Mark McDonald

Gaining scale while remaining close to your customers is something every CEO seeks in their go to market strategy.  The combination is difficult to achieve because of the way we think about solutions and operations. Too often we mix what we do with how we do it and the mix up reduces our ability to gain scale.

Ask someone about their job or a business unit about their operations and you get– what they do – their activities and how they do it — their tools.  While mixing what’s and how’s together is natural, it creates problems when it comes to building solutions.  Here is why:

What’s – the activities we perform exists as part of a complete business capability.  What we do is contextual influenced by the time, place, knowledge, customer, information, among other factors.  These factors provide richness in being able to change what I do by changing these and other factors.

How’s – the tools we use to perform our steps are less contextual, more routine and rules driven.  IT systems are how’s defining information and business rules.  The need for precision and consistency in executing business rules, recording data and providing answers means that there is little wiggle room in this part of the solution.

Enterprises create rigidity when they seek to implement what’s in specific how’s such as information systems.  This happens accidently in systems development when IT professionals as “What do you want the system to do?”  The question is the ‘second most dangerous question’ in IT and generates system requirements that unnecessarily lock companies into their current way of working.

Executives lock companies into subscale solutions when they dictate how something should be done without consideration of the complexity or variability of their environment.  When an executives, particularly those in charge of geographic regions state ‘we are different and therefore need different systems’ they are at least half right.  They have different what’s, but that does not necessarily mean that they have different how’s or systems.

Gaining scale comes from consolidating the how’s into single common systems using the same information and core set of business rules.  Executives can retain local customizations through placing that complexity in other what’s such as personnel skills, local culture, etc.  They can also meet local needs for tools through ancillary systems and services rather creating redundant core applications.

Take order entry as an example.  Taking customer orders is contextual to the industry, customer, geography etc.  This can lead companies to build multiple order entry systems for each contextual environment.  However, when you look at the information involved in an order, the business rules associated with an order most organizations find an 80 – 95% similarity across geographies operating in the same industry.  This means that essentially an order taken in Germany is largely equivalent to an order taken in Singapore, Sydney, or Syracuse NY.

Now if you are saying wait a minute but ….  Think about the objections you will raise.  Are you saying that the information, process and rules are radically different?  Or are you saying the context, skills, people, environment is different.  If the context, culture, environment is different then we are talking about what’s not how’s.

You are right in saying there are different tax, import, and other rules – but can those differences be handled as additions to a common order entry process (how) rather than requiring entirely different applications that drive up operating costs while driving down scale and flexibility.

The order entry example comes from a European company who operates four different business units selling in four different industries – all with the same single instance of their ERP.

When asked how is this possible, the CIO first answered ‘because we have smart people in IT.”  Then he added, these smart people helped the business realize that their operations were essentially the same – manufacturing and selling liquid products – so the systems could be essentially the same.

Asked about the impact of this decision and the CIO replied that separating the what’s and how’s enabled common solutions that have been essential to managing the company’s cost structure, operational improvement and innovation.  They could not achieve global speed and scale if we had to change four different systems even if the changes were largely the same.

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