The Analytic Organization

There are several possible ways of defining the term "analytic organization".

One way is to define a set of capabilities and working practices loosely called "analytics", and use the label "analytic organization" for an organization that has reached a certain level of collective competence or "maturity" in these. This is the approach taken by Peter Graham, who recommends the following set of characteristic features (Building the analytic organization, Information Management, August 2007).

• Formal functional role (e.g. Chief Analytics Officer)
• Enterprise analytics applied across all functions of the organization
• Shared analytics
• "Understanding the drivers of the business"
• Focus on applying order to information to create knowledge
• Common platform centrally maintained by analytic functional group

It's often a good idea to have a centre of excellence to promote and coordinate some desired capability, and Peter's centralized approach may make sense for many organizations. However, I'd be reluctant to say that Peter's approach is the only possible approach for building the analytic organization, and I should like to think that some organizations (depending on culture and circumstances) will achieve greater results with a more decentralized approach.

Meanwhile, @joemckendrick talks about an analytic organization in terms of the ability to fully leverage data (Joe McKendrick, 7 Simple Steps to Becoming an Analytic Organization, Insurance Experts' Forum, June 18, 2010). He quotes Christina Colby of CapGemini as identifying three ingredients for using analytics to its full potential as a competitive asset:

1. treasure-troves of data
2. the right analytic applications
3. effective management. 

Picking a software vendor at random for contrast, I found a page on SAS's website which appears to define the analytic organization as one maintaining a large and diverse portfolio of analytic models. See SAS Analytic Advantage for Teradata.

Lex Donaldson goes one step further than everyone else. His book is called The Meta-Analytic Organization, and is based on something he calls "Statistico-Organizational Theory", which appears to be a combination of statistics and psychometrics.


Meanwhile, other writer focus attention on what a so-called analytic organization cannot do. The suggestion here seems to be that an organization that is dominated by a certain kind of thinking is consequently incapable of other kinds of thinking. This may be what is intended in the following chart from @flowchainsensei.





Some writers use the left-brain / right-brain metaphor, and characterize analytics as exclusively left-brain in character. I'm not convinced by this metaphor, but it may well be true that analytic organizations have characteristic patterns of strength and weakness. So I was especially interested to find a "think piece" from the CIA which calls for

"an alternative analysis approach that is more an ongoing organizational process aimed at promoting 'mindfulness'—continuous wariness of analytic failure—than a set of tools that analysts are encouraged to employ when needed".

and concludes that

"Intelligence Community analytic organizations need to institutionalize sustained, collaborative efforts by analysts to question their judgments and underlying assumptions, employing both critical and creative modes of thought. For this approach to be effective, significant changes in the cultures and business processes of analytic organizations will be required."

Thus opening up the possibility for analytic organizations of transcending the stereotype.

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Warren Fishbein and Gregory Treverton, Rethinking “Alternative Analysis” to Address Transnational Threats,
The Sherman Kent Center for Intelligence Analysis, Occasional Papers: Volume 3, Number 2, Oct. ‘04.

[For further comments on Treverton's work, see my post Puzzles and Mysteries.]

What are silos good for?

@markgould13 tells us why the silo doesn't work

Of course they do work - after a fashion. As Mark points out, they are resilient structures, from which we can infer that they serve some purpose for someone in the organization, or the organization as a whole. It is common (Mark calls it a cliché) to reject information or work silos in most organizational contexts. But what exactly is the alternative?

Another useful observation about silos is that they generally represent some attempt, whether planned or emergent, to decompose an organization according to some notion of specialization and clustering. When people complain about silos this could be because they reject any kind of decomposition, but what is more likely is that they dislike this particular decomposition pattern. However, anti-silo rhetoric is often pretty vague about the difference if any between silo (=bad decomposition) and autonomous loosely coupled functional cluster (=good decomposition), and architects who automatically dismiss all previous attempts to structure an organization as "silos" create much the same impression as plumbers and electricians who automatically criticize the existing plumbing and wiring.


The main issue with any decomposition (whether or not we choose to label the chunks as "silos") is the coordination between the chunks, and I think this is Mark's main point. He quotes someone calls Ed Smith as saying

"Insight is the gap and overlap between silos."

Thinking about the requisite coordination between the chunks is an excellent route for understanding whether the architects should pay attention to the shape of the chunks or to improving the links and feedback loops connecting them. Or both. An architecture that is exclusively focused on cutting the enterprise into perfect chunks (relative to a fixed and abstract model of "the requirements") is probably not going to be much use in the long run.

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Update

Chris Bird expanded his Observations on Silos (see comment below) on his own blog.

Excellent defence of silos by Venkat, The Silo Reconsidered

Interesting discussion on Linked-In - What are the advantages of working in silos?

Shared Services for the UK Public Sector 2

@tonyrcollins asks if the UK government is having trouble closing down ID Cards and ContactPoint, what chance 25% across-the-board savings? (Computer Weekly, June 23, 2010)

Tony refers to the latest "Structural Reform Plan" (pdf) from the Cabinet Office, apparently produced in Powerpoint. I have picked out four bullet points that are particularly relevant to the topic of shared services, and these four interact in potentially challenging ways.

3. Information and Communications Technology (ICT) Strategy - Reduce the cost structure of ICT in central government, while supporting technologies which increase citizen involvement, and our agendas of transparency and localisation

3.1 Increase powers of CIO to drive the integration and improve value for money of ICT infrastructure; Set up infrastructure for new CIO office and increase central CIO powers; Start the roll out cross-departmental asset register on a common ICT infrastructure.

3.4 i Support Department for Education and Home Office in decommissioning / reshaping Contact Point and ID Cards

3.5 iii Establish IT skunk works team to assess and develop faster ways of developing ICT

4. Driving efficiency in Government Operations - Improve the efficiency of government operations by driving central management of core functions, including property, communications, procurement and project management

4.8 Simplify and take costs out of services; Support departments to simplify services; Support departments to reduce costs of transactional services including putting more services online

There are several conflicting agendas implied here.

• Centralization versus simplification versus automation as rival approaches to cost-saving.
• Localization versus central management.
• Top-down initiative and central CIO powers versus skunk works. (It is difficult to see how a project driven and funded from a Cabinet Office plan can possibly count as skunk works.)

With particular reference to ContactPoint, surely the original business case for ContactPoint was to create a common ICT infrastructure (3.1) that would simplify and take costs out of services (4.8). Even if the original estimated benefits are now thought to be unrealistically high, it would be equally unrealistic to imagine that the benefits would have been zero. So the Cabinet Office is backing away from a commitment to decommissioning ContactPoint, and is now talking about  "reshaping". This "reshaping" is essentially an architectural problem, and a complicated and intriguing one, since those responsible must presumably find a way of preserving or enhancing the value-adding aspects of the scheme while eliminating those aspects that were politically controversial or technically expensive. I am currently writing a paper that will outline a possible architectural approach.

Tony asks what chance of achieving 25% cost savings. The PowerPoint version of the Cabinet Office plan doesn't have these figures. I look forward to the Cabinet Office releasing the Excel version of the plan.

What do/should EAs pay attention to?

#entarch from the #IRMEAC conference, @Cybersal quotes Richard Weston's comment that conventional EA does not pay enough attention to the dynamics of enterprise. Excellent point says Cybersal, and I agreed. But I also wondered what conventional EA does pay attention to.

Keeping their jobs, answers @bmichelson with a wink. But how effective is conventional EA at keeping their jobs during an economic downturn? @bmichelson suggests this varies by expectations of Business & IT leadership. Aware of true potential of #entarch? Do they demand it?

So there are several variables here. Firstly, how far apart are the expectations of enterprise architecture from different stakeholders? The de facto collective vision is a (possibly uncomfortable or contradictory) compromise (emergent composition) between the expectations of business and IT leadership and the vision of the EAs themselves. And secondly, what is the perceived and actual ability to execute - are EA's really capable of stepping up to the kind of challenges urged upon them by the motivational speakers at conferences like this, and do their bosses have confidence in their competence in these new areas? What must EAs do to deserve the extended trust of their organizations?


I think there are some important and strategic issues where EAs could play a vital role, but it comes back to the question of paying attention to the right things.


So what are these things? Some EA speakers urge EAs to pay attention to the things that CEOs pay attention to, and that's certainly a good start. But EAs can only add value if they can offer a different perspective - hence the importance of new lenses and concrete systems thinking, not just abstract frameworks.

Ecosystem SOA 2

What are the problems of large complex sociotechnical systems? How far do SOA and enterprise architecture help to address this problem space, and what else might we need?


When I started writing about SOA and the service-based business over ten years ago, I defined two "cuts" across the service ecosystem. One cut separates inside from outside, while the other cut separates supply from demand.

(This diagram was included in my 2001 book on the Component-Based Business, and frequently referenced in my work for the CBDI Forum. For a brief extract from the book, see my Slideshare presentation on the Service Ecosystem.)

The inside/outside cut is sometimes called encapsulation. It decouples the external behaviour of a service from its internal implementation, and can be described in terms of knowledge - the outside has limited knowledge of the inside, and vice versa. (The cut is also sometimes called transparency - for example location transparency, which means that external viewers can't see where something is located.)

The supply/demand cut is about delegation, and can be described in terms of responsibility. Getting these two cuts right may yield economics of scale and scope; and the business case for SOA as a development paradigm is often formulated in terms of reusing and repurposing shared services.

For relatively small and simple SOA projects, it may be feasible to collapse the difference between these two cuts, and treat them as equivalent. (The inside/outside relationship and the supply/demand relationship are sometimes both described as "contracts", although they are clearly not the same kind of contract.) However, enterprise-scale SOA requires a proper articulation of both cuts: confusing them can result in suboptimal if not seriously dysfunctional governance and procurement. Many people in the SOA world still fail to understand the conceptual importance of these cuts, and this may help to explain why some organizations have had limited success with enterprise-scale SOA.

Going beyond enterprise SOA as it is generally understood, there is a third cut separating two views of a system: the system-as-designed (whose structure and behaviour and rules can perhaps be expressed in some formal syntax such as UML, BPMN or ArchiMate) and the system-in-use (whose actual performance is embedded/situated in a particular social or business context). This cut is critical for technology change management, because of the extent to which the designed system underdetermines the pragmatics of use. I have been talking about this cut for over twenty years, but only more recently working out how to articulate this cut in composition with the other two cuts.

One important reason for looking at the pragmatics of use is to understand the dimensions of agility. In many settings, we can see a complex array of systems and services forming a business platform, supporting a range of business activities. If no agility is required in the business, then it may not matter if the platform is inflexible, forcing the business activities to be carried out in a single standardized manner. But if we assume that agility is a critical requirement, then we need to understand how the flexibility of the platform supports the requisite variety of the business.

More generally, understanding the pragmatics of use leads to the recognition of a third kind of economic value alongside the economics of scale and the economics of scope: the economics of alignment. The value of a given system-of-systems depends on how it is used to deliver real (joined-up) business outcomes, across the full range of business demands. (I'm afraid I get impatient with people talking glibly and simplistically about business/IT alignment, without paying attention to the underlying complexity of this relationship.)

Understanding these three cuts (and analysing their implications) is critical to understanding and managing a whole range of complex systems problems - not just SOA and related technologies, not even just software architecture, but any large and complex sociotechnical systems (or systems-of-systems). If the three cuts are not understood, the people in charge of these systems tend not to ask the right questions. Questions of pragmatics are reduced to questions of platform design; while questions of the cost-justification and adoption of the platform are reduced to a simple top-down model of business value. Meanwhile the underlying business complexity (requisite variety) will be either misplaced (e.g. buried in the platform) or suppressed (e.g. constrained by the platform).

So there are three challenges I face as a consultant, attempting to tackle this kind of complex problem. The first challenge is to open up a new way of formulating the presenting problem, based on the three cuts. The second challenge is to introduce systematic techniques for analysing the problem and visualizing the key points. And the third challenge is to identify and support any organizational change that may be needed.

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With thanks to Philip Boxer and Bernie Cohen. For a different formulation of the three cuts, together with a detailed example, see their new paper "Why Critical Systems Need Help to Evolve" Computer, vol. 43, no. 5, pp. 56-63, May 2010, doi:10.1109/MC.2010.150. See also Philip Boxer, When is a stratification not a universal hierarchy? (January 30th, 2007)

Ghetto Wifi 2

Following my post on Ghetto Wifi, I passed a pub yesterday with a sign "Free wifi for customers only".

Thought of another perspective on this problem. How long do you remain a customer after you have bought a drink? One hour? One day? Is there some kind of dwindling right to use the facilities as time passes? If you bought a coffee within the last half hour then you are a full-status customer with full rights; if you haven't bought a coffee in the last two hours, then maybe your customer rights are weaker.


Let's look at some more examples. If you have lunch in a restaurant, and then do some shopping, can you then go back to the restaurant to use the toilet before driving home? (If you left a reasonable tip, then maybe the aura of "customerhood" still lingers.) If you have lunch in a pub, can you leave your car in the "customers only" car park for the rest of the day? Some establishments have strict limits - for example, some supermarkets have free parking for two hours, and then start clamping or ticketing people who stay longer.

Obviously there will always be some people to try to cheat - to use the facilities without buying anything at all. The point here isn't whether this is possible, or the extent to which the establishment tries to make you feel welcome (in order to convert you to future customer) or unwelcome (to reserve its facilities for genuine customers), but what moral rights you have in the first place.

Some people might think that the "customers only" goes without saying - you shouldn't need a notice - but presumably there are some people whose behaviour will be influenced by a reminder that these facilities are intended for genuine customers.

So it comes down to a question of what counts as a genuine customer, and for how long.

Ghetto Wifi

@TimHarford answers a reader's letter in his Financial Times Dear Economist column: "Why do cafes offer free wireless if I'm not allowed to use it?"

The reader complains about being politely asked to vacate a table at lunchtime, so that more paying customers could be accommodated. Should the coffee shop offer wireless internet access if it isn’t willing to accept the opportunity cost associated with it, rhetorically asks said reader?

As a matter of fact, the wireless is irrelevant. The problem of customers hogging tables for hours existed long before computers. The scarce resource (especially at lunchtime) is the table.

As Tim points out in his column, the lunchtime opportunity cost of letting someone take up a table for four is substantial, while the wireless access, cheap to provide at any time, is a side-issue. But Tim is more polite to his reader than the reader probably deserves, and he fails to point out the false premise in the question. Of course the customer is expected and encouraged to use the facilities of the cafe (table, wifi, toilets) as well as helping herself to milk and sugar. But there is an implicit notion of proportionality: you don't walk off with half a kilo of sugar; you are allowed to use the free wifi, but that's not an unrestricted right; and buying a single cup of coffee doesn't entitle you to sit there all day. (There is a similar dispute about the ethics of making Ghetto Latte.)

Even impoverished writers, who try to make a cup of coffee last as long as possible while writing the next Harry Potter, are aware that there are limits. JK Rowling herself says on her website "the best writing cafe ... has staff who don't glower at you if you sit there too long" (Places to Write). In other words, she doesn't think she has an automatic right to sit there too long, and she appreciates those cafes that tolerate her stretching the limits.

As a non-economist, I'd like to draw attention to two aspects of this. The first is the readiness of Tim and his readers to frame the consumption of coffee and wifi as an economic transaction. "I bought this coffee with free internet access, and I'm entitled to my economic rights." There is no sense of a social relationship between the cafe owner and the customer, or the idea that the customer might vacate the table at lunchtime before being asked, out of consideration for the cafe owner's ability to make a reasonable living.

The second is the irrelevant foregrounding of the wifi issue, suggesting that the reader wishes to see internet access as a primary economic issue. Perhaps this reader is one of those who would make a fetish out of net neutrality, and would see any restrictions on internet access (including this dastardly cafe owner denying me free and unlimited wifi) as a gross violation of some fundamental principle.


See also Ghetto Wifi 2

High Frequency Trading

Tim Bass upsets a few more people with his provocative posts arguing that authorities should Strongly Regulate High Frequency Trading (May 2010) and claiming that High Frequency Trading Destroys Market Integrity (May 2010).


Reading through the comments, it is necessary to separate three separate questions.

1. the potential value of certain classes of technology (notably CEP) to those using these technologies
2. the system-wide effects of using these technologies
3. the ethical consequences of these system-wide effects.

Taking the third question first, what does "market integrity" actually mean? The notion of "equal playing field" implies that certain forms of advantage are eliminated. The notion of "playing field" implies that certain forms of advantage may still exist - otherwise there would be no point playing.

For example, some sports are so expensive that only affluent people or well-funded organizations can compete. (Think F1 motor racing, yacht racing, anything with horses.) And in any sport, wealth can get you access to superior training facilities - tennis players with money can fly to Miami when it's raining at home. But there are still rules that prevent certain forms of unfair practices, or certain types of equipment, and there is still a certain amount of talent involved, so that the outcome cannot be simply predicted from the amount invested.

High frequency trading may indeed be directly available to some players and not others. Lots of people clearly believe this provides a genuine advantage, else they wouldn't invest in it. The effects of this are asymmetric - those possessing the technology may experience a detectable advantage, even if those lacking the technology may not experience a detectable disadvantage. Taking profits out of the system, without harming any individual investor, is a "victimless crime"; according to extreme libertarians, a "victimless crime" isn't a crime at all, and is therefore not an appropriate subject for regulation.

However, most people accept the need for some market regulation, not just to protect individual investors, but also to protect the integrity of the market. If only we knew what that actually meant in this case.