My First Digest

Beyond the crisis - the importance of wealth creation and enterprise software

Mon, 05 Jan 2009 05:18 GMT

2009 looks bleak, people are nervous, businesses have found the handbrake and sounds of changing gears without using the clutch can be heard.

But a crisis has a side effect; it spurs changes and new ideas that moves society forward. Even stronger, it cries out for changes and new ideas, just cost-cutting your way forward does not cut it.

As I said to my EI friend Dennis the other day - you have two choices:

Try to understand what's happening and get a grip on the future so you can prepare a defence (futile on all counts I would say), or
put on your best running shoes, a headlamp and a big smile as you venture out into the dark in search for opportunities.

I'm more inclined to the latter approach.

So let's put on the headlamp and do some nocturnal orienteering:

The credit crunch is scary, the loss of share and house values is devastating for pension plans and of course the loss of jobs is heart wrenching. But they're all inevitable results of the mechanism in how society works; either by the downs in the natural up-and-down imbalanced nature of things, or by the bigger shifts in "ways".

Imbalances and natural ups-and-downs are only surface effects, the core issue is how fast and efficient "real" wealth is created in the society as a whole. An increase in "real" wealth creation will affect us long term and should balance imbalances in short term, so that's where we should focus.

We've done the big leaps from hunter-gatherer to agriculture, and agriculture to industry moves - so not much to find there, and ICT has done it's job over the last 30 years in organisations/enterprises (the hubs of wealth creation), or so it "seems".

I use the term "seems" as I'm not so sure it's potential has been exhausted.

Academic studies are a bit vague as to specific figures, but while digging around I found at least irrevocable signs that IT in the industrial enterprise did have a serious impact on wealth creation, and maybe more interesting, it was an accelerator for the impact of other capital investments and labour. This should not come as a surprise as we have seen the IT enhanced efficiency of industrial production, logistics and other near-linear processes.

A surprise was the indication that IT did not have a similar impact on the services sector, there's even talk about an initial negative impact moving towards a neutral impact over time.

Why this? IT applied to linear and physical processes is what has been deployed, it's the kind of software that can run most of the industrial core and thus their main value creation processes. It's the software that some vendors have grown big by, SAP and Oracle being two good examples. In broad terms this enterprise software market is about 228 Bn $ per year.

On the other hand the services sector (and in parts of the industry sector), where the processes are much less linear, where people are involved, processes changes paths all the time. Such processes are called practices, exceptions, ad-hoc, knowledge worker or manual processes - and the software delivered is almost without exception non-process based. These are mostly ad-hoc application (linked or not) to aid ad-hoc writing, analysis, communication, keeping and sorting knowledge and recording of the ongoing.

More or less the only process based software that is trying to add some structure here would be BPM systems, still a fledgling and small market at 1.5 Bn $ per year. Beyond that, the processes are mostly run by "technologies" like organisational hierarchies, budgets, deadlines, email and meetings (methods that are accepted as a "given" and subsequently modelled by BPM, thus effectively limiting that IT solution long term in my view).

These types of processes are what I call, as you would expect if you've been here before, ERP (Easily Repeatable Process) and BRP (Barely Repeatable Process).

Now to something interesting: If you take world wide GDP (for the lack of better) as a reasonable measure of wealth creation for different sectors, then adjust it with some rough estimates as to where ERP and BRP type of activities happen you could deduce that ERPs stands for about 32% of world's wealth creation while BRPs stand for roughly 64%. [Note below]

So now we have this situation while we enter 2009 looking for the "yet to be used" wealth creation acceleration methods:

ERP, IT and wealth creation:

- 32% of world wide wealth creation.

- 228 Bn $ of software delivered per year.

- Mature technologies, widespread use.

BRP, IT and wealth creation.

- 64% of world wide wealth creation.

- 1.5 Bn $ of software delivered per year.

- Early or inexistent technologies, very early adoption.

If IT could do wonders for past world wide wealth creation by handling ERP better, why should it not have at least the same impact on future wealth creation if it could handle BRP better? In fact why should it not have twice the impact? Of course it could, it just have to be done and should thus be a worthwhile activity to focus on in 2009 and beyond.

As you would/might know, supplying an overall BRP solution is my particular area of interest and activity so I am definitely biased, but quite happy to do my bit to prove if I'm right or wrong.

[Note: GDP per sector: Agriculture: 4%, Industry: 32 %, Services: 64 %.

Estimated percentage of a sector's people processes being BRP: Using GM in 2007 as a measuring stick with 7.5% in Admin costs -> let's assume that 2/3rd of that is non-linear or BRP -> 5% BRP and 2.5% ERP on top of 92.5% core ERP or BRP.

Thus W-W ERP GDP share would be: 32% x 0.95 + 64% x 0.025 ≈ 32 %

And W-W BRP GDP could be: 32% x 0.05 + 64% x 0.975 ≈ 64 %]

Anatomy of a financial crisis - where are we going?

Mon, 29 Dec 2008 02:57 GMT

"How could this happen?" - the big question in two parts:

- What was wrong prior to the crisis.

- What triggered the crisis.

Why bother with "what triggered it"; is it not fair that you react and sell all your too expensive shares when you find out? When you're oblivious then see the obvious shall you not act quickly? And anyway, any reasonable construct should withstand a sneeze.

As a good friend of mine puts it - "why all this use of "Panic"? It's nothing but good sense kicking in!"

What was wrong is slightly more interesting. Of course something was skewed, off-balance, out-of-whack: In 87 share prices had gone up faster than ever and to scary P/E ratios, in 1998 many Asian states were into bubbly growth with precious little currency reserves to withstand even the smallest pin prick, the dot-coms and their eyeballs became eventually too ridiculous for common sense, as did 100% mortgages without a credit check this last time.

But then, nothing new in that, off-balance is the normal, it is the nature of things and the reason for having markets. Actually off-balance drives us forward so do not change that.

In reality there is the only one important question that should be posed:

- Who were confused by the sudden reality shift and how did they get out of confused mode again?

Confusion often leads to participants acting alone and against each other. Confusion leads to short term action steered by self-interest without taking the usual long term or global views into account.

In 1987 it was the investors and share "market" that got confused and yelled "sell, sell, sell" even if it pushed all prices even further down. Financial institutions and governments kept a reasonably cool head and the whole thing stabilised itself in short time when the confusing lags in the systems were overcome and new and reasonable price levels were established.

In 1998 it was the financial institutions that became bewildered and confused. The process took far longer than in 1987 as financial institutions played, undermined and gamed against each others for a long while (as they're supposed to do). The turning point seemed to be when the US authorities (cool heads) pressured the largest Wall Street players to sit down, physically in one room, and bail out Long-Term Capital Management in a concerted effort.

In 2008 the confusion took one more step up the ladder, this time the governments became bewildered by the need for an immediate de-leveraging of a huge imbalance, and confusion ensued as politics entered the game. Financial institutions had to be saved and money supply increased (only universal consistent acts so far). But then the local industries became an issue, crisis-wise irrelevant but politically even more important. And that's when I see the parallel to the earlier crisis' when the players acted with short term self interest that inevitably worked against the interest of others and ultimately themselves in the long term - something that prolonged the crisis every time.

I wish I could read about something else than bailout of local industries (inevitably counter to the interest of other countries) or dramatic one-sided lowering of VAT (again, same potential negative effect on other countries).

When I hear no more "local or national interests", only about concerted global actions without a trace of short term self interest I'll declare the crisis as over.

Long Tail and Long Snout strategies

Mon, 15 Dec 2008 06:45 GMT

The Long Tail is a great image for a strategy to get the most out of large and mature markets like music and books.

But what about new and virgin markets? When a product is new and unknown and uptake depends on understanding, which is inherently slow? When the product "creates" the "new" market so to speak?

Like the car that did not "take off" until (with the T-Ford) 30 years after the first patented automobile. Like Lotus Notes that took about 7 years in the market and version 4 before they started to talk about "explosive growth".

What could be the image for this strategy be (if indeed any strategy existed)?

That's what I'd call "The Long Snout".

[Hat tip to Thomas who got me thinking this morning]

Economic growth - what's next?

Wed, 03 Dec 2008 02:30 GMT

What's the most repeated word we hear these days?

GDP.

If it goes down a recession is declared and all hunker down, stock markets tumble and worse happens.

GDP is defined as the total market value of all final goods and services produced within the country in a given period of time. It includes government as well of course. By the way, GDP is in principle same as GNP, differs only in how the import - export equation is worked out.

So how to stop a recession from happening? Simple, very simple, here's the answer:

You write a paper (you choose the theme, it does not matter what) and call it a Report. Slap an invoice (any sum, big is fine) onto it and send it to me.
Upon receipt of your "Report" I'll add some notes and scribbles on the bottom. Then I'll send it back to you with another invoice for "services rendered". Your invoice is balanced by my invoice by the way.
Now you slap more notes to the thing, add another invoice and send it to me again.
Rinse and repeat as fast as we can.
At the end of the quarter we'll add up all the invoices and send them to whoever do the GDP calculations.

Voilà, GDP miraculously increased and we've done our duty.

Obviously this is not what an economist would suggest, too easy to criticise. No, some have a much better idea: Consume more!

You hire me to produce some consumer goods and pay me for that.
I use the pay to buy the product I just produced so you have funds to pay me next month.
Rinse and repeat.

Voilà, we all do our duty.

To help kick start such cycles Mr Darling of the UK has lowered the VAT and his colleagues in the US are using all the tools in their tool box to get the US consumers going. And all rejoice when the not-too-bad numbers from Black Friday came in.

Not the smartest of moves this, pure self delusion to be honest, but what to do?

Wealth creation is the crux, real increase in wealth creation is even better.

Go back in time and see what really made a difference in wealth creation: Every time we did a leap in productivity. Every time the equation of value created per resource unit spent increased.

It happened when agriculture and domestication of animals started, it happened when industrialisation happened, it happened when IT made it's impact on production and logistics.

And now, in one dramatic moment everybody stopped up, is looking around declaring loudly "we have to rethink our strategy", "we have to revisit our plans", "we have to do things differently". And the best part, corporate purchase-on-autopilot just because we always did is history.

Excellent. Bravo. That's what it's all about, do things differently.

Better agriculture, slicker production or tweaking IT to refine logistics or sales processes will not deliver the needed leap any more. They've done what they can. Thank you, but now is the time to look elsewhere.

We've done what we can with how we plough and harvest, with how we move stuff around efficiently, in how we produce with less resources, in how we move people into shops to keep the money flowing ever faster. All good, but we left one small item behind: How people work, how they spend their time, how to increase knowledge and it's use (aka innovation), how to create much more in less time while making the resources (people) even more enthusiastic and happy so they'll become even better.

Funny really, as that is where most of the resources go - not only when you're at the office, after all you have to live and consume when not working as well. We cannot shut you off after work hours and save resources. So getting more out of people while they work is a double whammy - and I'm not talking longer office hours, I'm thinking of innovation, less waste of time, smarter decisions, smarter processes, less fluff and much more.

There are billions of people delivering services - directly as a value to the consumer, to other firms or to their own firm. And they all work using paper based methodologies in millenniums old frameworks. And with "paper based methodologies" I include current crop of IT as they're still documents and forms based, include business rules and hierarchies, and reports by transactions as has been the method for hundred of years.

Business Models (as in how to use resources to deliver a value), workflows and methods are in for a change.

The best part is that not only is it the objective right way to move, it's now subjectively seen as the right way as other alternatives do not have the promise required in such scary times, and most important, the lull allows for the time and space to give it a go. When all was at 100% of capacity and nary a cloud was in sight nobody wanted to do anything different, neither did they have time for it.

With the cold shower and dark clouds all over all of that evaporated and a new tune can be heard.

I'm elated as suddenly the obvious becomes visible. And now, roll up your sleeves and get going.

Luckily my little project is built for precisely that, so I'm reasonably happy.

Business framework explained - the true version

Tue, 25 Nov 2008 02:17 GMT

Business is about process, typically starting with a customer calling, then proceeding through a sequence of tasks and activities ending with the delivery of some value.

No process exists unless there is a framework. And for that reason business have a framework, an old and proven one. Here's a condensed list of it's most important parts and how they work, in no particular order:

Meetings:

So we can get together, listen and pounce on presentations or remarks made by those we do not like. Actually meant to be a place where work is distributed and then later dissected.

Budgets:

AKA the elevator. This nickname is due to the fact that the boss wants higher sales and lower costs while you want higher costs and lower sales to make your life easier. Thus the budget process involves sending up, sending down, sending up, until you agree on something in the middle that nobody will be happy with. The result usually have a "© Walt Disney Inc" in invisible ink in the bottom right hand corner.

Deadlines:

This is important so you can keep your eyes focused at the end of a process and avoid having to focus on the beginning of a process as this might lead to immediate action that will ruin your already busy schedule (emailing, meetings, creating charts and bullets). Beside the excellent time-wasting method of meetings this is one of the best ways to limit profits, it's built in.

Business rules:

This allows the top managers to avoid unauthorised thinking among subordinates knowing that all purchase requests over ten grand will pass through their inbox, or that no credit check applies to returning customers. The credo being; less thinking is good for the company.

Organisational charts:

Maps out who's can direct who, who's to talk to who and other dream-like concepts regarding human behaviour.

Here's a good example from Fortune magazine in June 2006, left side is the official dream-world chart, right side maps the actual interactions over time:

Now, add a sprinkling of important support tools and you'll have the business-in-a-nutshell:

Email:

If we're not in meetings we receive and distribute work per email. Sometimes we cc to bosses so they can see how busy we are, or to remind the recipient that the "boss is looking". The Inbox is where about 1730 unread emails are kept safe as we usually read mails under the table on a BlackBerry while in meetings or at dinners.

Spreadsheets:

This is how we try to make sense of data. All programs and large systems that produces data have a spigot on the side into which you can connect your spreadsheet program and suck out meaningless data. Then you can apply some meaning to the data, your own meaning of course, before you go to a meeting to show the resulting fancy pie charts. Then somebody will hook up their spreadsheets to the projector and show more and very different charts, made from the same data but with their instead of my meaning applied. Jolly good fun.

Powerpoint:

This is when you'd like to convince a group of people. Very useful as most such programs comes with templates. Just fill in the blanks with sentences you'll find in other places and charts from your spreadsheets. Then at the meeting you can keep your back to the audience and recite from the bullets, no eye-contact nor rehearsing required.

Accounting:

A method where incoming papers regarding any kind of money - going out or coming in - is read and interpreted by highly trained people in the so-called accounting department. When they have made up their minds, they slot the amount into a specific "drawer" called an "account". Every now and then an outside interpreter arrives to see if the right drawers were chosen. More frequently the managers of other departments pays them a visit and try to convince them that certain sums should be in different drawers. This because the change will make them look better and give them extra bonus. Sometimes they're able to talk the accounting staff into it, sometimes not, it's after all a matter of guesstimating inside very elaborate and vague rules written in non-human-compatible languages.

In sum, despite the light hearted tone, this is in fact the very core of the business framework. If I suggest it's a buggy framework I would be off the mark. In truth it's truly, sincerely bad.

Worse, this is the framework accepted as the basis for most business software, believe it or not. Frame-working a bad framework is the result.

If you consider implementing some enterprise software, do the acid test: Does it reflect the organisational chart? Does it have business rules? Does it pivot around meetings? Does it interact with email? Does it rely on dumping data to spreadsheets to make sense? Any yes would indicate you have a system at hand that will try to manage a bad framework in order to manage a process, that's like driving a car by driving the driver. Not smart.

Are there better ways you might ask. To which I say, yes, there is.

Simple; business software shall model reality not the existing non-IT-based model.

The story of our times - time to abolish accounting as we know it

Wed, 19 Nov 2008 03:49 GMT

Imagine this, you're out driving... [Reality references in brackets at the bottom of the post]

But the windshield is not there, instead you have a standardised set of reports [1] coming up on a "dashboard" in front of you [2].

The reports are supposed to give you an idea as to where you are heading and what dangers might lurk, or jump out from the kerb.

The reporters are not in the cabin, they're under the bonnet somewhere, peeking out through the grille [3] delivering information to your windscreen-replacing dashboard. And they're trained to interpret what they see, or think they see, armed with thick manuals of standardised interpretation methods. Every now and then an inspector [4] joins the ride to check if their reports last quarter more or less reflected the standardised interpretation manuals.

(Image from idashboard.com)

Obviously the lag is bad for your driving prowess, but luckily you're allowed to roll down the window so you can stick your head out every now and then and get a fleeting glimpse of what's happening [5]. Coming back to the "dashboard" again you're often able to correlate that with what you saw. The best drivers are often the ones that stick their heads out frequently.

Obviously the speed of your vehicle is seriously hampered by this and an Elk jumping out of the woods would often hit your windscreen in full force, an occurrence often termed a "Black Swan" these days despite the fact that Elks do this all the time.

But you have masters, the owners of the truck [6], and they pay you well for speed and volume of goods delivered. This will inevitably lead to you convincing the masters that they should give you funds to buy a bigger van [7], preferably with a bigger engine and more refined dashboards to give at least an illusion of control. And the masters often comply while your driving expertise increases over time.

With speed and size Elks are flattened and other little wild animal corpses simply get stuck in the grille. But the size and speed increase makes sudden bends in the road harder to handle, although as long as the road is straight and the maps are good, it works.

Some drivers are in the business of fuel delivery [8], and their trucks used to be small and nimble driving at low speeds where the driver would have his head out the window all the time [9]. In those days the dashboard was not electronic, it was paper-based [10] and delivered by hand, so keeping the head in the wind was a must.

But with new dashboard technology [11] the fuel trucks grew in size to huge juggernauts, the speed increased to warp speed [12] - and for awhile the masters were happy while the driver's [13] bonus made them very rich men (mostly men I'm afraid, manly business such truck-driving).

The inspectors being soon overwhelmed, cozied up to the masters and the drivers crossing their fingers and hoping the maps where good. The traffic cops [14] and some traffic analysts [15] on the other hands saw a different world out there, almost blown off the road when the juggernauts passed at warp speed. Some started complaining, but as things stood, few legislators [16] were keen to do much as the speed and volume of fuel distributed was overwhelming and all were happy and able to live in big mansions and drive big trucks themselves. And BTW, the police chiefs and legislators saw even less of the reality than the drivers or the traffic cops.

Until some mid autumn day when the first truck hit a tree [17] and went up in flames, then another were saved in the nick of time [18], and another [19] and soon all the fuel trucks went into a crawl. The other trucks, delivering normal goods soon realised that they too had to slam on the brakes to avoid the suddenly obvious dangers out there, then move slowly forward to save fuel that instantly increased in price [20].

The traffic cops blew their whistles, and some entered some of the biggest trucks and took over the steering wheels as the drivers had been reduced from cocky one-hand-on-the-wheel road cowboys to shaking bundles of nerves. Even a new and unblemished police chief [21] was called in, increasing hopes for a solution. We have yet to see if he'll be radical enough, perhaps we'll only see more traffic cops?

And that's where we are today. And now we're trying to find out what went wrong and what to do.

Would lower speed and smaller trucks been better? Of course. Would more traffic cops out there been helpful? To a certain degree, but only very limited unless they took over the wheels which might have reduced the interest of the masters to put up money for the bigger trucks.

Nope, the answer then as today can be found in the driver's (and everybody else's) ability to see reality as it is. The dashboard reporting system that was developed for paper based technology worked adequately at low speed, with small trucks with drivers hanging out the windows. But not anymore if we want to grow the economy.

What we need is a transparent windscreen where the driver can see reality without a filter. And we need it now.

So forget the discussion about "more traffic cops" or more "traffic rules" or even smaller trucks at lower speeds. The discussion must focus on the way the drivers are given access to reality.

The indirect representation of reality by proxy, the transactions, in today's reporting and management systems has to go, it must be replaced with a representation of reality directly.

[1] Accounting rules, GAAP, IFRS

[2] Management systems, accounting

[3] Accounting departments

[4] CPA

[5] Visit customers, people at the front lines and in the plants

[6] Shareholders

[7] Capital increase, IPO

[8] Financial institutions

[9] Your local bank that knew all the townspeople

[10] Good old bound ledgers

[11] Enterprise software

[12] Derivatives and other creative financial instruments

[13] Wall Street workers

[14] SEC et al.

[15] Analysts (duh)

[16] Washington, Brussels, Westminster etc. workers

[17] Lehman Brothers

[18] AIG

[19] Fannie Mae, Freddie Mac

[20] TED Spread

[21] Barack Obama

The crisis: Which companies might prosper - two questions

Mon, 17 Nov 2008 03:10 GMT

The other day I got a newsletter from my old business school, INSEAD. The first paragraph was all about how serious they were about the current crisis, their dramatic and immediate cuts in travel costs given as a prime example. Then the newsletter proceeded to pitch an assorted number of conferences, all requiring travel over vast distances for the rest of us.

Unintended I'm sure, but nevertheless a perfect example of "grab the helmet and dive into the ditch" that is apparent everywhere. Jump first, think later and hope that it pleases the investors and saves the day. Action more important than thinking.

This not without reason as investors everywhere are asking themselves (and others) "what companies show resolute behaviour in the face of the difficulties?" as well as "what industries or companies could be recession proof?".

And it's not only investors that are asking, employees and vendors are in the same boat.

I think the questions are the wrong ones. This is not a "normal" downturn, most agree that this is a systemic failure.

Thus the first question must be if the "system" has infiltrated a specific company.

As discussed earlier, with "system" I allude to gaming the quarterly results, having off-balance items or any other structure created to make things look better, leveraging anything but core activities - in short the creative use of double-entry book keeping.

Take your local bank that has lent money to home owners and local businesses for decades using local knowledge keeping the loans on their books and a keen eye on what their creditors are up to. Now they're doing it the "new" way where loans are bundled and sent off leaving the local bank to earn money from placing loans without any risk. So now the local bank are good at pushing loans but have forgotten it's former core knowledge. In other words the "system" has taken over.

Do big conglomerates need to have "three legs" of which one is "investment" - hard to understand for an investor, employee or client and a funding volume far outstripping what the original value-creation required?

Spreading the "credit risks" or "enhancing the return on free cash" becomes quickly entangled in the "system" that has failed, so a "yes" to the question should be a warning signal.

The second question would be if the company is willing to face changes to customer behaviour, now.

As mentioned earlier, I do not think a "need" disappear when a customer becomes shell-shocked, but I'm sure his behaviour might change.

Plans for expensive family vacations being replaced with budget camping trips could be the first step. Second step could be that the kids loved it and it becomes the favourite summer activity.

The luxury hotels that have cut their costs waiting for all to go back to "normal" might never see "normal" again while camping outfitters will be hugely surprised and perhaps not geared to grab the sudden opportunity.

That would be the second clue I would be looking for - is the particular company I'm looking at revisiting it's strategies, are they in fact spending time with their customers and even new potential customers to try and understand what opportunities lies ahead? Or have they merely grabbed their helmet and is now carefully peeking out of the ditch?

In sum I would look for companies with these traits:

No-nonsense reporting, zero gaming of financial parameters, simple and visible value delivery.
Clear signals that the strategy is being re-visited.

I will be sceptical if I see:

Non-core financial engineering and/or too smooth results reporting.
Ditch-diving and blind cost-cutting unless the strategy has been re-visited and re-engineered already.

Obviously there are many more questions to be asked, but this would be my first filter.

Contrarian or not? A consensus that consensus is wrong.

Mon, 03 Nov 2008 06:42 GMT

As the world has it's pangs of panic and licks it's wounds, many have their helmet on or at least wonders what went wrong; one message comes up more and more frequent: Consensus is dangerous, be a contrarian.

Fred Wilson's recent post "Conventional Wisdom Will Be Wrong" is not alone.

Mind you, I do agree, I'm merely a sceptic smelling yet another consensus; this time that contrarian is good, a consensus that consensus is wrong. Spot the Paradox I say.

Taleb (of Black Swan fame) is often called upon as witness, but to me it seems one fact is all too often forgotten: Taleb is not simply contrarian in principle, he's a sceptic in principle. And he had some very practical ideas as how to translate his scepticism into action. Even in his book, long time before the latest downturn his hedging was described as based on two issues: Unexpected big dips in the market will occur and a sudden market fall is faster and steeper than a market rise. And lo and behold, that worked.

My point being:

Being contrarian as a principle does nothing, that would be rather confusing.

Being contrarian based on specific understanding, now that makes sense.

Being a sceptic leads to becoming a contrarian in specific cases, no shortcut available there.

In fact Fred partly acknowledges the point by saying "Read everything you can. And then come to your own conclusions. It is better to be contrarian in times like these. But do it wisely and don't bet the farm." But he should have added - start out as a sceptic!

Understanding "everything" is a bit too much to request, where shall I start looking, what signals shall I attune my radar to? That would be the crux of the whole exercise.

Here's a suggested sceptical method, mentioned a few years ago on this blog:

"The more I hear a 'Truth' the more I'm sure it's wrong"

It's based on some very basic human traits:

Intuition, gut feeling, often "knows" a long time before our conscious brain, and sometimes we get faint warning signals from somewhere deep down. But signals are not signals unless they differ from our conscious attitudes and actions, thus you've been handed an internal and personal conflict.

Thing is, we do not like conflicts, but we know the simplest way to handle it; smother it, overwhelm it with peer consensus. Repeat your conscious convictions and solicit agreement, the more the merrier and with that the internal voice of conflict is muffled. Much backslapping and nodding happens and the annoying gut feeling slowly loosens it's grip.

As an outsider my radar goes bip, bip, bip when I hear statements of some "Truth" being repeated. I smell conflict between intuitions and current beliefs, a clear call to challenge that "Truth". And believe me, that has led to many eye-opening discoveries over time (not always right I might add, but still). Discoveries, ideas or theories that are frowned upon of course, that comes with the territory.

I'd suggest you try it, not a bad path to some contrarianism with meaning.

The BPM path - a blind alley

Thu, 30 Oct 2008 03:48 GMT

Another not-so-meek enterprise software view, stubbornly inviting more head shaking. This time about the rising wave of BPM and similar products:

ERP and other classic "back office" systems could lean on (actual or virtual) physical frameworks - an assembly line, pipes and pumps in a plant, point A and point B in a logistics scenario leaving the choices to be limited to "by sea" or "by air". Stuff happening underway was appropriately termed and handled as "exceptions".

But with such process software pushing maturity while customers calls for systems to help running all the other processes, BPM and similar systems stands out as perhaps the most important "new" offering by the big vendors and small alike. Not unexpected this, as "all other processes" are the processes involving people, massively dwarfing the linear processes in value-added while under-supported by IT.

Again, the current framework as described in my last post (organisational hierarchies, meetings, budgets etc.), is simply accepted as the architectural underpinning for the BPM effort.

Note the M (manage or even modelling) in BPM, a tell-it-all: It sets out to manage (model) the given framework in order to run and control the processes. Budgets, business rules, organisational roles, transactions, meetings - all important parameters for the BPM.

If work was like a water flow and the given framework was the pipe it flows through, then BPM would be the system whereby pipes were shifted from side to side and valves opened and shut to direct changes to the flows. Good enough if the flow is water.

Not so good if the water molecules had a mind of their own and actually were able to make directional decisions underway. Funny thing, people can. And more; it's wanted because people are smarter than machines and that's why you hired them. Ever broken business rules or botched the main systems just so you actually can get your job done? But of course you have. Ever noticed that BPM descriptions mostly are limited to rather linear snippets of the overall flow and never the whole shebang?

Another framework is called for: A framework that allows the participants to choose the best path while still allowing focus on the task at hand - and with no cracks for work to disappear into! The framework must also reflect and describe the overall strategy so all can see beyond their own stretch and into any bend further down the hill. A riverbed with full view to the whole river instead of a closed and managed pipeline.

That's when the full potential of groups of humans with a common purpose - aka organisations - will be unleashed.

And in my view, for that purpose BPM is built on false premises, it will simply not do. Department of blind alleys.

PS: BPM implementation costs of 100 - 500 k $ are mentioned, while still giving 100-200% ROI - and that despite the limitations. Says something about the potential for an alternative path forward that does not end in a wall.

[The Obvious Disclosure: That's the stuff I'm tinkering with, a framework in itself running any process directly.]

The Everything 2.0 discussion - the real issue

Wed, 29 Oct 2008 03:05 GMT

Been itching to jump into the 2.0 discussion but have held back as I am a bit counter-every-theory... but why the heck not, risking much head shaking allow me a quick brain dump on one aspect of everything 2.0:

Work is a process, tasks in a sequence. Any type of process requires a framework, just like water will have to find the riverbed to become a river. No framework no process, even if the framework only resides in your head when doing the weekend chores.

The framework we have for people processes/manual processes/knowledge work/Barely Repeatable Processes is first of all the organisational hierarchy to distribute and control work, plus the usual building blocks like deadlines, budgets, meetings (the most important cornerstone) and double-entry-bookkeeping (basis for the ubiquitous "data models").

With that framework controlling the processes, delivering work and organising feedback we have system which youngest part is only 514 year old, oldest harks back to before pen and paper. And the framework-science; management theory, has not made huge strides since the Roman Army despite Harvard Business School, McKinsey, BCG and 40,000 management handbooks in print at any time. Dilbert is not the only one unhappy with that framework.

With Everything 2.0 hope arrived, and many threw themselves onto it seeing how these methods often allows work to happen outside the hierarchical framework. It felt good for awhile, and everybody talked about the dawn of something new.

In 2005 Hugh told us "somebody asked me to explain why corporate blogging works" talking about the membranes surrounding different parts of the organisation and suggested that "Blogs punch holes in membranes like like it was Swiss cheese". Precisely.

But:

There is one thing missing; such methods do not deliver a new framework. And without a framework no process. And without process, no enterprise.

Take a wiki - I often use the term "sandbox", fascinating place to be, but not much process-wise; little or no process ownership and thus no progress accountability. Excellent though as single task, single question, single write-up methodology - Wikipedia, SAP's SDN/BPX and in my early Linux days; the butt-saving newsgroups.

Actually, being even more "counter" than Dennis who in a guest post solicited this comment from Tim O'Reilly: "Dennis, this post demonstrates a shocking ignorance of what Web 2.0 is really all about. It’s the move to the internet as platform..."

In my reality Dennis understands very well what it's about - an ignorance for what enterprise is about; a social group with a purpose that requires sequential tasks. An environment that is fully dependent on a process framework - the context and process he calls for - and the Web 2.0 does not deliver that. At best it is a set of nice and useful single-task tools and the "internet as platform" is pretty much a non-core issue and beside the point.

Ah, well, just had to pipe in... :)