An Agile Culture?

Niel NickolaisenCOO, Deseret Book

nnickola@deseretbook.com

Agenda

Introduction

Historical Environment

Today’s Environment and Results

The Model

Examples and Caveats

Introduction

Main Points:

We are in an environment of rapid change and increasingbusiness and technology complexity.

To be adaptive, we need to pick our battles and simplify our methods.

The following approach is based on study and trial and error (and it seems to work).

Historical Environment

In the good old days . . .

Customers had fairly stable expectations.

Technology did NOT drive change.

IT (if it existed) was entirely in the backroom (dataprocessing).

Technology was, at worst, vertically integrated.

Today’s Environment

Change happens quickly.

Increasing vertical and horizontal complexity.

Technology is now involved in many (most?) businessactivities.

IT supports almost all known business processes.

Technology is (and it is worse) horizontally integrated.

Results

What worked yesterday no longer works.

What works today might not work tomorrow.

Between 75 - 90% of all IT projects are “challenged”.

Technology has undelivered (perhaps because it wasover-promised).

“IT Does Not Matter”

The high impact benefits are rarely achieved (we“crash on the shores”).

The Reality of Value?

Expected Benefits

ExpectedCosts

PlannedROI

RealBenefits

RealCosts

ActualROI

What Then Do We Do?

Do things differently in order to:

Create an adaptive culture (that can keep pace withthe dynamic marketplace).

Choose our battles (in order to simplify).

Define and use metrics aligned with value.

Align technology both strategically and tacticallywith the business.

Properly allocate resources.

Methodology

Define and use a decision framework (for example, the following model).

Filter existing and potential business processes and initiatives through the framework.

Based on the filtering, prioritize initiatives and changes.

Allocate resources accordingly.

Use adaptive design and implementation methods to deliver results.

Re-filter and re-prioritize frequently (to match the dynamics of the marketplace and to resist the urge to complicate).

As An Aside

If it were only that easy!

A Possible Decision Framework

PurposeUse a set of criteria to simplify, filter, and prioritize decisions about business processes, technology, resource allocation, et cetera.

The following “Nickolaisen” model seems to workreasonably well.

The Model

MarketDifferentiating

High

Low

Mission CriticalLow High

MarketDifferentiating

High

Low

Mission CriticalLow High

General Approach

PartnerFocus andAllocateResources

Who Cares?AchieveParity

Example of Differentiating and Parity

As a publisher and retailer, Deseret Book’s differentiating processes include product development and selection.

Our parity processes include the mechanics of productdevelopment and acquisition (and a lot more).

In our case, WHAT is differentiating, HOW (the mechanics) is parity.

This approach allows us to pick our battles, simplify plans,and properly allocate resources.

Application / Infrastructure Model

Applications(Differentiating and Parity)

Infrastructure (Parity)

ITManagement

Tools(Parity)

AnalysisTools

(Differentiating)

What is theorganizationalanalogy?

CustomerSupply /FulfillmentChains

Transaction “Core”(FIN, MFG, HR, PR)

CustomerInterface

Supplier /Fulfillment Interface

Goal is Parity? Goal is DifferentiationGoal is Parity

Applied to Applications

Chann els

What is theorganizationalanalogy?

CustomerSupply /FulfillmentChains

Transaction “Core”

CustomerInterface

Supplier /Fulfillment Interface

Channels

What This Means In Practice

“Vanilla”

“Vanilla”

Mostly “Vanilla”

What is theorganizationalanalogy?

Even Within Customer Interface

Example, E-commerce ChannelRegistration / Log-in StandardShopping Cart StandardPromotions CustomizeEase of Business CustomizeCredit Card Processing StandardUser Interface CustomizeE-mail Standard

Result 80 – 90% of stack can be standard (and simple)

All Together Now

Example: ERP Software Selection and Implementation

My belief: ERP is an “operating system” - we maximize the benefits of the ERP if we select and implement the applications as quickly and cleanly as possible.

Mapping business processes onto the model yields parity for ERP-supported processes.Adopt business processes to best practices (example dropshipping).Associate a measurable value with each proposedcustomization or complexity.Ideally (although it has not been done), do a three-week implementation.

Example – Application Development

Use a decision framework (I am biased towards the Nickolaisen model) at a component level to align to and define strategicpurposes and goals.

Do not design to extremes in parity processes (what value will this provide?)

Use adaptive development methods to achieve the tacticalresults of the development project.

Example – Application Development

Document Management and Collaboration System

Initial Development Budget = $2M and 18 months.

Filtered desired functionality through the model with the results:Two differentiating components.Twenty-seven parity components (re-use or license).Reduced function points from over 7000 to 240.

Final Budget = $350K and 4 months

Building Strategic and Tactical Plans

Identify all known and desired business processes.

Define filtering criteria (differentiating and mission critical).

Segregate processes onto the quadrants. For processes that are split, break into components.

Define current and desired process states.

Perform a weighted gap analysis (gaps between current and desired states.

Identify and prioritize business initiatives (and associated IT projects).

ExampleExample

ProcessProcess

Type Evaluation CriteriaCurrent

ScoreDesired

ScoreDifference Weight Score

eCommerce shopping cart Parity One click shopping

3 3 0 0.5 0

Recall past transactions

1 3 2 0.5 1

Price in advance of check out

3 3 0 0.5 0

Track customer across channels

Differentiating / Parity

Identify customer at transaction site 2 5 3 0.5 1.5

Common business rules

3 3 0 0.8 0

Shop here, ship there2 5 3 0.8 2.4

Purchasing Parity Three way match 1 3 2 0.5 1

Drop ship to sites4 3 -1 0.3 -0.3

Consolidate site purchases to single order

2 3 1 0.3 0.3

Differentiating / Parity Criteria Guidelines

Customer facing processes are likely the only real candidates for differentiation.

Analysis can be differentiating

Value-justify every complexity.

Treat exceptions like exceptions.

There may be significant work to achieve parity.

What This Requires

At macro and micro levels:Value-based decision criteriaConsensus (or obedience) on what differentiatesOn-going prioritization process

At a macro level:Credibility and relationship of trustamong management peers

Caveats

This changes the culture of the organization.

Changing cultures involves changing behaviors. Changing behaviors requires leadership (not management).

Changing behaviors is a pain, however, the ability to adaptmight be one of our most important characteristics.

What differentiates today can be parity tomorrow (i.e. fast pay).

Constantly evaluate and re-evaluate previous decisionsand priorities.

There are no complexity initiatives (they happen by themselves).

Think in terms of “future perfect” to define and design phases.

Summary

I am not sure we have a choice about developing an adaptive organization.

To be adaptive, we need to have and rigorously usea metrics-based method for filtering and prioritizing at both the strategic and tactical levels.

This requires leadership and a methodology!

Summary

At the 2004 MIT CIO Summit, 88% of the participants rated corporate agility as highly important. 72% said that IT was an enabler of corporate agility.

The three fundamentals of effective change management are Focus, Execution, and Leadership.

- Lou Gerstner