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Month: January 2007

Got Community?

Web 2.0 is in full swing and like everyone else you also want your own community. Can you compete with Facebook?
Every organization operates in an ecosystem. Your key stakeholders – employees, customers, suppliers etc. – are all part of that ecosystem. How you connect – or fail to connect – with them determines your transaction costs and long term business value.

If your customer comes seeking you then your transaction costs are lower by definition. “Repeat buying” and “Larger share of the wallet” are both phenomenons that use this simple fact as their foundation.

If your customer refers you to others then also your transaction costs are lower. “Viral marketing” and “Word of mouth advertising” are borne from this simple fact.

If you introduce a new product based on customer needs rather than random research then the chances of that product being bought are greater – hence generating higher business value. “customer driven design” and “customer focused marketing” are concepts that take from this little gem.

The series of nuggets coming out of a simple concept of active engagement of your key stakeholders is endless. The question is: how to create this active engagement?

You are competing with the inherent mistrust of your customer – how many people will actively participate on a Ford Motor company forum without thinking that Ford put it up for an ulterior motive?

You are competing with the other ecosystems your stakeholders are part of – Ford customers are on New York Times website and forums. They are on Facebook and Youtube. How do you compete with these juggernauts?

Making EAP work!

Business leaders – without exception – detest the idea of funding an enterprise architecture project. How can you get over this hurdle?

Enterprise architecture is one of those absolute essentials that is famously derided. Why? Because we lose focus and get into nice charts and graphs instead of creating business value.

So much ground has been lost over the years that most business leaders roll their eyes when any discussion of EA comes up! Because they have been burnt by the endless diagramming and no net connection with business value.

Why should they fund this scientific and/or academic adventure? In their shoes, would you?

The good news is that simple steps can help bolster the image of EAP and get your project the attention and funding it deserves. There is an unmistakable and UNDENIABLE connection between EAP and business value; it just needs to be made evident through action and results not words and walls plastered with diagrams!

This article provides a very good list of the top 10 best practices to get EAP on track. Read the best practices>>

Items 1, 8, 9 and 10 cannot be emphasized enough.

  1. Let business need drive the EAP train
  2. Remain flexible but to a point. There is no end to changes. Always focus on results not the architecture which is a means to that end
  3. Take baby steps. Most enterprise architecture adventures result in disaster because they try to boil the ocean!
  4. Identify quick hits. Nobody wants to wait 1 or 2 or 3 years for the payback. Would you?

Bon voyage!

Getting Project Portfolio Management Right!

PPM is the flavor of the month. Unfortunately, it will leave a bad taste in your mouth after you read this post!
You are doing Project Portfolio Management wrong.
Now that I have your attention, let me tell you why!
The objective of PPM is simple: maximize the return on your IT dollars i.e. produce the most business value for your IT budget. PPM tries to do that in two ways:
1)      Fund projects that produce higher business value. This is finance 101 or “duh” as the hipsters are calling it these days.
2)      Stop projects that are not producing business value. This is essential to stop putting good money after bad or to look at it another way, fund more promising investments
If you were investing in projects that produced the maximum business value then by definition you were maximizing IT ROI. This two pronged approach ensures that.
Simple enough, right? Well, almost!
PPM borrows extensively from the financial theory and practice of investment portfolio management. Simply stated, portfolio management says that to maximize your “overall” returns, instead of investing in one asset it is better to invest in many different assets. This “diversification” ensures that if one or more investments “fail” then the others that “succeed” will compensate for them and your “overall” investment will produce the “desired” returns.
In so far as every IT project/initiative is seen as an “investment” and a company invests in many projects borrowing PPM makes perfect sense. Further, our two pronged approach described above also makes perfect sense and we should maximize IT ROI.
Now you are wondering if you wasted time reading this article! Don’t because it is not the objective or the theory but the way IT organizations are implementing it that is making PPM almost useless.
In the financial world, investment portfolio management is about risk management i.e. hedging your bets because of factors not in your control. For example, does an average investor know if interest rates will go up or down over the next six months? (Technically no investor should know the direction of interest rates but if you are Alan Greenspan you do. If you are George Bush you do as well. If you are Halliburton then you do as well. So there is a class of investors who have this information in advance but I suspect a “vast majority” of investors do not.)
These environmental factors – such as interest rate – affect investment performance of individual assets. More importantly, they affect different assets differently. For example, if interest rates increased would you make more money in stocks or savings instruments? If interest rates dropped, would it make sense to be in real estate or bonds?
In this world of complex financial instruments such as asset backed securities, derivates of all kind and hedge funds, I am going to avoid making this discussion overly simplistic. But I hope you get the point that financial investors are trying to manage their risk in the face of the unknown by investing in a portfolio of assets. The unknown is environmental factors such as interest rates. The same environmental factor can increase the yield of one asset while hurt that of another. Portfolio strategy is to hold different assets to counterbalance the negative impact with the positive one.
You can see how this equation becomes complex because the interrelationship of many environmental factors and the resulting impact on many financial instruments. That is why hedge fund managers make their mega-zillions. That is why some people made a killing in this sub prime meltdown!
In any event, back to PPM and why we are doing it wrong. Simply stated, PPM in the IT world does not take into consideration environmental factors. Indeed, most people would not be able to tell you what these factors are, leave alone using them.
So what are IT investments hedging their bets against?
Should PPM borrow environmental factors from the financial world and hedge our bets against say interest rate movement? Why?
Are their environmental factors specific to IT investments that we should factor in to make PPM really meaningful? Or does the financial theories related to portfolio management break down when it comes to this aspect?
These are both rhetorical questions. There are specific environmental factors related to IT investments that PPM must take into consideration so our IT bets are hedged. Otherwise, PPM is meaningless in the IT world.
Let us take one example – technological obsolescence. If you are investing in a project that implements a technology that is going out the door in 5 years, how do you factor that in the investment decision?
This is a simple and straightforward factor affecting ALL IT projects. However, the answer is neither simple nor straightforward. For starters, how would you even know that a particular technology is going out the door in 5 years? If you are reading Gartner reports then try the “money with a dartboard” approach as that has a better chance of success and even if you fail you had fun along the way!

Who Will Bell This Cat?

The world is going green. You do not have a choice. The question is: Will you wait for your CEO to ask you or will you show leadership on this issue?
Going green is an imperative for corporations these days. If you are not concerned about global warming or want to wait and see if it is true or want to let the next generation deal with it or…think about your customers who are drinking the coolaid in ever increasing numbers.
Will they want to deal with a company that is not going green?
Going green is an imperative. Whether for the substance or for PR reasons you are going green. Whether you like it or not you are going green. The question is: who in the company will take the first step? Who will be the champion to see it through? Who will tell the world?
The CEO is undoubtedly the steward of any major strategy. Going green should be on her plate. Dell and Wal Mart CEOs are taking on the challenge head on. With good results.
Does the CIO have a role to play?
I believe CIOs should be taking this issue head on. For starters, greenhouse gases are being produced in data centers so you can work to reduce them. But more importantly the solution, as always, lies in technology. Like Y2K, SOX and other major issues IT has a critical role to play in going green.
Most importantly, this is an opportunity for you to take the lead. Do not let this golden opportunity to promote your career pass.

IT Spending: How much is enough?

Is 80% of your IT spending going to waste? It would seem so. It is also easily provable!
As discussions on IT Alignment and Value are the hot topic of the day and will be for the foreseeable future, it is appropriate to ask this question. How much IT spending is enough to get the most business value?
It seems logical that just like every other thing in life the 80-20 rule should apply to IT investments as well. Does it?
For those of you who are wondering about the 80-20 rule, it is a simple rule of thumb – I consider it a statement of fact – that the first 20% of your effort produces 80% of your gains and at the fastest rate of return; the last 80% produces the remaining 20% of the returns and at an incrementally lower rate of return. In other words, only 20% of things really matter in life. This rule is also known as Pareto Principle – 80% of consequences stem from 20% of causes.
So is there a magical 20% marker on IT investments? Where is it and how to find it?
Let us expand this argument a bit further and say that the “20% marker” is not a thin “line” but a “zone” – with a “floor” and a “cap.” The former is the least amount of investment needed to “optimize” investments and beyond the latter you are wasting your time and money!
Is there is a “cap” and a “floor” to IT investments?
If these points exist, then shouldn’t the whole idea of IT alignment be to find them? I mean we stand to save 80% of our IT investments!
I believe that the 80-20 Rule applies to IT investments. No doubt about it. I also believe that on average, over 50% of IT ROI is wasted. This is not quite the 80% number but still pretty significant.
So how to we save this wasteful spending on IT projects? The answer seems simple – do an IT alignment project. Identify a list of business imperatives. Draw a Perato diagram… Voila!
Well, that is certainly the logical way of addressing the problem. But there is another rule of thumb – in every team endeavor there is politics! This implies the existence of sub agendas – objectives that are logical to one or more people on the team but might not be in the team’s interests. In this case our assumption is that the team wants to maximize the organization’s IT ROI.
So projects that do not maximize IT ROI will be funded under one guise or another. The goal of IT ROI maximization is unachievable and will be till we figure out a way to get all objectives aligned. Overcoming politics, you see, is a much more difficult thing to do than applying the Pareto principle to IT investments.

eBusiness Strategy: It’s the Business Model, Stupid!

Companies get into eBusiness with a wish and a prayer when they think putting up a website is the path to success. Stop and think before you take that track and fail.
On the surface, eBusiness seems so easy. Put up a website; advertise and voila…hear the cash registers ring all the way to the bank. Your only problem: how to count the gazillions that you will make.
Unfortunately, that is a fantasy not supported by facts.
eBusiness is all about getting your business model right. Through the new ecosystem called the internet, you have new opportunities. The question is: how do you leverage them to create business value.
Nothing is a given. Nothing is obvious. Nothing can be taken for granted.
What is in your way is your existing business model – for most companies that get into eBusiness are existing companies and rare are those that are “pure-plays.” People tend to focus on the pure-plays forgetting that, sooner or later, even they need to expand their footprint into the on-ground world. Even a seemingly “natural” pure-play like Google has had to expand into radio and print advertising.
So how do you overcome your existing business model? More importantly, how do you create a new business model that may or may not leverage your existing business model?
Chances are you will grapple with the former because the latter is a complex and dangerous undertaking which requires an incredible amount of thought and yes, courage. Often, it is not necessary to destroy your existing business model. However, increasingly, it is an imperative to modify your business model.
eBusiness success depends on your ability to do that. It is not dependent on the coolness of your website or the features and functions it offers. If you do not get your business model right, no website can save you.
Do you doubt that assertion?
Then read up on www.Webvan.com. They had a star CEO, the coolest website and burnt through a billion big ones. The result? Well, have you bought your groceries from Webvan lately?
On the other hand is www.Peapod.com. They got the memo. The result? They are going strong and chances are you will buy your groceries from them at some point in the near future.
Whatever happened to www.Napster.com? It has been resuscitated but is it in the same league as iTunes?
There is one and only one cardinal rule of eBusiness: It’s the business model, stupid!

So you want to be an enterprise architect?

Does the Enterprise Architect role require some critical skills? What are they and how are they any different from those required by other roles?
As Shakespeare would put it: Some are born enterprise architects, some achieve enterprise architect status and some have enterprise architecture thrust upon them!
In my travels I have come across Enterprise Architects from all three realms. Never thought any path was better than the other. But I believe that there are there skills that all Enterprise Architects must possess in order to be successful?
The five skills I think are essential to the success of any enterprise architect – no matter how you got to the position – are:
1)      Business
2)      Technology
3)      Communication
4)      Consulting/Advising
Business skills are critical to understand the drivers for the enterprise architecture. Without business drivers or critical success factors there is no enterprise architecture. In most situations, these are not documented and/or not even understood!

Technology skills are critical to convert the business drivers into technology implications and optimal solutions. Without these skills the Enterprise Architect would be lost!

The above two skills are the core of the profession. However, the one skill that ties them together and makes an Enterprise Architect effective is communications. EA entails a lot of abstract concepts and explanations. The audience usually does not understand these concepts and in a lot of cases has disdain for the activity. A good communicator can turn things around. A bad one can lose even with a brilliant EA.

The Achilles heel of enterprise architecture is that it is a staff function within a staff function! There are no direct bottom line connections; there are no direct end customer connections. Consequently, you are an internal consultant or an advisor at best. On the one hand, an enterprise architect is expected to elicit the correct answers from people who know and on the other advise them on doing their jobs better. Not having the authority to affect change you know is critical is like being asked to watch as the titanic is going down. The problem? Well, you are on board the ship, aren’t you?

Are any of these skills more important than the other? I am not sure the architect can survive without being competent in all of them. So in my book they are all equally important.

Are there other skills that are needed? The short answer is yes. Enterprise Architecture is a leadership role so leadership skills are required. But I am not sure if they are any different than those required for some other leadership role, say project management. Similarly, working the organization or political skills are critical to any key role and Enterprise architects are no different.

Now the 64 thousand dollar question: can these skills be learnt? Well, what do you think?

Empower This!

Employee empowerment is the mantra every leader is supposed to chant at every opportunity. Does that work or are you better off really doing something about empowerment?
As buzzwords go “empowerment” is amongst the top 10 in any human resource setting. Companies and leaders sing paeans to the glory of empowerment. And then they go about business as usual satisfied in the knowledge that they did their part in making their people more productive and satisfied.
Now if that were the only thing people did i.e. talk loudly about empowerment then we would have been all set. After all other people have spoken eloquently about “diversity” and gone happily to sleep at the wheel. These “all talk and no action” or “all hat and no cattle” people are just ignorant wannabes – harmless unless they catch you at a dinner party and then that is usually the end of your evening!
The problem is also not that the empowerment talk does not match the walk. The problem is that the empowerment talk is followed by action that has the exact opposite impact. Kinda like urging you to take action on “global warming” while leaving all the lights on their 10,000 sq ft homes or talking about “freedom” while invading countries.
So our “no action” heroes are a little less dangerous that our “shoot first and think later” ignoramuses. Which one are you?
If you are in the category of “talk and walk synchronizers,” then you know that empowerment comes from some basic action on the part of the leadership. Talk is good in as much as explaining your philosophy but empowerment is about trust and trust comes from action…consistent over a long period of time!
Here are some ways to empower employees:
1)      Articulating a clear vision – where are you headed?
2)      Articulating a clear set of objectives and metrics – what are we aiming at along the way; how will we know if we failed or succeeded?
3)      Articulating a clear organization – where do they fit in?
4)      Articulating a clear system of rewards and punishment – fair and honest evaluation resulting in fair rewards and if applicable, fair punishment
While this is not an exhaustive list, it is clearly one that includes the “must haves.” Don’t kid yourself. You are not empowering anyone without these four things.
Now articulating means communicating in some fashion. and the cardinal rule of leadership communication is: your actions must match your words or you have empowered your way to yawns or worse, ridicule. Either way you are irrelevant and irrelevant leaders to not empower anybody, including themselves.

Overcome Your Business Model’s Midlife Crisis!

Monster.com has matured. And with it has come a slew of problems. Can they overcome their mid-life crisis. More importantly, can your ebusiness?
It’s an interesting dilemma. You pioneer a space – i.e. are the “first mover” – and then go on to own it. Till something happens and you are no longer in charge of the space or your own destiny. What do you do?
If you are the CEO of www.Monster.com, then you are spending every waking hour trying to answer this question and having nightmares on what if you can’t when you sleep!
Monster started and owned the online job search business till everybody and their brother jumped into the business.
  • Companies started their own job boards. The big brands can really hurt a Monster if they go this route – why would a job candidate apply for a job at Proctor and Gamble through Monster.com when they can send their resume directly through the company’s own website? Smaller brands might hurt but not to that extent.
  • Then they went a step further and took away the advantage of Monster by creating a job aggregator site themselves! www.DirectEmployers.com was in response to Monsters arrogance and shortcomings. The site offered employers the ability to post unlimited jobs and have a prayer getting their posting in front of candidates instead of getting lost in the pile
  • The head hunters survived the initial onslaught of Monster. It turns out that hiring people involves more than just reading their resumes. Who would’ve thunk it?
  • The head hunters also went ahead and took away the aggregation advantage from Monster. www.BlueStep.com and other sites cropped up and chipped away at Monster
  • Niche/Specialty sites – www.Execunet.comwww.Netshare.com;  etc.- cropped up to cater to a specific audience. From sites focused on senior executives to those catering to chefs took bites at Monster’s pie! It also turns out that jobs classification/topology/description is neither “cookie cutter” ready nor universal. Every organization has its own description of “manager” and “director”; “marketing” is not marketing and operations is not operations at every company; “legal” is bigger and more complex than a simple word.
Well, the bad news continues. CEOs have come and gone – some directly to jail. Just about every calamity – including a much publicized security breach – has apparently befallen the Monster. Now, Monster.com has some thinking to do.
I couldn’t care less about Monster.com but there are lessons in this story for every eBusiness.
  1. Business models are increasingly short lived. Protect yours.
  2. There is only one way to protect your business model – relentless innovation. If you are not turning you business model every so often then someone will turn you upside down.
  3. Creative Destruction is a necessity – you must destroy and rebuild. Carefully!
  4. Get your head out of the “eBusiness = website; if only I had more features” mindset and focus on your customer. Where are they headed? Are you headed in the same direction? (No amount of features are going to help Monster; they have to fundamentally rethink their business model)
eBusiness cannot be sustained if one does not heed these simple lessons.

The Hound of Music

RIAA won a lawsuit against an individual for downloaing music illegally. The question is, have they won a battle and poised to lose the war?
How would you like to pay 200,000 big ones for downloading 20 songs? At roughly $10,000 a song, one would think that you would prefer www.iTunes.com at 99 cents a song?
Think again!
Well, first the story for those of you who haven’t heard. RIAA – Recording Industry Association of America – won a lawsuit against a woman who was, shall we say, active on the P2P network www.Kazaa.com downloading and uploading songs. There were 24 songs in question and she was fined $222,000 in total but could’ve lost as much as $3.6MM but the court got to its senses before that travesty.
RIAA’s strategy is simple. Go after individuals rather than the P2P networks. A) Because the latter are better positioned to defend themselves. B) Individuals will panic; tell their friends who will panic and everybody will stop downloading. C) If you win then everybody will tell their mother, who will tell her neighbor…before you know it this fear would stop the illegal trade in music.
Simple enough, isn’t it?
Unfortunately, this strategy is not working. P2P networks are on the upswing! According to the NPD Group, a research firm, in 2006, there were 15 million US households downloaded illegal music – an 8% jump from the previous year. These results are consistent with the increase in drug use after the launch of the “war on drugs” and the increase in terrorism cases after the launch of the “war on terror.”
RIAA has not scared away people and cannot possibly prosecute 15 million households. If they are spending millions to get $200k verdicts, then they are obviously on the losing end of this bargain. It appears that this whole effort is doing little good for the RIAA – other than keeping their attorneys employed!
However, that is not the end of this story. RIAA is losing big time by ticking off potential customers – if anyone is going through the trouble of downloading songs chances are they want to listen to them! That to me sounds like a potential customer.
These potential customers are not buying the song but they might buy “music” or music related “peripherals. If only RIAA’s membership could figure out a business model to sell to them! (Note that this little thing called the iPod was invented not by any member of the music industry but Apple which caught the wave. How many albums would it take to make the same amount of money?)
The problem is that this requires a fundamental rethink of their business model. Not many people are smart to figure that out. The bigger problem is that it requires gutting their existing business model to make room for the new one. This strategy, also, referred to as “creative destruction,” is what the internet is forcing on many industries and players.
Can the music industry rise up to the challenge?
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The Hound of Music

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