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Business Ecology: Optimization for Innovation

As I mentioned in my 2010 plans, one of my projects this year is writing and advocacy for the OMG’s Business Ecology Initiative (BEI).  This morning, we launched the new Business Ecology Initiative blog, and I published the following overview post on Business Ecology, the Business Ecology Initiative and Business Ecology enablers. 

As you read the post, you’ll notice several themes common to my on-going writings (soapboxes), which is why getting involved with the BEI is a no-brainer for me.  The original post follows.

What is Business Ecology?

Business Ecology is a business-technology imperative focused on streamlining business processes, removing waste from technology portfolios, and adjusting resource consumption, to optimize business operations and foster business innovation.

As the world economy emerges from a painful recession, organizations are confronted with the challenge of retaining bottom-line diligence, while pursuing market sustaining and gaining innovation. 

For many organizations, the answer lies in harvesting savings and trapped value from existing processes, resources and capabilities.  To accomplish this, organizations are turning to Business Ecology. 

Business Ecology is not a one-time fix, but rather a management philosophy concerned with business vitality over time, balancing current conditions, optimization and innovation focus areas, resource allocations, and longer-term business motivations, capabilities and outcomes.

An important enabler of Business Ecology is the use of technology beyond automation. Business Ecology practitioners employ technology to identify, measure, model and drive business change. 

Business Ecology adoption and execution requires a cross functional team, comprised of business and information technology professionals. Key team capabilities include business process thinking, business performance measurement and analysis, financial analysis, IT architecture, portfolio management, service delivery and iterative project management.

Successful Business Ecology initiatives adopt the principles and values of Business Technology.  The team communicates with each other, sponsors and constituents in a common, business based language.  Measurement is defined and reported in business terms.  Funding and governance decisions and mechanisms reflect a shared resource, investment portfolio approach.

As Business Ecology teams progress, technology and business savvy is exchanged, fostering a greater understanding of each other’s challenges, skills and tools, which leads to a break in the longstanding, constraining, business and IT divide.  A byproduct of successful Business Ecology is business-IT integration.

The Chief Information Officer (CIO), given his/her unique position to view business processes, resource consumption, and technology portfolios across the organization, most often champions Business Ecology adoption and execution.  C-level executives, including the CEO, CFO and COO, sponsor Business Ecology initiatives.

What is the Business Ecology Initiative?

OMG, via the Business Ecology Initiative, leads the drive towards Business Ecology. 

The Business Ecology Initiative provides education, advocacy and member programs to enable organizations to achieve Business Ecology success, employ Actionable Architecture^TM, and carve a path to business-IT integration.

Actionable Architecture^TM brings transparent business methodology to the definition and delivery of common IT infrastructure, platforms and services.  Emphasized business attributes include quality, efficiency, compliance, agility, value, effectiveness, ease of use, sustainability and business goal traceability.

Business-IT Integration is the organizational model for business and information technology convergence.  This model promotes collaborative strategy, planning, architecture and execution; shared decision-making, business-tech savvy personnel and service delivery at the point of value generation.   

What enables Business Ecology?

Techniques: LEAN, Six Sigma, BPM, Value Chain Analysis, Actionable Architecture^TM , Business Technology, Agile, Modeling, Simulation, Business Measurement, and Sustainability Analysis

Technology: SOA, BPM, Cloud Computing, Event Processing, Analytics, Master Data Management (MDM), and Open Standards

Measurement Models: Business Process Maturity Model (BPMM), Sustainability Assessment Model (SAM)

People: C-level executives, business and information technology professionals, who embrace the philosophy of Business Ecology

 

[Disclosure: The Business Ecology Initiative is a client of my firm, Elemental Links.]

2010: The Rise of Event Processing

I don’t typically engage in predictions, but here’s mine for 2010, fresh from my tweet stream:

2010: Event Processing transcends niche status, to well-recognized & adopted business technique for real-time visibility & responsiveness.

I can list tons of reasons why, but it boils down to this:  you can’t change what you can’t see.

IT Savvy: Getting an Edge from IT

The WSJ has published a Business Insight Interview with MIT’s Peter Weill on IT Savvy, his (excellent) recent book, co-authored with Jeanne Ross.  The interview covers a few of the main ideas of the book, standardization for innovation, IT as strategic asset vs. liability, creating digital platforms, and the importance of connecting projects.  A couple of excerpts:

BUSINESS INSIGHT:Your newest book is about IT-savvy companies. How do you define IT savvy?

DR. WEILL: IT-savvy companies make information technology a strategic asset. The opposite of a strategic asset, of course, is a strategic liability. And there are many companies who feel their IT is a strategic liability. In those companies, the IT landscape is siloed, expensive and slow to change, and managers can't get the data they want.

IT-savvy companies are just the opposite. They use their technology not only to reduce costs today by standardizing and digitizing their core processes, but the information they summarize from that gives them ideas about where to innovate in the future. A third element is that IT-savvy companies use their digital platform to collaborate with other companies in their ecosystem of customers and suppliers.

So, IT-savvy companies are not just about savvy IT departments. It's about the whole company thinking digitally.

BUSINESS INSIGHT: You've done some research that suggests IT-savvy companies are more profitable than others. Tell me a bit about that.

DR. WEILL: The IT-savvy companies are 21% more profitable than non-IT-savvy companies. And the profitability shows up in two ways. One is that IT-savvy companies have identified the best way to run their core day-to-day processes. Think about UPS or Southwest Airlines or Amazon: They run those core processes flawlessly, 24 hours a day.

The second thing is that IT-savvy companies are faster to market with new products and services that are add-ons, because their innovations are so much easier to integrate than in a company with siloed technology architecture, where you have to glue together everything and test it and make sure that it all works. We call that the agility paradox—the companies that have more standardized and digitized business processes are faster to market and get more revenue from new products.

Those are the two sources of their greater profitability: lower costs for running existing business processes, and faster innovation.

…

DR. WEILL:  The real secret to IT-savvy companies is that each project links together—like Lego blocks—to create a reusable platform. IT-savvy companies think reuse first. When they have a new idea, the first question they ask is: Can we use existing data, applications and infrastructure to get that idea to market fast? When we look at the impact of reusing processes and applications, we see measurable benefits in the top and bottom lines.

The book also covers defining your operating model, revamping your IT funding model, allocating decision rights and accountability, driving value from IT and leading an IT Savvy firm.  Consistent with Ross and Weill’s other works, the book is research backed and calls out case examples.

Read the article.  Get the book.  Otherwise, risk getting the IT you deserve…

Feeding Problems & Starving Opportunities?

In recognition of what would have been Peter F. Drucker’s 100th birthday, the Wall Street Journal is rerunning some classic Drucker on Management pieces.  The piece today,  originally published Oct. 21, 1993, is The Five Deadly Business Sins. 

The first 3 sins are related to pricing and profit margins, the 4th is “slaughtering tomorrow's opportunity on the altar of yesterday”, and the fifth is feeding problems and starving opportunities:

“-- The last of the deadly sins is feeding problems and starving opportunities. For many years I have been asking new clients to tell me who their best-performing people are. And then I ask: "What are they assigned to?" Almost without exception, the performers are assigned to problems -- to the old business that is sinking faster than had been forecast; to the old product that is being outflanked by a competitor's new offering; to the old technology -- e.g., analog switches, when the market has already switched to digital. Then I ask: "And who takes care of the opportunities?" Almost invariably, the opportunities are left to fend for themselves.

All one can get by "problem-solving" is damage-containment. Only opportunities produce results and growth. And opportunities are actually every bit as difficult and demanding as problems are. First draw up a list of the opportunities facing the business and make sure that each is adequately staffed (and adequately supported). Only then should you draw up a list of the problems and worry about staffing them.

I suspect that Sears has been doing the opposite -- starving the opportunities and feeding the problems -- in its retail business these past few years. This is also, I suspect, what is being done by the major European companies that have steadily been losing ground on the world market (e.g., Siemens in Germany). The right thing to do has been demonstrated by GE, with its policy to get rid of all businesses -- even profitable ones -- that do not offer long-range growth and the opportunity for the company to be number one or number two world-wide. And then GE places its best-performing people in the opportunity businesses, and pushes and pushes.”

Drucker concludes the piece:

“Everything I have been saying in this article has been known for generations. Everything has been amply proved by decades of experience. There is thus no excuse for managements to indulge in the five deadly sins. They are temptations that must be resisted.”

So, I have to ask, is your IT leadership indulging in the fifth deadly sin?  Is enterprise architecture, typically staffed with top performers, focused purely on problems?  Or, do they resist temptation, by investing some top talent in opportunity?

Lessons from Baseball Science: A picture is worth 1000 data points

It’d be easy to chalk up today’s choice to my being in pre-vacation mode, but in truth, I’ve had this New York Times Baseball Science article open in a tab for nearly a month.  When I first read it, I immediately thought of connections to my recent post Lessons from Googlenomics: Data Abundance, Insight Scarcity. 

In the referenced Wired Googlenomics article, Hal Varian asks, "What's ubiquitous and cheap?" His answer "Data." He follows up with “And what is scarce? The analytic ability to utilize that data.” 

The Baseball Science article highlights an innovative way Major League Baseball is collecting even more player data – defense and base running – via a new system of high-resolution cameras and supporting software:

“A new camera and software system in its final testing phases will record the exact speed and location of the ball and every player on the field, allowing the most digitized of sports to be overrun anew by hundreds of innovative statistics that will rate players more accurately, almost certainly affect their compensation and perhaps alter how the game itself is played.

…In San Francisco, four high-resolution cameras sit on light towers 162 feet up, capturing everything that happens on the field in three dimensions and wiring it to a control room below. Software tools determine which movements are the ball, which are fielders and runners, and which are passing seagulls. More than two million meaningful location points are recorded per game.” 

However, the system output is “simple time-stamped x-y-z coordinates” which require sophisticated algorithms to turn the raw data into insights:

“Software and artificial-intelligence algorithms must still be developed to turn simple time-stamped x-y-z coordinates into batted-ball speeds, throwing distances and comparative tools to make the data come alive.”

Beyond turning the raw data into meaningful information regarding player actions and game outcomes, the teams, league, and legions of fans and broadcasters, still need to figure out how to act on, and manage, this data trove:

“Teams have begun scrambling to develop uses for the new data, which will be unveiled Saturday to a group of baseball executives, statisticians and academics, knowing it will probably become the largest single advance in baseball science since the development of the box score. Several major league executives would not publicly acknowledge their enthusiasm for the new system, to better protect their plans for leveraging it.

“It can be a big deal,” the Cleveland Indians’ general manager, Mark Shapiro, said. “We’ve gotten so much data for offense, but defensive objective analysis has been the most challenging area to get any meaningful handle on. This is information that’s not available anywhere. When you create that much data you almost have to change the structure of the front office to make sense of it.””

The above two challenges, making the data meaningful, and developing actionable business insights, are accomplished by individuals that Hal Varian refers to as the “datarati”:

“Varian believes that a new era is dawning for what you might call the datarati—and it's all about harnessing supply and demand. "What's ubiquitous and cheap?" Varian asks. "Data." And what is scarce? The analytic ability to utilize that data. As a result, he believes that the kind of technical person who once would have wound up working for a hedge fund on Wall Street will now work at a firm whose business hinges on making smart, daring choices—decisions based on surprising results gleaned from algorithmic spelunking and executed with the confidence that comes from really doing the math.”

In the baseball world, Billy Beane and Theo Epstein are considered ‘datarati’ archetypes. 

As a geek by trade and a lifelong baseball fan, I find myself intrigued by this new data collection technology and the resulting analytic and management possibilities.  Of course, it also got me thinking beyond baseball, and sports, to wonder what other fields (no pun intended) might benefit from digital camera based data collection and data point to scenario reconciliation.

From my own background, I can envision the technology being applied to analyze and improve efficiencies in retail stores, warehouses and factories.  How about you?

Some questions to consider:

Could this data collection technique benefit your organization? 

How about as a data consumer?  Can you think of an external scenario that might provide meaningful “simple time-stamped x-y-z coordinates” to your organization?

Has your organization embraced the rise of the datarati?