A Newtonian view of management

I think I've finally discovered the relevance of Isaac Newton to modern management. And it is not related to gravitation and how companies that go up must come down. His laws of motion describe action and reaction and how they are different and in many ways opposed to each other. How would you classify management behavior as actions or reactions?

Let's take a look at some typical business situations and behavior in the context of action and reaction.

Analysis of business activity 

What are actions and what are reactions? We associate actions with behavior based on standards and principles, knowledge, behavior that is well thought through and intelligent. Reactive behavior, on the other hand, tends to typically be inconsistent with standards (often ignored in haste), executed with insufficient knowledge of the situation and clearly not well-thought through and embellished with more emotion and not as much rationality.  Reactive organizations tend to do more fire-fighting, have more cowboys than Indians and a ready-fire-aim attitude. They are always short on time and information. Is the business cowboy a real hero? Or is he really a lone ranger who is fast vanishing in tot he sunset?

How do we make the journey from a reactive organization to one that tends to act more often than it reacts? In addition  to experience and thorough training, having a clear set of operating principles a fundamental difference is the awareness of the business - its customers, the supply chain, competitors, asking the right questions and making appropriate decisions. The two most important responsibilities of a business are to know (all of the above) and to execute flawlessly. A business that simply executes but lacks intelligence (has a clear, comprehensive picture of its environment) is severely handicapped.

What does it take to become an intelligent business? It's more than simply having lots of data and reports. Most businesses are swimming in an ocean of irrelevant bits and bytes provided by their IT staff.  Being able to ask the right questions is even more important than getting lots of answers. For example, is it more important to hear about a new product announcement from the competition or to ask how the competition is able to get new products out on schedule and create a buzz in the market. An urgent priority for leadership is to think hard and deep to find the right questions for their business unit on an ongoing basis. Regardless of whether questions can be answered or not easily, the question must be raised. Management meetings should be rated by the number and sophistication of questions raised rather than information exchanged or issues resolved. Questions increase organic awareness and knowledge,  result in actions, directions being set and risks being identified. Questions that are not raised result in risk exposures, blind spots and poor learning. I once asked the CFO of a local semiconductor equipment manufacturer about inventory levels and how these were determined and how his company determined they had inventory issues. His answer was not very surprising - as long as the year over year trends were acceptable and there were no shortages having millions of dollars in inventory or excess were not questioned.

Business Maturity Model

A culture of seeking the right questions combined with powerful analytic capabilities using information (including benchmark data) from within the organization,  from the market, from the competition and other external sources and tapping in to expertise is an essential step to becoming an intelligent, learning organization.

What is smart business?

Smart business is essentially a more intelligent business.

Traditionally, business is all about decision and actions. The ideal picture of business is one of intense activity, hopefully productive but certainly without inactivity. The focus of business is decisions, actions and results. A fundamental element missing here is intelligence.Without intelligence there can be no smart in business.

What role does intelligence play in business? Intelligence is the essence of leadership and the heart of business is leadership. Asking the the right questions infuses intelligence in to business activity. In my consulting days I would describe the difference between real consultants and contractors as the difference between helping define the customer problem as opposed to implementing a solution. And helping define the customer problem is all about asking the right questions and understanding customer requirements. Whatever the stage of your business it is smart business to repeatedly ask appropriate questions. Questions such as:

1. What is our product or service?
2. Who is the buyer and the who is the user?
3. Why would a buyer buy our products/services and a user use our products/services?
4. How do we connect with our markets?
5. What is our competition?
6. How long does it take to sell our product/service? What is our average cost of sales?

And there are many, many other questions that are critical to staying in business and thriving. And because the business landscape is continuously evolving, these questions must be repeatedly asked. 

Asking questions is the essence of intelligence because it results in better understanding of the business realities. Ask no questions and you are literally flying blind. Asking questions is difficult for many reasons. Questioning is not part of our culture, hurts feelings, appears unproductive, does not fit the decision/action model of business, appears as an obstacle rather than a facilitator of right action and also because we are simply not trained to ask rigorous, insightful questions. Businesses hurt because the tough questions either do not get asked or answered.

What should software vendors focus on

Traditional business software models focusing on 3-letter acronyms (ERP, CRM, SCM, PLM etc) have matured and new forms of software (mobile, on-demand) and software delivery have evolved. The sun is setting on expensive software that requires months to deploy and hundreds of thousands of dollars in support and maintenance and upgrades. The good news for business software vendors is that customers continue to have a dire need for information and an even greater need for business automation. All of this driven by continuous change - shorter product cycles, greater competition and dynamic markets.

Software vendors should recognize this core need and strive to address this with solutions that match the pace of and enable business - mobile, low-cost, rapidly deployable, flexible. If the past is any indicator, then business transformations happen with the new surrounding the old , until the old is replaced. The evolution of mainframe computing to local networks, wide-area networks, distributed computing and desktops is one such model. The change in today's model based on ERP-centric computing would likely come from on-premise and on-demand applications and data resident on servers connected on the web, accessed via mobile and desktop applications.

Given that ERP vendors do not encourage customizations and changes to the core ERP system and other on-premise applications, the best alternative to extend functionality and introduce IT support of new/changed business processes would be best provided via on-demand applications that easily and quickly integrate with on-premise applications. SAP introduced an innovative extension framework called xApps a few years ago that offered quick, painless extensions to SAP functionality. The idea of xApps based out a cloud infrastructure would be compelling and enable extending the value of ERP for years to come.

Mobility adds a similar dimension and requirement to business processes - the need to extend the reach of business to customers, prospects, suppliers and partners. No longer will the 4-walls of a company limit the reach of a company. Since information is the DNA of a business, it must be accessible and communicated efficiently as far as the reach of business. And the IT support fro this must be nimble, flexible and cost-effective. This is the opportunity for today's software vendors.

The future of IT

Where is IT headed? What role will IT - the technology and the IT organization - play in tomorrow's business organizations? What will the software industry look like? How effectively will software enable business?

These questions are relevant today for a couple of reasons. First, a lot is changing and has changed in business. Starting with product life-cycles, increased competition, pricing pressures coupled with a near-zero tolerance for large IT budgets and projects, globally dispersed and complex supply chains, customer acquisition and product fulfillment among many changes. Second, among all these changes which will only intensify and speed up, traditional software vendors (Oracle, SAP, Microsoft) are responding or trying to catch up, new solutions from a new batch of companies (Marketo, Gooogle, Groupon) are emerging and often companies are having to improvise with custom solutions or simply work with primitive tools (Excel, email, phone). This is a trend that will continue. Business and market changes will continue and speed up while IT vendors play catch-up.

Some aspects of business and IT structures of the future are already upon us.

1. Budget pressures on internal IT costs leading to outsourced IT, cloud computing, on-demand solutions, specialized maintenance/support
2. Reduced use of low-level IT contractors, greater use of business / technology consultants
3. Growing list of software vendors, reduced customization costs, faster deployments, subscription pricing models, greater use of video (documentation, communication), social networking, mobile (information access), remote conferencing and remote consultants and development resources.
4. Role of IT and the CIO will change, The focus will be more on process and information and far less on technology.

How does one cope with and more importantly, help business ride out these changes effectively? The key for the CIO will be to continue focusing on the fundamentals of business. Business needs (1) Information - accurately, timely, actionable and (2) Automation - all work that can be automated MUST be automated at will (when necessary). Incidentally, automation implies less manual work. Sitting in front of a computer screen punching numbers is not automation. IT must enable business and as long as the business has all the information needed and has truly automated every task that can be automated, we can rest assured that IT is fulfilling its purpose in the organization.

What IT must do is about as important as how IT enables this. IT must operate in lock-step with business - be responsive to business needs, must anticipate business needs, be cost-effective and non-obtrusive. IT must simply do its job quietly. Businesses must not be aware of IT.

There is no question about IT going away. It must, like all mission critical infrastructure, simply merge with the background.

How technology can enable business

My earlier blog discussed the role of technology in business. Simply put the only reason for technology to exist in a business context is to enable business. The purpose is defined from a business perspective and the conclusions will be also be looked at from a business point of view.

The traditional view of technology has been to ensure 3Cs of technology - computation, communication and collaboration. This is still true today. If you want to make a quick assessment of how technology is serving your business today (regardless of the cost and complexity of maintenance and support) you really need to assess how well your business is doing in these three areas. Let's look at them in some more detail.

• Computation has to do with organizing and keep track of business information. It's all the accounting activities and the ability to update the accounting system as needed. 
• Communication is ensuring people in the company connect, exchange information with customers and partners and others outside the company and ensure everyone has the information they need to do their jobs. 
• Collaboration is the ability of all employees and external partners, customers and suppliers to conduct and transact business (sell, market, service, build product, manage benefits etc) efficiently.

These are things technology must do to enable business and have been promised for years. After years of business investments in IT we should look at how well these investments have served their purpose.

It is clear that IT has done a good job tracking information and business transactions. The data is there, it is reasonably accurate and is used to report progress from an accounting perspective. From a computation perspective IT has been a success. 

However, it's around business communication and collaboration that IT has come up short. CIOs continue to view business analytics, business intelligence and collaboration as key initiatives today. The clear implication is that communication and collaboration have not been adequately served by IT. The reasons are many spanning lack of financial motivation for the major software vendors to build such solutions, business and technical challenges and the changing marketplace of customers and partners.

Fundamentally, communication and collaboration are different from computing capability. Solutions in these areas will most likely be driven by a different set of vendors. As Steve Jobs recently noted, the competition has treated the ipad more as an extension to the laptop and will never be a threat to Apple which considers the ipad as a different type of device - not a computer or an extension to the computer but a mobile appliance.

The role of technology in business

The role of technology vis-a-vis business is to enable business.

What does enabling imply? Let's look at how Nature enables life on the planet. Trees for example provide food for the planet, homes for birds and clean up the atmosphere so life can be sustained and so on. Trees enable life on the planet.  The eyes, the heart and the immune and nervous systems enable life. One never hears or has any inkling what some of these enablers do unless there is a problem. Enabling a system implies the following:

1. Critical support of system goals and objectives over the life of the system. 
2. Enablers are rarely seen or heard from.

IT has always been considered an enabler of business so let's take a look at how well IT has enabled business using the criteria we just defined.

Most businesses have two types of operations - an internally focused set of activities (HR, accounting, G&A) and a market-focused set of activities (product development, marketing, manufacturing, sales, customer service).  Clearly, the former is a stable, well-defined set of activities and is well supported by IT while the latter are more subject to change, less well defined and are simply more complex. This latter area is where accurate information is needed for decisions and comprehensive business automation is needed to stay competitive and grow. Traditional software and ERP vendors do an excellent job with financial book-keeping and internal facing processes and most ERP vendors have extended their functionality to support some of the market-focused business needs. However, all of these functional extensions have not been able to keep up evolving requirements, are excessively complex, expensive to customize and maintain and do not effectively enable (as defined above) these critical customer facing processes. 

Today's customer facing business processes need to be built on a foundation of flexibility, collaboration, mobility, process automation and information-enabled decision making. IT managers have to face up to dealing with point solutions, multiple products and vendors, integration challenges, customization, cost and excessive complexity. This is where today's IT is no longer delivering on the promise as a business enabler. A Gartner CIO study conducted a few years ago listed IT as one of the biggest stumbling blocks to change.

Cloud computing is a technology that will enable business by lowering costs and complexity of IT. However, there is a dire need for business applications that complement and extend the traditional ERP-type application to genuinely enable business - transparently and effectively.

Cloud Computing

A good way to look at Cloud Computing is to avoid using definitions suggested by analysts and the media but to set your own expectations of this emerging IT trend. IT has handicapped business due to excessive complexity, cost, time to value and not delivering on business value - information, decision making and business automation. For cloud computing to make any sense at all it must address these business issues with greater transparency and effectiveness.

Cloud computing is a major variation on an old theme of remote computing. It combines the reduced cost of IT infrastructure - hardware, software, networking - with faster, reliable, lower-cost connectivity and advances in requisition and allocation of IT infrastructure coupled with dedicated management. This addresses the growing cost, complexity, performance, scalability of IT infrastructure while ensuring a very high level of security (often higher than what can you currently have on premise). Amazon, Google, Rackspace and other vendors offer such services. If you are looking for IT infrastructure that can be quickly, easily and affordably requisitioned and scaled up or down as needed, then cloud computing is just what you need. The alternative of running or expanding your own data center simply does not compute anymore unless you are big player in the IT space i.e., you already own large IT assets and the organization to manage these assets.

The greater business value of cloud computing is based on applications and services that can, like the IT infrastructure, be quickly, easily and affordably requisitioned and deployed. Examples of such apps and services are CRM apps (read salesforce), collaboration (Google apps), marketing and other so-called SaaS or on-demand applications. The list of SaaS or on-demand applications is growing. Setting expectations and properly evaluating such applications based on your needs is critical. Here are some of the things you should be clear about before looking at alternatives:

1. What functionality must you have and would like to have? Stop thinking of all the bells and whistles and customization as in the past. If technology can enable 80% of your business effectively (not 80% of business functions but 80% of business results) it is doing a great job. The remaining 20% is not core, is subject to change and not worth the cost of automating on an ongoing basis.
2. Is the functionality needed dependent on data in your ERP or other internal applications?  Does the information created in the application need to be shared with other applications such as ERP?
3. Usage - who will use it, how frequently will it be used, mode of usage (remotely, at work), how will the app be accessed (phone, ipad, PC)
4. Training, support - how much is needed, how savvy are your users?
5. What's your budget, when do you want this live?
6. Is internal IT going to support this effort?

Bottom line: Cloud computing and on-demand apps are the future - for all the right reasons. Get informed, get going to the cloud and get ahead of the competition.