, think of it as requirements gathering. Great sales people are great at client side requirements. This is a skill worth building in your organization. No outside vendor should be able to beat your team in understanding your own organizations requirements, yet I have often heard from business executives that they decided to do something because vendor “X” really got their problem. How is this possible for an outside sales team? How could an outside team come in and beat you at understanding your own organizations requirements? If an outside vendor has the right technology to meet your business requirements you should be the first to realize it and should be the ones bringing the vendor to the business rather than evaluating it after the fact. Don’t depend on the business to drag you to their next set of requirements. One of the greatest competitive advantages your organization should have is an absolute lock down on domain expertise. To be successful and stay relevant you must exploit this to your fullest advantage. Identify and begin talking to your business customers about the technologies and solutions that are going to be changing the industry before the vendors of the same start talking to your business. This isn’t about shutting them out, because to be a successful IT organization you will need to bring in and adopt some of these same technologies in order to ensure the business is successful. It is about ensuring that you have the confidence of the business. Every time the business hears a pitch about something that a competitor is doing to save money, enhance productivity, etc. that you haven’t talked to first you lose credibility and eventually this will affect the performance of the organization as a whole.
Finally, I hope that the above isn’t taken as an approach to maintain control and budget over increasing performance. Quite the contrary, I believe that running the IT organization more like a business will significantly increase performance both within the IT organization itself and for the organization as a whole. At the core of this statement is a belief in competition and clarity, which I think are closely tied in this case. I think that as organizations demand more clarity and insight into what they are getting for their money that competition for those dollars will intensify between internal and external organizations. I believe that this is a good thing and that it will play a key role in driving the sort of business and technology partnership that is so often talked about but so rarely realized. I also believe that organizations are opening themselves up to making terrible mistakes if their internal executives do not prepare themselves to participate in a more competitive environment. The world is changing and as more technology savvy business people enter the working world, the unquestioned expertise in all things technology related will no longer be ceded to the IT department. Business executives who are comfortable with technology and who depend on highly sophisticated technology in their lives outside of work are going to bring with them a different set of expectations. These executives are going to be more likely to expect agility, more likely to be aware of other options, and increasingly likely to question the wisdom of the IT organization. In order to meet that challenge the IT organization is going to have to evolve if it expects to thrive. Part of that success is in thinking more like and acting more like a business that is competing for their own organizational dollars because, like it or not you are.

Thanks as always for reading my blog, I hope you will join the conversation by commenting on this post.

If you liked this post, please consider subscribing to this blog and following me on twitter @jmillsapps. I regularly give talks via webinar and speak at events and other engagements. If you are interested in finding out where to see me next please look at the my events page on this blog. If you would interested in having me speak at your event please contact me at events@joshmillsapps.com.

If you are interested in consulting services please go to MB&A Online to learn more.

Building Analytic Components, Part 2

In the previous article we discussed the big picture process of developing analytic components, and we introduced the example we will build on moving forward, which will be drawn from an examination of the data available to review and manage IT Portfolios within the Federal government. The example is enormously relevant because of the challenge of developing useful reporting based on the existing data, which is focused on supporting citizens in understanding the execution of government spending, but may not be as useful for government folks in understanding their own portfolios. This is very similar to the issues most developers of analytic components will face within their own organizations. We are often forced to make a first iteration that “proves the point” with data that was developed for some other purpose or which isn’t a perfect match for our analytic purpose. Often in the pursuit of better organizational performance we are trying to glue different types of data together to provide some previously uncovered insight that drives improvement. Almost inevitably our effort will run into issues with data because we are developing things for a specific purpose, which had gone un-measured until we discovered that new purpose. Maybe we need additional financial data from the accounting department on purchasing of technology to marry to performance information from the IT Operations organization. It may be that the purchasing information as it stands is not granular enough for our final purposes now, but if we build our mockup and business case well enough we may be able to persuade all parties that gathering that information would bring real value to our decision making. 
In our current example, the challenge will be to develop something more meaningful for government decision makers based on the data that is currently available, as well as to develop a “wish list” of information we will need to better facilitate the decision-making process. Some of this information is completely aspirational, and some may be as simple as querying the internal systems and reports that are not publically available but that we know are tracked. For example, we know that project execution data within individual investments is tracked in detail within the OMB 300b; while this information is not publically available and therefore not going to make our initial live analytic components, we can assume it is available for future reporting should our IT investment manager require it. To the degree possible, I try to find the balance between what I can show now to make the data and benefits real for a client, and not constraining the total possible value proposition too much by ruling out data that is not immediately available. In this case we are working to better enable our government IT investment manager to better manage the portfolio and improve organizational performance. In order to keep the size of this article reasonable we are going to constrain our hypothetical IT investment manager to only three high level goals: 
  1. Look at their IT portfolio and identify investments that may be at risk or that may require intervention. 
  2. Look for opportunities for collaboration and attempt to identify redundancy in the portfolio. 
  3. Identify data quality issues, process issues, or other factors that may be impacting the performance of the portfolio.

Identifying Investments at Risk 

Our IT investment manager may first want to look at the portfolio from the standpoint of understanding which investments might be at risk. In order to do this we need to be able to understand the factors that may potentially impact investment performance. The following seem particularly useful and are available from the IT spending dashboard: Variance from Schedule: Are we ahead or behind schedule? I would posit that too great a variance in either direction is probably bad. Even if you are ahead of schedule, it usually says something about your planning if you have too much variance. On the IT spending dashboard, variance greater than 30% is red, 10-30% is yellow, and less than 10% is green.

  • Variance from Cost: See above for the most part; variance of any kind isn’t great, but obviously most of the time you are less worried about being over budget than under. 
  • CIO Rating: This is a best-judgment measure that is supposed to roll together quite a few things into one simple rating, including: risk management, requirements management, contractor oversight, historical performance, human capital, and others. 
  • # of Baselines: The standard against which the performance of the work (in the context of cost and schedule) are measured. Understanding the baseline history places the variance from cost and schedule in context and provides insight into the planning and management of the IT investments. 
  • Size of the Investment: This is useful for prioritizing deviation from cost and schedule. In terms of identifying where to exert management influence first, the investment manager may want to understand the dollars involved. 
  • Performance Metrics: The specific metrics being used to measure investment performance as well as detailed attainment data. 

Things that might be helpful but which aren’t available from the dashboard:

  • Criticality of the investment: Every investment is important, but some are absolutely critical to the organizational mission. The IT spending dashboard lets us see what business function is being supported (BRM) and what services are being delivered (SRM), but doesn’t help us get to a value judgment on the criticality of the investment to that agency or its relationships with or influence on other investments. 
  • Internal/External Users: As above, there is precious little information that would help me determine how big the impact to organizational performance would be if there were problems with the investment. Understanding the size and scope of the user community may help us understand and evaluate the potential impact of investment risk. 
  • Organizational Desire for the Investment: I am trying to draw a line between criticality and desirability here. Criticality I am defining as the investment’s relationship to achieving the mission. Desirability may be something which takes performance from satisfying a requirement to exceeding a requirement. As part of our stakeholder analysis we put ourselves in the shoes of the IT Investment Portfolio Manager and came up with the following key criteria:
 Important Investment Factors

Purpose of the Analytic Component 

One of the hardest things to do when thinking about developing analytic components is develop the statement encapsulating the purpose of the analytic component. Our first analytic component for the investment portfolio manager (IPM) will be focused on helping guide the IPM’s eye to the investment that most require attention. This may be harder than it would seem. One of the hardest things I find in developing high-level dashboards is to resist the temptation to overcomplicate or try to service a broader audience than is really intended. Our dashboard is intended for the person in charge of managing the entire IT investment portfolio. As such, some detail that will be available from more analyst-oriented dashboards will either be abstracted or otherwise wrapped into the presentation layer. The design tension here – between giving enough detail to support decision making and presenting a very complex information set in a manner that is accessible – is going to be very difficult. Throughout the development of most analytic components we will identify measures and views that are very relevant to other stakeholders. In the case of this example we are going to find a great deal of information and views that will resonate with individual investment managers, project portfolio managers, project managers, and analysts. Keeping laser-focused on the objective of our high-level stakeholder will be critical to ensuring the eventual success of the dashboard. We may also need to build some of the lower level analytics in order to understand the various components of the high level analytic well enough to understand the interplay and relationships of the various components.
Stay focused on the right stakeholder group

Finding Value in the As-Is Analysis I mentioned in our first article that an early step in the building of analytic components is to start with what is currently in place. For our IPM this means looking at the existing IT Spending dashboard for ideas. In looking at the information available to us currently, I think that it is obvious that we need to address issues with investments that are ahead or behind schedule/cost or that have been flagged by the CIO. These are the “Big Three” on the existing IT Spending Dashboard and are represented as shown in the following:

IT Dashboard Big Three

Project Level Cost and Schedule Variance Rating
Evaluation (by agency CIO)
Color
≥ 30%
1 (High Risk) or 2 (Moderately High Risk)
Red
≥ 10% and < 30%
3 (Medium Risk)
Yellow
< 10%
4 (Moderately Low Risk) or 5 (Low Risk)
Green

The dashboard does provide the useful feature of enabling you to select whether to view the variance in terms of investment count or by dollars, but does not necessarily help me group or grade investments in order to ensure I give my attention to the ones that are most in need first. Because of this, I think one of the first things our investment manager needs is a way to combine these measures to get a reasonable sense of their impact on investment performance. A problem also exists when we dig deeper into the data, because the cost variance and schedule variance are being driven at the project level, which lives below the investment level. This creates a reporting problem because any specific project-level schedule or cost variance may have disproportionate impact to the overall execution of the investment. A critical path delay in a specific project may unleash a ripple effect of consequences that greatly exceed just the specific project impact; the reverse is true as well. We can certainly handle this from a detailed analysis level by providing a detailed project analysis dashboard depicting cost and schedule variance across the project portfolio. However, even here some real thought will be required in order to surface critical path projects that are at risk. For a large department with several hundred projects and billions of dollars in the portfolio, we need to develop an analytic component that provides a holistic view of our investments. The spread and number of the projects presents us with a problem as we try to look at our project portfolio for clues to our investments. If we use a four square chart showing project variance by cost on the y axis and project schedule variance on the x axis we can clearly identify projects that are in trouble, but it is hard to visually understand how this relates to my investments because there is not a clear way to group the projects and show a consolidated measurement of what this means for the containing investment. It would be much cleaner if the investment portfolio manager could look at the simpler investment only view.

Cost Variance and Schedule Variance Grid
Investment Portfolio
Project Portfolio

It is immediately apparent that the investment chart does not present the whole picture and that the project portfolio chart does not necessarily help the investment manager. In order to help our investment manager we are going to have to come up with some way of characterizing the project-related characteristics being carried within the investment that will help the investment manager identify trouble spots within the portfolio. It should be understood up front that this analysis will not replace open communication with individual investment managers in order to ensure that hidden threats do not turn into major problems. The purpose is to help the portfolio manager identify who to speak with first and direct the attention of the portfolio manager to the areas of the portfolio where attention is most needed. The following include some of the many strategies for enabling the ITPM to leverage the project related characteristics contained within the project portfolio that is attached to each investment:

  • Adding total variance from estimated cost and schedule: Characterizing the investment by total variance gives us a sense of how far off the plan we are, but not necessarily how far off track we are. For example, if we are way ahead of schedule and way behind on cost we may be poor planners, but we may not be in big trouble. 
  • Average into a score: Average all of the projects within an investment and score them on that basis, then characterize the investment in the same manner. This is essentially the same strategy that was used previously under the investment wide scoring process used until last year. The flaw of course is that it does not truly represent the cost and schedule risk in proportion to the dollars that comprised the project. 
  • Percentage of dollars at risk: Create a scoring system or other mechanism to categorize CV and SV into a way of putting it into buckets (R, Y, G). Essentially, size the projects by dollars, decide how what percentage of the investments total dollars need to be “at risk” to constitute an overall rating (R, Y, G) for the whole investment. 
  • Combined with Rules: Create a scoring system or other mechanism to categorize CV and SV into a way of putting it into the (R, Y, G) buckets. If any project is Red, the investment goes red. Outside of red, decide if the investments are green or yellow overall based on a simple majority of the dollars at risk. 

Depending on the organization, any of the above could work, and one of the nice things that would be possible with a strategy that enabled a real score based on project risk per investment is that it would allow us to rank our investments in order by our risk factors. This might be very helpful is we were to attempt to develop a scorecard and ranking system that included all of the above investments. However, that exercise will have to wait for another day. We want our portfolio manager to be able to view the IT investment portfolio and intuitively grasp which projects need the most attention. To do so we have narrowed our focus to a few critical categories of information and developed the following rough design:

Rough IT Investment Portfolio Design

We are going to use a TreeMap, which is useful for “displaying hierarchical (tree-structured) data as a set of nested rectangles. Each branch of the tree is given a rectangle, which is then tiled with smaller rectangles representing sub-branches. A leaf node’s rectangle has an area proportional to a specified dimension on the data. Often the leaf nodes are colored to show a separate dimension of the data.” (Wikipedia, http://en.wikipedia.org/wiki/Treemapping). 
By default, our treemap will depict the following: 
  • Dollars at Risk: Investment dollar value will be characterized by rectangle size, with their associated projects nested within them also shown by dollar size. 
  • CIO Rating: Each investment box will be colored Green, Yellow, or Red, based on CIO Rating. For an explanation of CIO rating, see http://www.itdashboard.gov/faq#faq7. 
  • Project Risk: Each project will be colored Green, Yellow, or Red, based on Cost Performance Index range. 

CPI essentially provides an indicator of how much you have accomplished of the plan based on the dollars expended against the plan. One of the most difficult decisions we made in developing this design was in trying to develop a method for characterizing and visualizing project related risk within the portfolio. We chose to use the cost performance index (CPI), which is described by Wikipedia as: 
“CPI greater than 1 is good (under budget): 
< 1 means that the cost of completing the work is higher than planned (bad); 
= 1 means that the cost of completing the work is right on plan (good); 
> 1 means that the cost of completing the work is less than planned (good or sometimes bad). 
Having a CPI that is very high (in some cases, very high is only 1.2) may mean that the plan was too conservative, and thus a very high number may in fact not be good, as the CPI is being measured against a poor baseline. Management or the customer may be upset with the planners as an overly conservative baseline ties up available funds for other purposes, and the baseline is also used for manpower planning.” (Wikipedia, http://en.wikipedia.org/wiki/Earned_value_management) 
The downside of this is that it is more geared toward financial performance than specific performance against the plan so our investment portfolio manager will not easily see important schedule lags for example, but we felt it was a good compromise. No dashboard will replace good communication, and critical path issues – including schedule lag or other issues bubbling out of the project portfolio – will still require excellent communications and further analysis. I’ll post the finished dashboard to the site next week. As always, I appreciate your feedback and look forward to continuing the discussion. Are you interested in learning more about the visual design of informational elements? Read”The Visual Display of Quantitative Information“to get the journey started.
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