Two Second Advantage

There are two reasons I like TIBCO's new slogan "The Two-Second Advantage". (I have some reservations as well, but let's start with the good bits.)

advantage means something to business

The first reason is that it actually means something to the business, unlike the widely misunderstood technical term “real-time”. One company that is currently boasting “real-time” performance is SAP, which claims that its in-memory databases will result in analytics that are “really in real-time”. Larry Dignam quotes Hasso Plattner as follows. “In analytics, there’s theoretically no limitation on what you can analyze and at what level of detail. (In-memory databases) mean reports on a daily basis, hourly basis.” [ZDnet] @davidsprott calls this In-memory madness. Even if an hourly or daily report counted as “real-time” (which it doesn't), this kind of technical wizardry doesn't make any sense to the business.

On a Linked-In discussion thread recently, I've seen vendors excusing their misuse of the term "real-time" (to describe software that isn't strictly, or sometimes even remotely, real-time) by claiming that the meaning of technical terms evolve over time. Oh yeah, very convenient. But we shouldn't allow vendors to fudge perfectly good technical terms for their own marketing purposes, any more than we should tolerate car manufacturers self-interestedly redefining the word "friction".

(In The 2 second advantage...the 2 culture disadvantage? Vinnie Mirchandani praises TIBCO executives for being able to talk business, and contrasts them with the IT analysts in the expo hall, with a special dig at Gartner.)

Unfortunately, TIBCO is not content with the "two second advantage" slogan, and we find TIBCO CEO Vivek Ranadivé over-egging the pudding by introducing some additional notions including Enterprise 3.0. Transcript of HCL keynote by TIBCO CEO Vivek Ranadive (April 2010). For @neilwd "Enterprise 3.0 ... is the sound of a company trying too hard" (TIBCO, Enterprise 3.0 and the two-second advantage, May 2010. See also Tibco’s Hits and Misses (Ovum, May 2010).

advantage is relative

The second reason I like the phrase "Two Second Advantage" is that it focuses our attention on the business advantage - not of raw speed but of getting there first. If you are a speculator who judges that some asset is overvalued or undervalued, the way to make money from this judgement is to buy or sell and then wait for other speculators to arrive at the same judgement. Being just ahead of the pack is actually more profitable than being a long way ahead, because you don't have to wait so long.

And although simple decisions can be taken quickly, complex decisions need time for understanding. (See my presentation on Mastering Time.)With complex decision-making, it's about spending just enough time to process just enough information to make a good enough judgement.

Ranadivé also talks about two trends - the increasing volume of data and the diminishing half-life. (In physics, the concept of "half-life" suggests a long tail of residual value - just as a radioactive sample will always remain somewhat radioactive, so the value of data never reaches zero.)

But as @neilwd points out, these trends don't necessarily refer to the same kinds of data, especially if we measure data volumes in terms of physical storage, since these volumes are dominated by email attachments and rich media. Maybe we need to find a way of measuring data volumes in terms of information content ("a difference that makes a difference"): as the cost of data transmission and storage continues to get smaller, it is not the number of megabytes but the number of separate items (giving managers the experience of being overloaded with information) that really matters.

Even if we limit ourselves to traditional data, the relationship between data volumes and response speed is not as simple as all that. Let's look at a specific example.

If a retail store gives a hand-held scanning device to the customer and/or places electronic tags on all the goods, it can collect a much higher volume of data about the customer's behaviour - not merely the items that the customer takes to the check-out but also the items that the customer returns to the shelf. As technology becomes cheaper, this enables a huge increase in the volume and granularity of the available data, collected while the customer is still shopping, and therefore the retailer actually has more time to use the data before the customer leaves the store.

For example, you might infer from the customer's browsing behaviour that she is looking for her favourite brand of pasta sauce. The shelf is empty, but there's a new box just being unloaded from a truck at the back of the store. Find a way of getting a jar to the customer before she reaches the checkout, and there's your two second advantage.

Shared Services for the UK Public Sector

The incoming government has already announced that a number of high-profile shared service initiatives will be scrapped, including BECTA and ContactPoint. While some of these initiatives have been overshadowed by privacy concerns, their abolition is seen as a cost-saving measure, thus indicating a lack of belief in the cost-saving arguments previously put forward for these initiatives.

The termination of ContactPoint will introduce migration problems for local authorities that have already migrated their systems and procedures onto the ContactPoint database, and will now need to procure some viable alternative. (What should follow ContactPoint? CYP May 2010)

At the same time, however, new shared services are being proposed. For example, I note a report commissioned for the Welsh government, suggesting that collaborative working and shared services could make savings on its education budget [Kable, 19 May 2010]. And Westminster wants to share social care software [Kable, 25 May 2010].

The whole area of shared services remains controversial. John Seddon of Vanguard, a notable critic of shared services, has been voluble in his criticism of the assumption that shared service designs will automatically lead to economies of scale and therefore lower transaction costs. Here are a couple of his pieces.

• Open Letter to David Miliband (May 2006, registration required)
• Speech against the motion 'Shared services will deliver the greatest efficiency' (Institute of Revenues, Ratings and Valuation annual conference, October 11th 2006)
• Why I'm suspicious of shared services (Local Government Chronicle, January 2010)

I agree with Seddon that the business case for shared services often looks simplistic if not naive, and there appear to be some serious architectural flaws in the way that some of these initiatives have been conceived.

However, I remain convinced that shared services can have a place in the public sector IT strategy, provided that the architectural complexities can be sorted out, and with radical changes to the procurement regime. But there are some critical asymmetries here that have to be managed, and I don't see much sign that the key players fully understand this complexity yet.

And simply abandoning shared services doesn't solve the problem either.

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In December 2004, @PhilBoxer and I wrote an analysis of the Child Support Agency from the perspective of asymmetric design. Public Sector IT - The CSA Case

In January 2006, @davidsprott and I, on behalf of the CBDI Forum, submitted a brief response to the UK government's published strategy on transformational government. Shared Services for the UK Public Sector (pdf). Our response identified the need for architecture, but we didn't spell out what this entailed.

Organizational Intelligence at Aviva

A few weeks ago, I spotted a quote in Computer Weekly from Toby Redshaw, global CIO of Aviva. Speaking about Aviva's cloud-based Web 2.0 platform - which includes an intramural social network, a global knowledge management solution, a collaboration suite and a sophisticated content management/intranet - Toby asserted that the results were spectacular in terms of improving workers' access to expertise, ideas and solutions, and described this as a general increase in the firm's cumulative IQ.

Source: Ian Grant, Aviva uses Web 2.0 to build corporate culture with global reach (Computer Weekly, Feb 2010)

Given my ongoing researches into organizational intelligence, I was of course very interested to follow this up, and recently I managed to grab an hour of Toby's time to learn more about Aviva's experience and his future plans.

For a global corporation like Aviva, the online world provides a virtual equivalent of the company "campus" that emerged in the 1980s, and is still popular with technology companies like Microsoft and Vodafone. A physical campus can be an efficient clustering of co-workers, or it can be a confusing sprawl - see Brian Lam's personal impressions of Microsoft and Apple, Gizmodo March 2008. But in any case, a physical campus is limited to co-located workers, and does not provide a solution for a globally distributed enterprise such as Aviva.

The Aviva Web 2.0 platform provides horizontal connectivity across the globe, helping to integrate the global intelligence of the firm. The benefits are as follows

• Consistency ("One Aviva, twice the value").
  
• Reducing cycle time for decision-making and problem-solving (cut "waste"). Improving the quality and efficiency of decision-making.
  
• Reducing the innovation cycle time (cut "uninnovation"). Innovation involves not only solving problems, but getting the solutions out into the mainstream.
• Reducing communication time, e.g. for disseminating top-down management vision.
  

I asked about the platform's role in picking up weak signals from the environment. Clearly there are specialist functions within any large insurance company (investment management, risk management, security and fraud) that need highly sophisticated mechanisms for monitoring the environment, with rapid sense-and-respond, especially from a financial perspective. While the platform doesn't replace these mechanisms, it provides an efficient and integrated way of communicating insights within each functional specialism.

For more general weak signals (for example, picking up new kinds of customer demand or customer service issue), there may be a greater role for non-specialists to contribute observations and ideas, which might (if repeated and confirmed around the organization) lead to new opportunities for product or process innovation, with a much more generalized notion of "sense-and-respond". Although the Aviva platform does not yet support this kind of bottom-up analysis, Toby sees an opportunity to bring more traditional business intelligence and analytics into the platform, which would allow data mining and number crunching capability to be distributed more efficiently around the organization. Like many organizations, Aviva identifies three levels of business intelligence user. For most people, business intelligence merely means having a reasonably comprehensive picture of what-is-going-on, using dashboards and similar devices offering multiple views but with fairly static schemas. For business number crunchers, the platform could help to bring some coherence and order into a turbulent sea of spreadsheets. And serious data mining and statistical analysis would remain the responsibility of a relatively small handful of experts. but with the power to collect data from a larger and more distributed pool, and then disseminate their findings more effectively around the company. In the first instance, the challenge is not to extend business intelligence capabilities as such, but to use and share the existing capabilities more efficiently, and reduce duplicated analytic effort.

Critical to the success of the platform is its ability to integrate traditional knowledge management and communication with the business process itself, so that the platform is not a stand-alone adjunct to the day job. The key here is to integrate the platform with BPM tools, both as a construction framework to allow process-related problems to be solved collaboratively, and to allow the platform to inject decision-making and problem-solving support into the operational process. My understanding from Toby is that this is very much work-in-progress.

A platform like this cannot be done on the cheap, and Aviva has already invested millions of dollars in the technology alone. Over time the technology will get cheaper, but the effective use of the platform is learning-intensive, and Toby believes that 12-18 months' worth of cultural change gives Aviva a considerable competitive advantage, which late adopters will find it hard to catch up. Early evidence for the perceived value of the platform can be measured in terms of the volume of use -  the number of forums (running into tens of thousands, some short-term single issue, others more ongoing), and the amount of time spent per employee using the platform. This usage represents a vote of confidence in the usefulness of the platform. In the future, it may be possible to measure the business value in more direct ways.

One of the difficulties managing this kind of technology is knowing how much to spend on ongoing improvements. There is a continuous stream of innovations from suppliers, as well as a constant wishlist from the more technically enthusiastic sectors of the workforce, and it is often hard if not impossible to see the business value of any particular improvement in isolation. Furthermore, Toby points out that there can often be a huge variation in the prices charged by different vendors for systems with broadly simmilar business benefits, and says that procurement skills and experience are essential.

It is a common cliche that radical initiatives require senior management support and commitment. But with this kind of platform, it is not enough for senior management just to sign the cheques and act as cheerleaders (acknowledging and praising achievements and those responsible for them) - they also need to be seen using the platform themselves. Thus the CEO and CIO blogs are featured on the Aviva platform home page, giving particular prominance not only to the content of their ideas but to their commitment to the process and their belief in its value. (Obviously if senior management blogging were to become more and more infrequent, this might send a negative message to the rest of the workforce.)

Is this venture limited to Aviva's own workforce? Based on Bill Joy's remark "Not all smart people work for you", which Toby quoted, there are clearly opportunities to extend this platform into the Aviva ecosystem - for example external providers and channel partners, one day even perhaps customers - thus leveraging the intelligence of the ecosystem as a whole. There are some obvious challenges here - not just technological but commercial - so this isn't going to happen overnight, but it would undoubtedly be an interesting development for any company of Aviva's reach.

In any case, regardless of these speculative future visions, Aviva is clearly embarked on a promising and ambitious journey of systematically improving its organizational intelligence, and I look forward to following its progress in the future.

SOA and Risk Management

#soa #risk In this post, I identify some contrasting views on the relationship between SOA and risk.

SOA involves innovation, and innovation always introduces new risk

• SOA Benefits, Challenges and Risk Mitigation (Eric Roch, 7 March 2006)
• How SOA increases your security risk (Gartner via ComputerWorld, March 2007)
• SOA Benefits outweigh risks (IBM via SearchSOA, April 2008)
• SOA adds risk to an activity that is already “success challenged” (CIO Update, August 2008)
  

SOA helps reduce risk

• SOA Reduces Risk and Cost in Shared Services Projects (Merrill Douglas, Public CIO Magazine, 7 May 2008)
• SOA Helps Cadbury Schweppes Reduce Risk and Increase Flexibility (CapGemini case study)
• SOA may be taking the risk out of cloud computing (EDS via ZDNet, April 2009)

SOA providing visibility and control of aggregate risk and unexpected behaviour

• CEP and real-time risk (Chris Martins, Progress Apama, March 2008)
• Exclusive Interview With Nick Leeson: An Inside Look at Rogue Trading (Advanced Trading, March 2008) (via Aleri)

SOA complicating visibility and control of aggregate risk

• Can a Service-oriented Architecture Hinder Sarbanes-Oxley Compliance Efforts? (Internal Auditor, undated)

Therefore ... risk management as one area likely to see spending increasing

• Aleri October 2008
  

Oh yeah? Any evidence of this?

Differentiation and Integration 2

In my previous post on Differentiation and Integration, I mentioned the Operating Model propounded by Jeanne W. Ross, Peter Weill and David C. Robertson in their book Enterprise Architecture as Strategy (Harvard Business School Press 2006). I shall continue to refer to this book as RWR.

The publisher offers a pdf extract from the book, in which you will see the following diagram, depicting what RWR call a “traditional” approach to IT solutions. (It's a secure pdf, so I've had to scan my library copy instead.)

According to RWR, the “traditional” approach is characterized as follows

• Each strategic initiative results in a separate IT solution, each implemented on a different technology, producing a set of silos.
• The company’s data is patchy, error-prone, and not up-to-date.
• Companies often extract from silos to aggregate data from multiple systems in a data warehouse; but the warehouse is useful only as a reference – it does not offer real-time data across applications.

RWR cite a company whose systems were linked together so effectively that no human being ever touched a transaction (straight-through processing - sounds pretty integrated to me) but for some unspecified reason this provided “a lack of foundation for execution”.

Sounds like there is “good integration” and “bad integration”. Which brings us to the squiggles in the diagram. RWR appear to have adopted a notation in which “good integration” is denoted by straight lines and “bad integration” is denoted by squiggly lines. As far as I am aware, this notation has not been not formally defined, and is therefore purely a rhetorical device.

While I accept the need for enterprise architecture to create a powerful strategic narrative, I fear that these rhetorical devices permit and even encourage a kind of woolly uncritical thinking, which is not capable of dealing with the real challenges of enterprise strategy, and could easily be dismissed as intellectually lightweight by sharp CEOs presented with this kind of stuff. Vague diagrams with undefined notation are no substitute for proper analysis.

It doesn't matter how often the three characteristics identified by RWR above are found together, the key question is whether it is possible and practical to separate them. Is data sharing (as RWR believe) the only way to achieve “good integration”, or are (as I believe) other aspects of integration (coordination, organizational intelligence) more strategically important?

Contingency Theory

RWR identify two key questions for determining your organization’s strategy.

• To determine your organization’s integration requirements, ask yourself to what extent the successful completion of one business unit’s transactions is dependent on the availability, accuracy and timeliness of other business units’ data. (RWR p30)

• To determine your organization’s standardization requirements, ask yourself to what extent the company benefits by having business units run their operations in the same way. (RWR p30)

These would appear to be critical questions for enterprise architects to consider, so it would surely be useful to have some rigorous methods for analysing these questions systematically, instead of merely a few pen pictures of companies that have followed one or other path.

Furthermore, both questions seem to be questions of degree ("to what extent") rather than questions of kind (either/or) - so where are the examples of companies whose rightful place is half-way along the path, rather than at one or other extreme?

Differentiation

RWR then introduce the notion of strategic differentiation. "The operating model concept requires that management put a stake in the ground and declare which business processes will distinguish a company from its competitors." (RWR p43).

I find this statement puzzling, because there is no obvious connection between the two dimensions of the operating model identified by RWR (viz standardization and integration qua data sharing) and the idea of competitive differentiation.

There are methods that focus on identifying which business processes will distinguish a company from its competitors, such as the method developed by my former CBDI colleagues out of the ideas of Geoffrey Moore (see my post Tesco Outsources Core ECommerce) but this is not the same as the RWR method.

Shared Services

One way of achieving some kinds of standardization is through shared infrastructure. When talking about shared services, RWR implicitly shift the scope of “the enterprise” from a single organization to a partnership ecosystem.

“A strategic partnership forces a shared-services mentality, requiring business leaders to come to agreement on which services will be provided centrally and which will be provided locally.” (RWR p148)

The decision of which services will be provided centrally or locally is a matter of standardization, and therefore an aspect of enterprise-architecture-as-strategy.

Enterprise Architecture as Quantitative Practice

What I find troubling in many popular accounts of enterprise architecture, including RWR, is the apparent disregard for economics. RWR talk glibly about the costs and benefits of standardization, but they are not willing to explore the economies and diseconomies of scale, or the distribution of fixed and variable costs, and there isn't much meaningful quantification. Handwaving as strategy?

Differentiation and Integration

In my post on Business Design Choices, I suggested that the real challenge for business architecture was to appreciate the economic and social impact of structure. I identified some advanced business design choices where business architecture has a useful role to play, and where some IT people might have some relevant aptitude. In this post, I am going to expand on one of these.

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Where does standardization make sense, and where should requisite variety be deployed? This question goes back to the work of Lawrence and Lorsch (L2), and has recently been rediscovered (in slightly different terms) by Ross, Weill and Robertson (RWR).

In their book Enterprise Architecture as Strategy, RWR define something they call an Operating Model, with two independent dimensions, business process standardization and integration. "Although we often think of standardization and integration as two sides of the same coin, they impose different demands. Executives need to recognize standardization and integration as two separate decisions." (p27)

Many people in the IT world take for granted that standardization (reduction in variety) is a good thing.  RWR acknowledge the benefits of standardization not only in terms of throughput and efficiency, but also predictability. However, they point out the potential downside of standardization both as a state (standardized processes limit local innovation) and as a state-change (politically difficult and expensive to rip out and replace perfectly good and occasionally superior systems and processes).

Integration, which RWR define primarily in terms of data sharing, is also assumed to be a good thing. RWR identify the benefits of integration in terms of efficiency, coordination, transparency and agility, and acknowledge the challenge of integration as a state-change in terms of "difficult, time-consuming decisions".

The two dimensions of standardization and integration produce a two-by-two matrix as follows.

Operating Model Quadrants (Adapted by Clive Finkelstein from Figure 2.3 of “Enterprise Architecture as Strategy”) - Source The Enterprise Newsletter #38.


Although RWR are careful to present a contingency theory of enterprise strategy, in which any of these four operating models may be strategically valid, the conventional rhetoric of the two-by-two matrix places the preferred strategy into the top right quadrant - thus Unification. Many enterprise architects from a traditional IT background may feel most comfortable with the Unification quadrant. (There may be a process of idealization here - see Schwartz.) Indeed, RWR go on to present an Enterprise Architecture Maturity Model, which starts with the easy bits of enterprise architecture (where things are already Unified) and ends with the challenging bits (where things are or should be Diversified).

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L2 also identify two dimensions, which they call differentiation and integration. They tend to see increasing differentiation as a healthy response to increasing opportunity and complexity - a growing organization in a growing market - "faster change and greater heterogeneity" (p 235). Differentiation is not merely a difference in working practices, but includes at its core "the difference in cognitive and emotional orientation among managers in different functional departments" (p11).

Integration is then the administrative response to this increasing differentiation - how to maintain the overall coherence and viability of the enterprise as a whole. Integration is defined as "the quality of the state of collaboration that exists among departments that are required to achieve unity of effort by the demands of the environment" (p11). The topic of integration covers both the organizational state and the mechanisms to produce and support this state. For L2, the challenges of integration are not primarily IT related (data sharing) but personal and political (conflict resolution).

L2 don't offer a two-by-two matrix of Differentiation and Integration in their 1967 book (I guess the two-by-two matrix hadn't then established itself as an essential consultancy tool), but if they did then presumably the top-right quadrant would be High Differentiation, High Integration. This very roughly corresponds to what RWR call Coordination.

But in any case, a two-by-two matrix would be misleading. The point isn't to choose whether you have differentiation and integration or not; the point is to determine how much and what kinds of differentiation  and integration you need. L2 are explicit in their support of contingency theory (different strategies being appropriate for different organizations depending on environmental factors). The more complex and dynamic the environment, the greater the need for differentiation and integration.

If we are to take business architecture seriously as a discipline, then this kind of question is clearly central. In his post on Contingency Theory and Enterprise Architecture, Andy Blumenthal argues that contingency theory entails keeping your options open, but sometimes it just means making appropriate strategic choices. If the slogan "enterprise architecture as strategy" is to mean anything at all, then surely this is what it means.

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Lawrence, P., and Lorsch, J., "Differentiation and Integration in Complex Organizations" Administrative Science Quarterly 12, (1967), 1-30. (see summary here)

Paul R. Lawrence and Jay W. Lorsch, Organization and Environment, Managing Differentiation and Integration. Harvard University 1967.

Jeanne W. Ross, Peter Weill and David C. Robertson, Enterprise Architecture as Strategy. Harvard Business School Press 2006.

Howard S. Schwartz, Narcissistic Process and Corporate Decay – The Theory of the Organizational Ideal. 1990. See his paper On the Psychodynamics of Organizational Disaster (Columbia Journal of World Business, Spring 1987) See also Joe Bormel's blogpost on Narcissism, Oxygen and HCIT Vision (June 2009).


Related posts

Business Design Choices (January 2010)
EA Effectiveness and Process Standardization (August 2012)