Wednesday, September 02, 2009

Economics of agility 2

In my previous post on the Economics of Agility, I noted how little material has been published on this topic.

As Nicholas Whittall and Philip Boxer point out in their contribution to the recent debate on The Meaning of Value-for-Money in Defence Acquisition (RUSI, February 2009), there is an important link between agility and alignment. See also their earlier piece on Agility and Innovation in Acquisition (RUSI, February 2008).

The first observation is that defence acquisition - just like systems acquisition most anywhere - operates on a much slower tempo than the requirements of the business. The "business" of a military organization is running military campaigns; thus when writing for the defence community, Whittall and Boxer refer to the Campaign Tempo and the Acquisition Tempo.

The second observation is that there is a complex set of activities (such as orchestration, customization, and improvisation) involved in bridging between Demand (the demands of the campaign or business) and Supply (the procurement of specific systems and devices). These activities operate on an intermediate tempo, which Whittall and Boxer call the Alignment Tempo.

"Meeting the campaign tempo then depends on the alignment tempo possible, which in turn depends on the acquisition tempo at which gaps can be filled. Any slowness in acquisition tempo leads to increased bricolage and process short cuts to enable the alignment tempo to keep up with the campaign tempo. Thus, ‘agility’ finds its richest expression in the ability of the alignment tempo to meet the required campaign tempo at the lowest cost – i.e. to maximise the value-for-defence."

The challenge is then to produce just enough variety within the acquisition to optimize the economics of alignment. Boxer has developed a technique of Cohesion-Based Costing (not yet published), which "offers a means to attach a value to the cost of introducing flexibility". This kind of technique will clearly be of enormous benefit within the SOA world.

2 comments:

Ralph Hofman said...

It has been a while, but some time ago we defined a research study to get a better understanding of the economics of agility.
It never came to the point that we actually started the research program, but maybe there is better momentum now.

The idea was to study major business transformations (mergers, product-introductions, process redesigns, new market entries, etc) in the financial industry. The hypothesis was that 'agile' banks would be more successful in executing major business transformations, and that IT was a (or maybe the most) important enabler for this agility.

We would gather data of large transformations: time, effort, cost, quality, etc.. Specifically we would specify the IT costs/effort/etc. as % of the total of the transformation. We would then look for indicators of business agility based on architectural principles, both in business and IT.
Interesting correlations would then for example be:
- Firms with an Agile IT Architecture, have lower % IT cost in large transformations then .....
- Agile firms would be more successful in realizing large transformations - and what is the business value of achieving this agility?

Any ideas, feedback?

Richard Veryard said...

It would be great to see more of this kind of research. However, it's generally not easy to get hold of good enough data to support meaningful comparisons. (I know, I've tried.)

In some cases, we may have to start by building new kinds of management information and control systems, in order to start collecting useful data to allow us to start paying more systematic attention to the factors affecting the economics of agility.