Value Co-creation In The Age Of The Customer

In this Age of the Customer (AoC), many traditional businesses are under threat and need to change. Organizations often have the need to rethink their business strategy and operating model – but they often don't know how to approach the problem. Today, they tend to ask others to do it for them, when in reality; they need to do this for, and to, themselves.

We’ve been helping our clients rethink how they deliver value to their customers – thinking about how to industrialize their approach by working “Outside-in” – bypassing the political challenges of individual silos. The central part of an engagement is normally focused around a “big-tent” workshop format (with 20-80 people in a room); where cross-functional teams are facilitated and guided to elucidate a set of “service propositions” that together form the core of a future-state – a new way of working, or a new way of engaging each other to solve their own problems, even a new operating model. Along the way, they will use a number of core Forrester techniques– from persona design, through customer journey mapping … before getting down to processes and metrics design.

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Choosing The Right Shower Vendor

 

In this modern world - where everything is in the age of the customer, I was looking for advice on which vendor I should engage in my strategic Bathroom Portal Modernization (BPM) program. So, I reached out to my friendly CIO Analyst Consultant, outlining my need for advice and guidance and this is what he came back with.

“Apple do a very attractive and shiny iDoor for showers but it only fits their own bathroom series – looks pretty, sort of works but they’ve only got part of the bathroom modernized. Google produce a huge range of doors designed by rank amateurs. Depending on which training school they went to, you’ll get either the framed, or frameless, shower door. While cheaper than the Apple door, once they’re fitted, they become brittle, require ongoing customization and can fall off without warning.

It’s a tough choice – you could also punt for the Microsoft variant. It doesn't really fit anything and requires upgrading annually at a significant cost. However, there are thousands of MS Doors consultants who will come in and rejig your measurements and overall bathroom design and sell you new mirrors, cupboards and shower mats, which are all color coordinated. Only problem is that each entails separate service agreements and you could end up with water all over the floor.

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What Is The Value Of Good Health?

What's the value of being able to operate at the peak of fitness and health? Is it less stress? Is it longer life? In an organizational sense, is it being able to change and adapt more easily? Is it being able to outperform your competitors in a race? Is it being able to set appropriate expectations for projects? Does organizational health lead to better longevity?

A recent crop of customer conversations prompted this line of thought. One customer asked how to prove the case for cultural change. Another wanted to quantify the value of successfully introducing a new set of IT systems. Another wanted to develop a solid business rationale for getting organizational functions to work together - to stop playing silo-oriented games where the chiefs fiercely protected their fiefdoms at the expense of the overall enterprise. Others have asked about project failure rates.

This prompted me to draw the analogy of trying to prove a negative. In one of those conversations, I found myself challenging the client to answer the question of quantifying not having functions work together; of not implementing change in a robust fashion. To be honest, this could have easily been any number of conversations over the last 6 months. 

Really, these questions were about proving the ROI disciplined change. We have become so besotted by cost reduction, that we fail to see the value side of the equation (if productivity=value/resources). And while we might all agree it’s blatantly obvious that having organizational functions that work well together, and having successful projects … it’s quite hard to put figures around that.

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“All Projects Are Business Projects”

I read this somewhere recently – I think it was the CIO of Intel, Kim Stevenson (quoting IT folklore). But it stuck in my mind, long after the link that I harvested it from had evaporated. I like it since it gets to the heart of the discussion . . . what’s the business problem you are trying to solve. So often I find myself fielding queries where the people on the other end of the phone have decided on a technological solution (a hammer), and are now looking for a problem (the right nail).

The business doesn’t want a hammer or a nail; they want something of value – the house. It’s not important that your solution has this product or that techno buzzword. They don’t care for how cute your big data credentials are, or whether your mobile mojo has trumped your social ace in the hole. These sorts of trends – big data, mobile, social – are just like, well, like the context within which the house sits.

Of course, we need that application delivered to our customers on a digital device nearby to them. Of course, we want that engagement to leverage the history of what we’ve done with that customer in the past – their wants and preferences taken into account. Of course, we want to leverage what we know others in the same context considered the right choice. But we also expect the customer to channel-hop to the Web, and then perhaps wander into a branch or store, and ring up about it to see where things are at (WISMO – what is the status of my order).

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Why All The Apprentices Should Be Fired

Watching a recent episode of The Apprentice, I was struck by how completely disorganized they all were. I realized that it didn’t matter who the PM was on the “team”; they all suffered the same problem – there was never enough discussion of goals and objectives, never any discussion of needed responsibilities and the roles that would carry them out, no clarity on ownership of those responsibilities (trust and empowerment). Instead of a consideration of what is needed, there is a rush to action . . . as though just starting will get them to the goal sooner.

As a result, there were always people standing on the sidelines wondering what to do – always people trying to lord it over others, always errors of judgment, missed opportunities, lack of transparency, and a complete failure to meet the goals and objectives (set by Lord Sugar).

Doesn’t that sound familiar?

So many businesses are similarly disorganized. Most organizations struggle to balance a wide range of issues – the differing demands of customers, the need to cut costs, ensure compliance, respond to the actions of competitors, etc. Point is that without an integrating architecture; these conflicting challenges spawn weak execution and organizational thrashing (just like the teams in The Apprentice). The culture in these organizations focuses on appeasing the leaders of the silos, with little thought put into what is needed to achieve the ultimate goals and objectives. And for most commercial businesses it’s the outcomes delivered to customers or external stakeholders that suffer.

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Have Your Cake And Eat It Too!

 

How can your firm deliver great, loyalty-inspiring customer experience – and achieve its efficiency objectives?

Firms that want to boost Return on Equity (ROE) or Return on Capital Employed (ROCE) must improve productivity.  And in a very real sense Productivity = value / resources.  But too often, the role of IT is to reduce the denominator – resources, and usually leave the numerator – value, to someone else to worry about. So many EA professionals are expected to deliver cost or risk reduction - reducing the resources required for delivery of that value, or the risk associated with that delivery. They usually take an inside-out view with a primary focus on efficiency; and struggle to engage with the value delivery side of the equation.

But if productivity = value / resources, then the challenge is to both reduce resources and deliver enhanced value.   The opportunity for Business Architecture and BPM professionals is to connect great customer outcomes and experiences (the value side of the equation) to scalable and efficient back office operations within the organization. That’s “both/and” – not “either/or.”

But how do you do that?

Generally speaking, business people don’t really care too much for efficiency. They come to work for the value they deliver to their customers; not the reductionist philosophy of cutting costs. If you want to engage them on a journey toward performance improvement, leading with the efficiency side of the equation can be a mistake.

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The Evolving Role Of Business Architecture

Business architecture has become a bit of a watchword for organizations thinking about their future. It’s about all sorts of things – the “what” we do and “why” we do it. It’s about the “who with”, or more importantly “who for.” But it’s also about the “how we do it”, and “how we build engagement” to ensure we “do the right things,” rather than just “doing things right.”

Given that I focus on the methods and techniques that help organizations translate strategy into action (business architecture, process architecture, business engagement, etc.), I want to talk a little about the trends, methods and approaches that we see in the practice of business architecture.

I have to say recent engagements have been a real eye opener … some folks are very advanced in some areas – say capturing strategic intent, but then struggle to translate that into meaningful plans that energize colleagues in the business. Some are talking a good story of target operating models – focused around the experiences they deliver to their customers, but then miss the link to current day project portfolio that’s singularly focused on reducing the employee headcount. And as we saw in our recent BPM Suites Wave, business architecture principles are becoming more important at the process execution layer too.

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Which Mountain Are You Trying To Climb?

When I look at the sorts of advisory work we engage in, I am often struck by the fact that our client organizations are at very different start points on their business architecture journeys. The start point is complicated by the team’s perception of the stakeholders they serve (to whom they deliver value) and the ultimate objectives for their initiative. Not only are the start points and journeys themselves different, but the challenges met on the road also differ. So in a very real sense, working out which mountain you are scaling is just as important as the deciding the route to get there and the team required for success.

We see many different types of business architecture efforts — usually they are attempting to support one or more of the following initiatives:

  • Provide the basis for transformational change.This is especially difficult when transformation implies changing just about everything you do and, most importantly, the way you think. When the organization is going for a “wellness program,” rather than continuing to apply project fixes like Band-Aids, the challenge is to engage colleagues on that longer-term objective rather than becoming fixated with short-term efficiency goals.
  • Remove redundancy post-merger in an M&A scenario. Often, the challenge here is to take two or more distinct cultures and legacies, and develop one compelling future, complete with new organizational structure and road map to get there. Sometimes dressed up with other titles such as process harmonization, this usually involves surfacing views of the business and its purpose such that leaders and managers see past their own silo-oriented agendas.
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Band-Aids Or Wellness Program - Which One Will Help You Survive?

While you no doubt answered wellness, the reality is that when you look at the typical change programs in a major corporation today, Band-Aids are far more common. But that's hardly surprising given the short-term pressures facing organizations today. Let's reflect on a few examples:

  • Those in the financial services industry are still struggling to deal with the rash of new regulation post meltdown. Following a spate of high-profile failures, risk management has taken center stage, while in others there is a hurried review of operating procedures in far-flung corners of the corporation. 
  • In virtually all industries, others are trying to respond to hemorrhaging sales statistics. Customers are no longer happy to keep quiet when they get a bad service experience - they tell their friends and followers via Facebook and Twitter. Customer churn is rampant.
  • Or is it increased competitive pressures? More and more new entrants are turning up to challenge and disrupt the incumbent business models of many established firms. They don't have the baggage of high-cost business models and 12 layers of management.
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Groupthink And The Problems Of Silos

I think we would all agree that BPM and business architecture set out to overcome the issues associated with silos. And I think we would also agree that the problems associated with silos derive from functional decomposition.

While strategy development usually takes a broad, organizationwide view, so many change programs still cater to the suboptimization perspectives of individual silos. Usually, these individual change programs consist of projects that deal with the latest problem to rise to the top of the political agenda — effectively applying a band-aid to fix a broken customer-facing process or put out a fire associated with some burning platform.

Silo-based thinking is endemic to Western culture — it’s everywhere. This approach to management is very much a command-and-control mentality injected into our culture by folks like Smith, Taylor, Newton, and Descartes. Let’s face it: The world has moved on, and the network is now far more important than the hierarchy.

But guess what technique about 99.9% of us use to fix the problems associated with functional decomposition? You guessed it:  yet more functional decomposition . I think Einstein had something to say about using the same techniques and expecting different results. This is a serious groupthink problem!

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