Andrew White

One article in the Economist last week, “Love of Labour”, highlighted how the change in leadership in the Whitehouse has changed the government’s relationship with unions.  One particular negotiation with the union representing the air traffic controllers was re-launched by President Obama.  He promptly reversed President Bush’s directive and gave the workers a 3% pay increase.

My experiences with unions are mostly from afar – but I certainly watched the wretched organizations help ruin British competitiveness in the 70’s and 80’s with their national bargaining, disregard for reality, and restrictive practices.  I won’t go on about this here – but wanted to highlight the shift in the ease with which a 3% pay increase was given.  This is a dangerous sign: with long term seeds being sown for inflation, the setting of pay levels like this creates the view in the public mind that inflation is going to rise and, as a consequence, they start to plan for their own request for more money – in order to keep up with everyone else.

This is what causes a classic wage-price spiral; all very reminiscent of the 70s.  We need to be on our guard.  Worse, our governments need to be intelligent and remember their history.

In “Bribing the Markets”, the Economist last week highlighted explored the impossible task of eliminating uncertainly.  The short article highlights how uncertainty is different from risk; betting on the probability of a card turning up in poker is risky business; macroeconomic analysis cannot predict all the unknown outcomes.

This article touches on some ideas that have troubled me for many years.  The only reason why our stock market works is because information theory is imperfect; in fact the market needs imperfect information and it also needs information to take its time to move through the market.  If every investor knew everything that was important to a decision, on a timely basis, and all other things being equal*, the market would leave no room for vagaries and profit at someone else’s expense could not accrue.  The fact that information is imperfect and slow to make the rounds is what makes the market move.  So any effort to change this can have dramatic ramifications on market dynamics.  I wrote about this issue 10 years ago at the height of the .com bubble when e-Marketplaces where promising such changes.  It didn’t make sense to me then – it doesn’t make sense to me now.

Which reminds me of a book I read a while ago that came to be from off the beaten path.  I read this in December 2007: More than you know: Finding financial wisdom in unconventional places, Colombia, 2007, Michael J Maubboussin.  This was my book review at the time: 

If you liked “Freamonomics”, you will love this.  Maubboussin is chief investment strategist at Legg Mason Capital Management.  This book goes someway to explain the various theories you can draw on to understand – and perhaps predict – how individuals behave as well as crowds – within the stock market.  Maubboussin draws on psychology, innovation and competition theory, as well as complexity.  He nicely draws out the non obvious conclusions from what would obviously have led to incorrect conclusions.  The book it littered with examples, often quoted in the Economist and other such journals.  One lovely example repeats the finding of a survey of horse-race handicappers: researchers asked handicappers to predict race results with 5, 10, 20, then 40 pieces of information about each horse.  Though the accuracy of the results improved very slightly, even falling off in some scenarios, the confidence of the handicappers increased as more information was shared.  In other words, information – the amount of it – may not be as important as you think to support decision making, but it sure could make you feel much better about the process.

Back then I was not scoring books when I did my review; I added that later.  But on reflection, based on the fascinating insights I gleaned from the book, I would not give it a “9 out of 10”.

We finally published a note (see The Differences, and Similarities, between Operational MDM and Analytical MDM) that tries to get the bottom of this thorny issue.  It has taken a while, but it is worth it.  This should be “the” note that nails the key questions most users have asked over the last couple of years.

Operational MDM centers on assuring “single view” of master data in the core systems used by business users; it is where master data is created first; and it is often a common source of concern for many organizations since this is where poor (MDM) process integrity fails.

Analytical MDM centers on assuring “single view” of master data in the downstream data warehouse used most often to supply the data for a business intelligence (BI) solution.  We coined the term a few years ago to highlight the overlap (and differences) between the two environments even though “single view” seemed to be a common goal or requirement.

There are differences in what is called, “master data” in the two environments (hierarchy), and also a big difference in how “governance” is effected.  There are similarities in the use of some (not all) technology, most especially related to data quality and data transformation.

At our recent MDM Summit this topic was of great interest.  Hopefully we have provided “the” note that will close out most, if not all, of the open questions.  There were two other notes just published summarizing some common questions users shared regarding MDM.  Ted Friedman just published Q&A for Data Quality and Data Integration From Gartner’s 2009 Master Data Management Summit.  Don’t be mistaken – this is not all about technology; much of data quality is dependent on “context”; the reason why the data is used and the understanding the business user brings to the “question” has a huge impact on what the data means. 

And John Radcliffe published Q&A on Organizing for MDM From Gartner’s 2009 Master Data Management Summit in which he explores some of the issues related to the organizing for MDM.  Organizing for MDM is never too far from process, and governance, so these questions can get pretty complex, and very quickly. 

Want to meet and chat about all things MDM?  I will be at the Gartner Application Architecture, Development, & Integration Summit  in Las Vegas, NV, December 7^th-9^th. 

The UK’s Daily Telegraph ran this story last week: Al Gore, the former US vice president, could become the world’s first carbon billionaire after investing heavily in green energy companies.   I actually found the comments posted on the Telegraph’s site, in response to the article, quite entertaining.

October 24^th-30^th

Briefing: America’s Public Debt – Tomorrow’s Burden.  An up to date review of the dire situation we find ourselves in.  You need to stay on top of this to appreciate the pickle we are in re politics and economics.  Our children will be materially impacted by this. 

Schumpeter: The Three Habits…of highly irritating management gurus.  Somewhat tongue-in-check look at how management gurus, over the years, peddle, then re-peddle, their skills.  How is it that a book that hails the new business models and leaders, less than 2 years later, have little credibility as industry winners succumb to the next cycle?  Why is it that no single tenant remains universally dominant?  Is it that traits that lead to winning are, by definition, dynamic and changeable?  If so, what value is in reading a book or consulting with a guru who will be out of date by the time you get to the last page, or he has cashed the last payment?  Why indeed.

Silvio Berlusconi and Italy’s Judges: Injudicious – The prime minister’s worrying plans to promote judicial reform in Italy.  You have to read this article.  It highlights what a farce the Italian prime minister is making of Italian politics.  The guy is a crook (a Brit had been found guilty of receiving a bribe from someone – everyone knows it is from a dealing with Mr. Berlusconi) that owns a sizable chunk of the press and TV media in Italy, who keeps changing the law to ensure he, and his political cronies, cant be prosecuted for any wrong doing.  It is amazing that in 2009 this can go on. 

INTERNATIONAL: The Roman Catholic and Anglican Churches – Unleashing the Counter-Reformation. Quite amazing article on the offer, by the Catholic Church, to allow disaffected Anglicans, who are torn by their own inability to reconcile itself to the social fractures, divisions, and sub groups (we call progress) in our society, to join the Catholic Church.  More importantly the offer is not for individuals, but for whole churches!  The vary fractures in society that are creating stress faults in the Anglican Church are being used as reasons to allow for them to “return” to the Catholic Church.  As the article quotes at the conclusion: “As Richard Chartres, the Anglican bishop of London, commented, the pope’s initiative “sounds to me like a vindication of the idea of married priests, which was one of the achievements of the Reformation.”  He was being ironic.  Probably.”

October 17^th-23^rd

Unconventional monetary policy: Loose thinking – Japan’s sobering experience of quantitative easing.  A draw on the Japanese experience of the last 20 odd years whereby “quantitative easing” (what we in the west are undertaking) has not worked, so the Japanese recessions has long endures and low-growth is the norm.  I have a book on my reading-list on this topic which I need to get too soon before this is old news.  The idea is that Japan, when their economy hit the wall, took too long to respond in this fashion, and never stuck with it as long as they should have.  The result is an anemic economy that never quite get’s going again.  The US, UK and some other western nations responded to their own recent crisis much faster, and much more quickly, and though the risk of a “slow growth” period looks pretty sure, it seems the west might survive the risks the east did not.  Well, that’s the hope.

October 10^th-16^th

Buttonwood: The Nature of Wealth – The World confused financial assets with real ones.  Interesting if all together brief review of how assets are defined, and measured.  And how we collectively respond to signals for managing and getting value from them. 

Sport and Game Theory – Common-room Quarterbacks.  One of my favorite topics, game theory, explained in terms of how teams play (American) football.  Specifically, how particular responses to few or frequent interactions, can be leverage in order to maximize value…or not…

Well I have to give IBM more credit for day two.  IOD 2009 opened up with a general session that was filled with customer stories of changed business outcomes, and changes in business processes.  In fact, some of the examples highlighted how “information led-transformation” was transparent since the real focus is not data, or information, but changed processes that lead to a better business outcome. 

So the overall feel of the event was much more positive today. If yesterday was somewhat mixed, I felt that the net over the two days was positive.  I still feel that, of the two items I highlighted yesterday, the key is IBM’s MDM strategy, and specifically, how it evolves toward a broader Enterprise Information Management strategy, and also a more believable and packaged master data governance framework.  My feeling is that IBM understands these challenges, and more than many other vendors, it has the assets in the organization.  Question is – will they “pull it off”.  I think they will.  The question is, when.

So I took copious notes from the morning sessions at IBM’s IOD 2009 conference!  In fact I took so many that I might have to get them into a note format.  But, to there were three items that stood out for me that I have to tell you about.  The first is good news, the others are little more circumspect.  Firs the good news:

IBM is firmly focused on ‘decision making’ in the organization, and how such decisions should lead to better business outcomes.  This goes to the center of how the firm works.

It was refreshing to hear the messaging around how users make decisions – at every level of the business, across different time periods, in every industry.  Much of our own research looks at this also – and I saw in the IBM message a lot that aligned nicely with ours. 

This focus leads to some good things – an understanding of how some firms win, and more importantly, how many firms fail.  Decision making is one of main jobs we all have; if decision making was not needed, we would not be needed.  But decision making is not just about data, or BI, or even predictive analytics.  Knowing that a train is about to hit your car, at rest on the railway tracks is one thing.  Someone has to do something about it.  Decision making does not exist outside the context of the right action.  Someone has to cut the order, move the product, pick up the telephone, issue the credit note, or get out of the car and get as far away from the train as possible.  Decisions are made in context, and are related to action.  This seems to have been a “gap” for IBM at IOD 2009.  Let me explain this “gap” with the other two observations.

IBM’s Information led-transformation and IOD strategy fell short compared to Gartner’s Pattern-Based Strategy^TM. 

There were numerous case studies, examples, and customer speakers in several sessions – highlighting some real good stories.  Many were from the BI-rich (predictably) industry segments such as insurance, public sector, oil and gas, healthcare, and retail; where examples are predicated on a BI approach and much less on process or operations.  There were some real innovative examples mostly in isolation with the NY Fire Department (monitoring building integrity as a means to predict when fires might start).  This was good – as far as it goes – but this highlighted, for me, the gulf between IBM’s strategy and that part of the planet that encapsulates its decision making routines within business processes and applications (think Oracle and SAP and the rest of the world’s application infrastructure).

More importantly the examples tended to look a lot like “more BI” and “better BI”.  There was no distinction between BI and performance Management (PM).  For Gartner, there is a BIG connection, yet a BIG distention.  PM is not about a cleaner report; but the alignment of behavior across the organization to assure the desired (business) outcome is maximized.  In other words, PM can be achieved with BI, but not always, and not everywhere, and in some cases without it.  In fact, for many organizations, PM will be achieved when BI is “transparent” and hidden within the business process and attendant application.  In our language, IBM’s message was lacking Optemo and PM-based culture (enablement) – and instead focused too much on “if you can build the predictive analytic, it will be used”.

IBM’s strategy hinges on data consistency.  At the heart of this is MDM.  Unless IBM has a credible strategy for “owning” MDM enterprise wide, and in an Oracle or SAP application environment, IBM will never dominate.

IBM has a lot of great technology (and some process) assets lying around, but there is little vision publicized to wrap the key pieces together.  IBM is doing a pretty good job in MDM land when it comes to current market requirements (see our two Magic Quadrants for MDM) but when we consider MDM in its broader sense (all industries, all use cases all domains, enterprise wide) there are gaps (as there are for all vendors). 

• Governance
• Enterprise-wide Meta Model of Master Data (Design MDM)
• Master Data Services across all master data stores
• Alignment of Analytical MDM to Operational MDM

Governance of master data is the key to the IBM strategy.  So where is IBM’s strategy for this?  At our MDM Summit 3 weeks ago we highlighted this emerging need – for specific solutions – yet it is not present in IBM’s overall MDM vision.  IBM’s Metadata Workbench (demoed alongside a Cognos product for data lineage) is required, in some fashion, for governing master data hubs and application data sources.  Several vendors are looking at this “crown jewels” space and no one is making the right moves, yet.  Oracle, SAP and IBM are chasing the same crown jewels.

Though much of the IBM message and examples this morning were good, value added and useful, I did not see the linkages I had hoped for.

It turns out that the afternoon was enlightening for me.  Clearly IBM has experience in the area of “governance” – a lot in fact.  I had forgotten the work I had looked at some 2 or 3 years ago with their Governance Council.  So I should qualify now the point I made above: IBM still needs to package up all the pieces needed to operationalize and formalize master data governance.

Several of my user 1-1’s today highlighted another piece of research that continues to put the spotlight on a part of IT that remains complex.  Organizations from different industries reported how they continue to wrestle with spreadsheets.  It seems that despite the growing focus on MDM, EIM and EIA, a huge amount of data resides outside the formal purview of IT.  

Much data, some master data and much more related to it, exists in systems that surround the formal IT systems.  Just walk through the offices of your business and look at the desktop’s of the users.  You will see sticky notes attached to the screen; Spreadsheets peaking out from behind the Order Entry screen; scribbled notes on last months report sitting on the desk next to the screen, and so on.  And we should not forget all the other data that sits in other applications on the desktop – what Microsoft calls Enterprise Applications (which are not the Enterprise Applications I talk about).

Despite all the progress and promise we see with MDM, it seems at least one other frontier remains “out there”.  We call this place, “Process of Me”.  The Process of Me describes the business processes from the user perspective, not the application or the IT perspective.  The Process of Me view models all the data and tasks users follow and need to get their work done.  

Over time IT seeks to extends its formal system of control and governance to include this Process of Me – but it seems that there is far more work in this areas ahead of us, than is behind.  I think I will stick to MDM for a few years…might be a bit easier….

Busy day – spoke on “Cracking the code for MDM” to a packed room; and helped with two workshops.  They Key note was really, really good this year. Gartner is taking a much more forward looking view of IT, and some of the themes presented were firmly oriented in the business use of IT (which is great news).  Pattern-Based Strategy™ was introduced in summary form, after speakers had explained the value and need for organizations to identify weak patterns.  The bottom line with Pattern-Based Strategy is that organizations have moved beyond “too much data”, and is now drowning in “too much information”.  The next level of dominant discipline with be the management and exploitation of “patterns in the information”.  This does not mean, more BI, or more data mining: it means enabling users across the business to spot weak patterns that others have ignored (for whatever reason) such that the organization benefits from this action.  So insight, and action, are part of Pattern-Base Strategy.

Anecdotal dialog with attendees threw up contrasting views regarding attendance and general content.  A few attendees commented on the apparent fall off in numbers of “practitioners”; real users that do stuff.  Several users wanted to find like minded and situated users to share war stories and gain tips and tricks on how to proceed with large, ERP projects.  Despite the huge increase on hands-on workshops, more of the attendees were higher level (CIO and direct reports) and so it seemed to some folks that there were more decision makers and less “doers”.  Another few comments hinted at the “can’t Gartner be more business oriented?  I need it brought down (or brought up?) to my level.  This is just too detailed”.  Interesting how the same material can be seen from two contrasting views.  I guess it depends on who you are and where you are coming from.

I helped with one workshop on Cost Optimizing your ERP Operation; and another on Business Process Improvement with Top Processes and KPIs.  Both workshops were designed to facilitate attendee dialog and to help them explore ways to get more money out of their IT investment.  The first workshop provided a framework to look at how packaged applications (like ERP, SCM, CRM, PLM, Procurement, etc) are operated, and how IT could look for ways of standardizing and simplifying operations.  The second workshop challenged users to identify if they, or their business partners, had clear visibility into key, or top business processes, that drove their business, and what KPIs were used to monitor their effectiveness.  I think we toot as much feedback from the attendees as they took from us!  It was a great two sessions.  I look forward to more workshops in the future.

First up, “The rumours of the dollar’s death are much exaggerated” in the Financial Times, October 14^th.  There is an ongoing dialog in financial circles about the dollar, its value, and if the US (Fed, government) is worried about its change in status as the world’s reserve currency. 

There are doomsday views that focus on how much short term debt is held by China (for example), and how much long term debt is held by China and other nations.  The issue being that if the return (very low) is thought to be of much less value than expected, the holders of debt would sell (thus reducing the value of their holders further) such that interest rates in the US would have to shoot up in order to continue to fund the debt.  As such, a tricky game is being played between the Fed and the holders of government debt.

On a positive note that are others that suggest that the US economy, the largest policy-homogenous economy in the worked (the EU could be larger, but they don’t organize themselves through one policy structure) is not likely to lose its reserve currency status due to its size and inertia, so there is virtually no desire by anyone to sell debt since it would “shoot oneself in the foot”.  As such, the US is very liquid and able to keep printing money (issue debt) as needed. 

The article introduces the “Triffin Dilmma”, after Rober Triffin, a Belgian-American economist who, in the 1960’s, who argued that a global monetary systems based on the dollar had a flaw: the increased liquidity that world sought would require current account deficits in the US.  But, sooner or later, the overhang of monetary liabilities would undermine confidence in the key currency.  This seems to have played out several times – and most noticeably with the collapse of the Bretton Woods system.

Second up, in the Economist , print edition October 3^rd-9^th, there was a special report on the World Economy, which I happened to cite at our recent MDM Summit.  The special report is well worth reading to give you a quick overview of where we are, and what the problems are that will slow the recovery.  But, one particular article caught my eye: From Ozzie to Ricky. 

The name of the article refers to a TV sit-com in the US back in the 1960s that followed a family, headed by Ozzie and Harriet, that were “very happy” and also square.  Christina Romer, chair of President Obama’s Council of Economic Advisors, in a speech in May asked whether America could grow without bubbles. “Yes we can” was her (predictable) conclusion. But it was telling that she had to reach back to the era of Ozzie and Harriet for her best examples. Throughout the 1950s, she pointed out, America experienced “healthy” growth and “sensible asset markets”. And from 1962 to 1967, as the show came to an end, America grew by an impressive 5% a year, with a balanced budget and modest trade surpluses.

The article then goes on to explore the relationship between US consumer savings ratio and spending over the next 50 years:

“By the early 1980s Americans had large amounts of equity locked away in their houses. In 1982 their property was worth 106% of GDP and their debts amounted to less than 50% of that sum. Two pieces of legislation, the Monetary Control act of 1980 and the Garn-St Germain act of 1982, unlocked this wealth. The new laws made it easier for households to refinance their mortgages and borrow against the value of their homes.

“What followed was a “borrowing shock of huge macroeconomic magnitude”, according to Jeffrey Campbell of the Federal Reserve Bank of Chicago and Zvi Hercowitz of Tel Aviv University. Shortly after the legislation was passed, household debt began to rise much faster than take-home pay. Ozzie Nelson’s youngest son, Rick, who pursued a career in country rock music after the show ended, was a trendsetter, sinking into debt in the early 1980s after an expensive divorce.”

The article explores several shocks that hit consumers that impacted savings and spend – and then presents a case for a natural trend for both.  However, based on the massive run up in consumer debt, that characterizes the current economic climate, the article suggests:

“To restore their wealth to this long-run average, households would have to repay about $1.4 trillion of debt. At their present rate of saving, these balance-sheet repairs will not be finished until 2012.

There are some other scary pointers in the article, worth reviewing in detail:

“Consumption accounts for over 70% of American spending. Thus even if households do not go back to 1950s saving rates, their balance-sheet repairs will still weigh heavily on demand in the economy as a whole.

“Crudely put, therefore, American spending is about $760 billion short of the amount required to return the economy to full employment. Martin Feldstein of Harvard University, who makes a similar calculation, calls this shortfall a “black hole”. If no other source of spending takes over to fill the gap, then sales will stagnate, employment will fail to recover and household incomes will falter.

So can we assume that the government will fill the gap?    There is an article on this too – so I would recommend the special report in its entirety.