These tools and beliefs have all of the right intentions in theory. In practice they create situations that separate rather than bring the business together by creating formalities around fairly simple things.  Consider the formalities around IT governance, portfolio management, prioritization, deployment, etc. and you can see how IT can fall back on following a formal process in exchange for creating functional value.

Nowhere does this happen with greater frequency or ferocity, than it does in the business case.

Business cases are formalisms that fall well short of their functional requirements.  Most cases are created as justifications for investment spending rather than pivotal parts of a future performance plan.   They justify largely IT projects rather than business goals or performance improvement plans.

Business cases wither away as the project gets started and fall into folklore by the time it comes to deploy for the simple reason that they are incomplete. They stop at macro level benefits, often expressed in abstract terms like ‘improved customer service’, ‘greater agility’, or ‘implementing strategy’.

Without a more explicit set of tools, the value potential of a business case is never quite in hand – to the degree that a company can count on is benefits.

Business value is at your fingertips, if only you would consider each finger in turn

Fortunately, there are a few simple questions that you can ask during business case development to help strengthen your hand and give you the ability to create and manage for greater business impact.  Assigning a question to each finger of your hand is a quick way to remember the information required to define business value.

These questions are:

What is the issue? – The answer to this question is the problem that is happening (what’s wrong) or the opportunity you are missing (what needs to happen, that is not happening).   Addressing issues represents the start of the business case and the source of value.  This question acts like the index finger pointing out the direction of the business case.

When does it happen? – The answer to this question describes the situation or circumstances when the issue comes up.  Are there any specific situations, geographies, products or situations when the issue arises more than other situations?  This question acts like the middle finger.  Expressed alone, saying that a problem happens creates only disturbance and distress.  Used in combination with the index finger (what) it makes the ‘peace’ sign that shapes the landscape of the business case.

Who is impacted? – expressed in terms of the specific customers/operating groups/suppliers that feel the issue.  Addressing who gives you a target audience, a way to visualize the issue and help determine what success looks like.  It also gives you an idea of the size of the population affected.  Is this a mass-market problem or one in a particular niche?  Without asking who, you never really know the audience and the audience will be allowed to change undermining the business case. This is the ring finger with the sign of success in the wearing of the wealth created by serving others.

How often does it happen? – the frequency of the issue determines the scale of its potential value.  How often per day/week/month/quarter does this happen?  The more frequently it happens, the greater the value potential and more importantly the potential for the problem to be solved in a meaningful way.   The pinky or little finger represents frequency, why I am not really sure.

What is the cost of the issue? – this seems to be the most obvious, like the thumb, and therefore can easily dominate your attention.  Expressed in terms of the cost to correct a problem, the revenue, or customer satisfaction etc. missed by an opportunity.  Your business case needs a thumb, but it is more than just the thumb, as without the other fingers you cannot grasp the value potential.   I know that sounds cheesy but its true.

Business value slips through your fingers when you only think of your thumb

Business cases that focus only on the thumb – the cost – without consideration of the other fingers and their questions.  It is easy to think of the thumb, as that is what the CFO is asking about.  Thumbs are easy to describe, particularly in terms of financial figures, which are the lagging indicators rather than the situations that are the leading indicators of future performance.

Use the questions above to give yourself a strong hand in creating business performance transformation.  Without all of the answers to these questions, you business case is nothing but all thumbs and you will never get the clear, compelling and actionable case required to create value in today’s environment.

Leaders are thinking about their organizations in new ways, replacing monolithic IT structures based on technical silos with new structures, teams and jobs that are smaller in unit size but geared toward agility, speed and responsiveness.  Understanding the different ways in which people think about their IT organization is an important first step in re-imaging new ways of thinking about IT — including ‘small’ thinking.

BIG IT views the IT organization as the single source of technology skills and abilities.  IT is a monolith within the organization, structured and supported by pillars of architecture, technology decisions, infrastructure and the like.  BIG thinking in IT organizes these resources into technical based silos around either a particular class of technology or technology solution.  Data center group, SAP group, CRM Group, etc. are elements of big thinking in IT.

BIG IT views the people as the scarce resource.  People are the reason behind the assumption of a fixed supply of IT.  They are also the reason behind the way IT works, manages and controls itself.  In BIG IT the work flows to the people more often than the people coming to the work.  That results in management that concentrates on conformance to process rather than creation of value.

Medium IT adopts much of this big thinking and transforms people into services and services into sourcing arrangements.  Instead of an SAP team, there is a contract with people offshore who do the same thing.  Medium IT organizations think that they are doing something different under the guise/buzzword or multi sourcing, IS Lite, ISCO, or Lean IT, but in reality its just more of ‘do more for less’ thinking that dominates medium IT organization.

Medium IT is not sustainable in the long run. Medium thinking creates a ‘hollow’ IT organization which has an organizational structure to cover the IT landscape but it does not have/control the resources necessary to deliver on that structure.  Organizationally, medium IT is a little like a mansion that has all of the rooms, but just the first floor finished.

Thinking Small about IT means thinking differently about resources.  Thinking small recognizes that resources create value when they are in motion and create cost when they are tied down to large, long and high-risk projects.  Those who are thinking small about IT, see the organization not in terms of skill-based silos, but as teams that combine, collaborate and contribute rather than require control, coordination and management oversight.

The figure below offers a graphic comparison of the different ways of thinking about your IT organization.

Break the monolith into pieces and then create a mosaic

From a “Thinking Small” perspective, the IT organization is a mosaic where each piece creates value on its own, but taken together can quickly scale to tackle complex challenges easily.   This is a model that scales from a lean IT organization of less than 100 to a global IT organization of thousands like the CIO at Deutsche Bank described at last year’s Gartner Symposium in Cannes France.  The key is not in how you draw the boxes on the org chart, but rather how you define your resources and the ways in which they come together.

Thinking small – thinking roles not jobs

Thinking small about the IT organization means thinking in terms of people playing roles rather than having defined jobs.  Medium and Large IT thinking often compartmentalizes people into dozens of roles and levels.  Think of all the variations of the role ‘analyst’ and you get an idea.  Specific jobs mean specific job assignments, that job does this.  Specific job assignments create rigidity, hierarchy and structure that bear limited connection to the flow of work that is coming in.  Sure people will join project teams, but if you have every heard them compare or complain about job titles you know what I mean.

Thinking small involves giving people roles.  In one case a CIO eliminated more than 38 job titles to come down to a set of eight roles: developer, analyst, relationship manager, project manager, operations, infrastructure, architect, team lead.  He uses these roles as the basis for forming teams in response to ever changing requests rather than creating organizational structures.

Thinking small, thinking about how you can do more and faster with less management

Thinking small involves changing the IT organization’s ‘manager to staff’ ratio.  Fixed jobs and finite teams each require managers with the appropriate span of control. For some IT organization the ratio of managers to staff has become 1:8 or 1:12 – reflecting a requirement for significant management oversight.  But why?  Well because in most cases ever team needs a leader/manager and managers need managers etc.  Count the number of levels in your IT organization from the bottom to the top, if its more than four then you are living a large IT model.

Thinking small involves reflecting on what managers in IT really do.  In most cases they are expediters, issue resolvers, conflict coaches as their teams face too much multi-tasking generating resource tensions that require ‘management’.  The result is unnecessary oversight created not by the organization, but by a limited ability to prioritize.  One IT organization reformed IT governance and PPM practices to give people a single task at a single time.  They were then able to expand the manager to staff ratio from an average of 1:8 to 1:20.  What happened of the managers?  Well they became contributors raising the organizations productive capacity by more than 20% with no impact on the budget.

Making the mosaic

How you define your roles and manager requirements are two examples of ‘thinking small’ about IT and the IT organization.  In both cases, small thinking is focused on raising flexibility, productivity and performance, not cutting the size of IT.  That is important to keep in mind, because when you shatter a monolith to create a mosaic you really notice when you are missing a piece.

Think small my friends.

Mark McDonald and Anthony Bradley are the co-authors of a new book:  The Social Organiztion: how to use social media to tap the collective genius of your customers and employees. Please check it out.

Every organization faces the need to create new solutions, processes, products and services better, faster and cheaper.  Often mislabeled as innovation what firms need is a better approach to ‘start up’ new things.  This is the focus of Eric Ries’s book The Lean Startup.  This book is an excellent resource for innovators looking to start something new either a new company or a new capability in an existing company.

Highly recommended for anyone who wants to create something new, whether in their garage on the weekend or within their company.    I suggest that this book is required reading for every CIO, product developer and business unit leader each of whom is charged with creating new solutions and revenue streams.

Eric Ries’s book describes an innovative approach to starting a new business, based on his experience as a social media start-up and consulting other companies.  The term ‘lean’ in Lean Startup applies to a different form of waste that traditional lean thinking.  In a start-up waste is defined by Ries as anything that keeps the team from learning about how to create value for the customer.   The techniques Ries applies to being a Lean Startup are related to general lean principles but unique to the challenges of creating something new.

Ries makes a significant point when he wrote, “Entrepreneurship is a kind of management.”  And that point sets the context for the rest of this book.  Taking a management approach enables Ries to focus on the mechanics and approaches to getting new ideas out and into the market.  It also allows him to incorporate Lean thinking in ways that address many of the limitations of high risk, low yield, long lead time product development processes.

Unlike prior books on startups, Ries focused on approaches and metrics used to guide the actual process of creating a startup. This is in marked contrast to other books that discuss funding, marketing, etc. – everything other than the work required to create a startup.  The fact that these practices can be applied within companies makes this book one of the top two or three I have read so far in 2011.

Strengths

• Describes the principles of entrepreneurship as management in terms that are readily applicable in a startup as well as in established companies that are creating an internal start up.
• Discussion of specific techniques and concepts related to running an effective startup.  Ideas like validated learning, vanity metrics, innovation learning, and minimum viable products, among others.  Each of these techniques offers a new approach and way of thinking about the process of creating new sources of value.
• Ries uses his experience to discuss how these ideas are applied in real life providing the reader with sufficient depth to think about how these ideas might apply to your situation.
• The book presents these ideas in a clear and engaging manner that builds understanding.

Challenges

• The book’s examples and cases concentrate on eCommerce and social media Startups that will limit its direct applicability outside of high tech.
• The book gives you just enough detail to start you thinking but not enough to give you a recipe that you can apply on your own.
• The book can be read as an extended advertisement for Reis and his startup consulting practice.  You get this feeling when he introduces a new subject, providing a description without actionable advice and examples.

Overall, this is one of the books that everyone should take the time out to read, as the Lean Start-up practices are actionable both within a start up and an established company.  Everyone needs more than a stream of ideas, we need a stream of new solutions and the Lean Start-up provides a strong description of how to bring those ideas to market.

Related Post on Lean IT, although not directly related to the book:

Lean IT — Muda Matters

A model for a Lean IT organization

Thinking small touches just about every aspect of IT from its foundational assumptions, to how it operates, to how you judge its value and contribution.  This post focuses on first on how BIG thinking paints IT into a corner.  It sets the context for thinking small about IT, which is in a subsequent post because people tell me my posts are too long.

It is easier to get caught up in the need to control costs and resources when you think about IT as BIG.  Big IT thinking views the size of IT as a measure of its importance.  IT is critical because of the number of systems, the required CAPEX and OPEX, the number of people, the complexity of contracts, the unique technologies, etc.

Thinking BIG means thinking about one thing in one way

When we emphasize how BIG IT is, how complex, how different, how much the business does not know or understand it, we create an environment with only one question and one response.

How much does it cost? And prove to me that you are not wasting our money.

You do this in your personal life

Think about it, in your personal life when someone shows you a complex sports car, a new dishwasher, a new TV and bombards you with features, functions, specifications that you may understand but have a limited ability to value what do you go back to – what is the cost?  What is the feature function comparison?  You group choices them by similar features and qualities and then ask, what is the best value?  Sure but in reality the group has equal value so you give preference to the lowest cost?

Why?

Because, no one wants to be stuck overpaying for something they could have purchased cheaper.  You take pride in showing off your new TV to your friends and talking about what a great deal you got.  After all getting a great deal is a sign of business acumen. Paying too much is a sign of weakness.

Getting a good deal and controlling the cost you pay is about the only way to feel good about a choice where all options are essentially viewed as equal and there is a fear of getting ripped off.  You might comment about brand, snob appeal, etc., but if your neighbor got the same or better for less, you feel differently.

It is exactly the same with IT, particularly when we think of IT as BIG.  We tout new solutions, new technologies, architectures etc. all of which are complex and some of which we really do not fully understand.  Under that bombardment of BIG messages, the only dimension the organization can value and control is – how much it costs.   The only risk.

Don’t believe me?  Then consider this.

CFO’s think this way, because you give them little choice about how to think differently

Last week I had the opportunity to present to 18 CFO’s on the subject of IT.  I asked them the following question:

Which would you rather have a 10% savings on IT’s infrastructure and operations budget or the business results of a 23% increase in IT’s capacity to create new business value?

A 10% savings on I&O would represent about 0.0014 of sales. See “the math” at the bottom for details.

The majority of CFO’s took the 10% savings.  The other group said that they were not sure and would have to see what the 23% increased capacity would be spent on.  Not one, said ‘yes give me more IT.’  Not even the CFO holding a cowbell!

When I asked why, the answer was simple.  Because the 10% cost savings has a 100% certainty.  The business investments are uncertain, unpredictable and IT has a spotty record at best with benefits realization.  Even when that 10% savings represents less than 0.0014 of sales and the new business solutions could grow revenue by 3 – 5%; they opted for the sure thing.

Why?

Because they see IT as big and the only way to control something big is by controlling its budget and cost.  The CFO’s at the meeting asked for new models and ways to value IT investments, more on that in a latter blog post, but it’s a sign that they recognize that the current way of thinking about IT, BIG thinking, presents them with an easy but not necessarily the right way to make decisions.

So what?

Recognizing the context thinking big about IT creates is the first step in recognizing the need to re-imagine what I can be like and the potential of thinking in new ways.

What is the difference when you THINK SMALL?  That is the subject of Friday’s post.  Why Friday, because people tell me that my posts are too long and to break them up more.

XXX

The Math

The percentages assume: An IT budget set at 2% of sales and a split of that budget of 70/30 between I &O and investments.  A 10% change in I&O budget transferred to investment changes that ratio to 63/37 reducing I&O as a percent of sales from 0.0140 to 0.0126 a change of 0.0014 of sales.

All of this cost cutting must have worked to one degree or another as IT budgets have been essentially flat since the dot com bust about a decade ago.  However, the monotony of cost cutting has beaten the IT organization into submission.  It has driven out emerging technology, innovation, creative capacity and the capability of IT personnel.

Yet it is not finished. The drum beat of another 10 – 15% ‘take out’ in IT can still be heard. IT risks marching towards a dangerous tipping point where we can no longer do the same things at lower funding levels and expect to get the same result.  The world of “managing IT demand, with fixed IT supply”, robs an organization of one of its most dynamic capabilities: IT, just when competitive dynamics means its  needs it the most.

It is time that we change the way we think about IT.  It is time to re-imagine IT.

It is time to “get Think SMALL”

The path from Large Thinking IT to Thinking Small IT.

We all started with LARGE IT.  Large in the sense that the IT organization was fully vested in in-house staffing, equipment, applications and the like.  Large IT was slow and expensive, but it was necessary as companies had to build much of the technology stack on their own.

Large IT still exits, although its increasingly rare as cost pressures, coupled with Large IT’s inability to deliver quickly, fueled demand for substitutes that the IT market vigorously responded to. In turn, these readily available substitutes created a compelling business cases for  Large IT that led to the creation of MEDIUM SIZED IT THINKING.

Medium IT is medium in the sense that the IT organization attempts to do everything it did in the large model, but at a cheaper rate.  If you have ever spoken the words “more for less” then you have participated in the super re-sizing of IT.  Medium IT is the domain of IS-LITE and LEAN IT where organizations seek to do everything that they did before only for less money.

The problem is Medium IT is no more sustainable than Large IT.  The only way to make it sustainable is to think of IT as a generic commodity that is managed by concerns of cost, scope and quality.

Just because IT costs less, it does not mean that IT is worth more.

The vast majority of IT organizations are now medium IT organizations.  If you look across your office and find a sea empty cubicles, manage a set of services relationships that took advantage of labor arbitrage, are trying to manage IT demand, then you are a medium IT organization.

A medium IT organization is not sustainable in the long run as you cannot manage demand effectively in an environment of increasing consumerization and choice.

Thinking Small IT is now on the agenda for many.

Yet CFO’s and cost cutters beware — Thinking SMALL IT has nothing to do with the size of the IT organization, its budget or cost structure.

Thinking SMALL IT is small because of how it thinks, how it manages itself, and the way it works.  Yet it is BIG in the results it delivers.

Thinking SMALL IT is a state of mind, not a staffing situation, or a budget request, or a strategy to do more with less. That is how we got into the mess that is MEDIUM IT.

Thinking SMALL IT addresses fundamental issues of productivity, cycle time and throughput across the organization, including the part of the organization now called IT.

Leaders are already showing the way to think SMALL IT.

Sure they have new answers to IT’s old questions about cost, control, security, IT’s role in the enterprise, IT value, etc.

But they have more.

They are finding new answers to new questions raised by changing technology, economic conditions and our progress.

Thinking SMALL IT hinges on new questions organizations must answer:

• What is the production function of an IT Organization?
• How should an organization measure the value of information and technology?
• Why are traditional notions of IT and IT management losing their effectiveness?
• What are we going to do about it?

Thinking SMALL IT provides new answers that are focused on:

• Creating value through what you produce and how you produce it rather than controlling service costs or resources
• Creating results rather than managing activities
• Raising IT’s strategic contribution
• Moving the IT organization from being a monolith to a mosaic
• Gaining the new skills needed for the future
• Embracing lighter weight technologies and their implications
• Generating a greater yield on information and technology resources
• How can you achieve all this by being small?

Thinking Small IT is one of the ways that leading CIOs are re-imgaining ITfor 2012.  Over the next few weeks, the blog will discuss these and other aspects of SMALL IT.  Look for the key word SMALL IT as well as links that I will try to update below.

Related Links

Thinking Small — Creating value rather than controlling costs (part 1)

Thinking Small — Thinking value (part 2)

Thinking Small means ‘dating’ the business

Thinking Small — the IT organization from monolith to mosaic

Management systems have implicit incentives for accretive change and leaders when they place greater value the future benefits they are chasing and think less about the cost and complexity such change builds up.

Here are a few ways to that you can manage accretive leaders and change.

• Ask, “where have we solved this issue before?”
• Set a simplification goal for all new investments.
• Fund decommissioning and removal activities
• Change the performance goals, targets and metrics for line management
• Incorporate ‘time to market’ considerations in evaluating investment operations

A brief description of each of these techniques

Where have we solved this issue before?

Accretive change happens when organizations build solutions that they already have.   Reuse is the remedy for accretive change.  Reuse starts with the question of where we have solved this issue before?    It’s a question accretive leaders will have trouble answering as every solution looks ‘new’ to them.

They are right to a point, as the conditions demanding a new solution are never the same as the ones that created the need for existing capability.   But the fact that the situation is different does not matter as much as you think.  Reuse matters for financial performance, even in 2009 when the economy was in a downturn.

Set a simplification goal for all new investments

Investing in change is incomplete unless it creates new capability as well as eliminating the old.  Setting a simplification goal for new investments is one way to require every leader to think about making things simpler.  Establish new measures to bring simplification into the investment equation. For example, how many systems will be replaced by the new system, how many organizational responsibility centers will go away, location consolidations, items in the product catalogue, parts in products, steps in a process, etc.

Adding simplification to your investment decisions requires the accretive leader to formally address the issue of actively replacing old components with new solutions.  Investment committees need to incorporate simplification criteria into making the business case, value proposition, development schedule and design.

Fund decommissioning and removal activities

Simplification is meaningless without the funding to remove old equipment, change business processes, reports and reporting structures, etc.  Too often these activities are ignored, or assumed to be part of the deployment process, or left to the business to others.

Decommissioning is critical to managing accretive change as without active removal old components will remain and become part of the woodwork.  Decommissioning also reduces enterprise risk.  For example, a long time ago I was working on a change program in banking that installed a new teller system that could encode cashiers checks.  The system replaced a specialized check encoder – a giant typewriter – that could turn a piece of paper into a negotiable instrument.

Decommissioning the system was not considered leaving branch managers to throw out the old machine by placing it in a dumpster.  Not a best practice in large part because decommissioning was never formally funded.

Change the performance goals, targets and metrics for line management

Accretive change exists when executives and managers do not care.  While projects are engrossed by change, managing can often be indifferent to new things preferring to sustain old ways of working even in the face of new solutions.  Retaining old performance goals, targets and metrics tell line managers that change is cosmetic and that old practices and the systems that support them are accepted.

Resetting performance goals, targets and metrics represent the essential change elements for managers.  New tools, data, processes, equipment etc. are important, but they will be used in old ways and old solutions will persist.  Changing the way you work does not happen in a sustained manner unless you change the way you manage.

Incorporate ‘time to market’ considerations in evaluating investment operations

Accretive change and accretive leaders frequently use time to market as the reason why they need to build out new solutions rather than resolve issues through improving current systems and solutions.

Accretive leaders say that the quickest way to get into the market is to build new rather than reuse. Such thinking not necessarily correct.  A Gartner EXP/MIT CISR study of more than 400 companies indicates that effective reuse programs cuts ‘time to market’ in half compared to building or installing ‘new solutions.”  The only thing that comes from building new channels is accretive change that complicates you operations drives up cost and trades short term benefits for long term cost and limited agility.

Managing accretive change and accretive leaders is everyone’s responsibility as everyone bears the cost of accretive change and the limitations it creates for the enterprise and its future.

Change is vital to an organization and its sustained performance but change for its own sake creates a different kind of leader – an accretive leader.

What is an accretive leader?   One who allows individual changes to build up, one on top of the other, with little consideration of the cumulative effect of change.

CIOs and IT call accretion – legacy – and recognize it as a barrier to change as new solutions and technologies rest on the debris of past transformation efforts.   The figure below provides a lighter look at the accumulated legacy that has accreted in many organizations.

Some characteristics of accretive leaders include:

• Piling on solutions in an ‘ad hoc’ fashion to address point needs and specific situations.  If you do not ask, what will we stop doing, then you may be an accretive leader.

• Recreating your prior enviornment whenever you come into a new orgnization or role.  If you the only way you can be successful is to deal yourself a new hand rather than playing the cards you were given, then you may be an accretive leader.

• Valuing the promise of potential value over the reality of current operations.  If solving the issue is only as far away as ‘buying a new solution’’, then you may be an accretive leader.

• Allowing organizational performance to reach a crisis situation before taking action.  If you have to create a burning platform that presents no option to the organiation, then you may be an accretive leader.

• Following an old engineering ‘rule’ that when something breaks you need to make it ‘thicker’ or applying more duct tape.  If just making something better by giving it more management focus,  creating a new organizational unit, or assigning a task force, then you may be an accretive leader.

• Discounting the experience, insight and potential of your people to find creative and innovative ways to re-imagine and re-engineer solutions.  If you assume your organiation is biased against change, then you may be an accretive leader.

• Placing greater value in activity over results, as activity, any activity as being as a substitute or diversion for achieving results.  If you are talking about building momentum or getting started even if we may be partially wrong, then you may be an accretive leader.

If these statements ring a bell, there is a chance that you may be an accretive leader or be leading an accretive function – which can include IT.

An accretive leader is not a bad leader, rather than are incomplete leader.   Their mindset treats transformation as a transaction and a way of managing rather htan resolving business issues. Accretive leaders find purpose in perpetuating a performance sistuation, constantly tinkering with it, engaging in sequential change.  They see change as something they do and need to do more of to create value without regard for the cumulative impact of change on operations, finances and future organizational agility.  If there is no need to change, then does the company need you as a leader?

So are you an accretive leader?  Do you work for one?  Do you know of others in your company?

Some thoughts on reforming the accretive leader is the subject of the next post.

Muda Matters — The Sources of Waste Applied to IT

Lean principles are all the rage.  Cutting the fat and reducing waste are leading people to affixing ‘lean’ to everything: lean manufacturing, lean process management and recently lean-IT.

Lean principles were originally applied to manufacturing processes and since IT is a process many of these practices apply.

Eliminating waste, what lean calls ‘muda’, is the essence of Lean thinking.  Lean highlights seven sources of waste.  How ‘muda’ applies to IT are the subject of this post.

1.     Overproduction – making things before they are needed is a source of waste.  In IT overproduction comes when IT builds solutions or provides capacity that is in excess of the business requirements.

2.     Waiting – the time and resources consumed in between major steps in a process.  In IT waiting happens in areas like user signoff, requirements definition, testing, and other areas.  Waiting comes from multi-tasking that often comes from trying to fully-allocate IT resources.

3.     Transporting – the unnecessary movement and handling of work.  This happens when you pass work between multiple teams, multiple companies and locations.  A lack of clear process, poor coordination tools and weak management raise transporting in IT.

4.     Inappropriate Processing – involves resource overkill, also known as ‘gold platting’ solutions.  Over-provisioning service levels, taking on extra requirements or building beyond business needs are IT examples of this form of waste.

5.     Unnecessary Inventory – in manufacturing the concern is Work-In-Progress (WIP).  In IT the resources tied up working on multiple concurrent projects.   Remember that active five projects means five investments and no results.  Shorting cycle time and increasing throughput reduces the amount of WIP.

6.     Unnecessary / Excess Motion — refers to the unnatural acts that people are made to perform in doing their job.  In IT excess motion can he thought of the ‘hero’ actions that are common in IT.  Whenever you need a hero you are requiring excess motion.

7.     Defects – errors are the common focus of improvement disciplines like six-sigma.  In IT defect removal concentrates on verification, validation and testing.

Muda matters in IT and every CIO and IT executive should look at these sources of waste in their operations and plans.

The dichotomy of front vs. back is the basis how we think of everything from compensation structures and rewards (front office) to information systems (back office) and the way we look at reducing organizational costs (primarily back office).

Mid-office processes are decision centric, semi-structured and require bringing experience and tacit information together to assess the situation make decisions and mobilize the organization.  THey sit between the front and the back office as shown in the graphic below.

These processes are not formally recognized or even overtly managed, but they are critical because the decisions they produce and the actions that determine the company’s direction and cost structure.  Think of pricing, resource allocation, strategy formulation, strategy execution, compensation and rewards, etc.  All are semi-structured processes which highlights the following:

You cannot improve something that does not have a name .

Many mid office processes are poorly defined, the first step is to give them a name so you know where to focus your improvement efforts and identify leverage points to influence quality, cost and effectiveness.

• Pay particular attention to areas where you make decisions repeatedly or conduct knowledge based work, or think of things as handled by ad hoc teams.
• Take a hard look at processes deemed to be the domain of management, but have become the domain of committees or cross- functional processes.  These are mid office processes that are handled calling a meeting or having a standing meeting.
• IT systems for information and reports can identify mid office processes from the perspective of highlighting people using systems in ways that they were never intended to work.  Scanning a list of custom, ad hoc and repeated special reports is one way to identify these processes as these reports feed the type of semi-formal work found in the mid office.
• Identify the major decisions that influence organizational performance, particularly the ones reached via committee or that happen periodically but not regularly.
• Identify the processes involved in making these decisions the resulting impact on organizational performance.  Processes where there is not a clear connection are candidates for reform or removal as they are no longer needed or may have outlived their useful life.

These steps give shape to work found in the mid-office by looking at its decisions, information and direction.  Create a list and do not worry too much if it looks like a mixed bag of committee’s, special task force, exceptions, loose bits and odds and ends.  The work in the mid-office is semi-structured so its natural that it would be difficult to cleanly define these activities.

The key criteria for things being on the list include:

• It is work that you do, even if you do not do it on a regular basis.
• It is work that matters, the decisions, actions or agreements made have an impact on the business, its customers, products, people, suppliers etc.
• It is work that people will remember, you may have to say ‘do you remember when we …” but once introduced people acknowledge the work.

Applying these three criteria will help you focus the list on work that you do, that has meaning and that people can identify.  Push things that do not meet these criteria down the list for latter consideration and you now have an outline of the work that happens in the mid office.

Related materials:

Financial Times:  Time for a new concept – the Mid office by Paul Taylor

Blog post: It is time to start talking about the middle office

However, there are signs that it may be coming back!

Inflation fears are on the rise as governments watch prices and demand rise as a natural part of a recovering economy. That should be good news, after all a little inflation is not a bad thing as its a sign of increased demand as well as having palliative effects on paying off debts on a personal and national level. You know paying off future debt with ‘cheaper’ money.

The time to deal with inflation is before it happens, as that is when your resources have the greatest value. That means understanding what inflation does to the business, your budget and priorities. These form the considerations for a plan and determining the trigger that puts that plan in place.

Some thoughts on what to do going into a potential inflationary environment does to your business. The principles are simple; in the future, your dollars are worth less. Dollars including the ones you will earn in sales as well as the cash you hold on your balance sheet

• Pricing power becomes important in an inflationary environment as you the power to pass on pricing increases become critical to maintaining profitability. For CIOs and IT, this becomes a critical target for deploying new technology as your company has pricing power where customers feel that you know them well and have what they need, when they need it. All three things rely on technology to achieve.

• The value of immediate SG&A cost cuts and controls increases to preserve profits in the face of uncontrollable input costs. CFOs will go through another round of ‘operational’ tightening ahead of the inflation spike, as savings matter the most at the start when the dollars saved have higher value.

• Debt becomes relatively cheaper, which can lead to increased leverage buyout activity either in the form of consolidation or perhaps increased privatization of public firms. Companies are sitting on record amounts of cash and they will face increased pressure to put it work as its value erodes with inflation. Look for some to leverage up to buy others. However, given the increasing scrutiny of public firms I would not be surprised to see more companies go private via leveraged debt as banks and hedge funds need to put their cash to work as well.

• Suppliers shift their focus and service away from their long-term contracted prices to spot market requests. Consider what you did over the past few years in terms of squeezing your suppliers and get ready for them to squeeze you back. Their criticality to your operation determines supplier-pricing power.

• Wage pressures will increase as people are squeezed, particularly after years of low to no salary increases. Pay will be come immediate and good people who are behind the pay curve will become vulnerable to leaving. Consider increasing the frequency of bonus payments, as people will value money more today than in the future.

• Increased focus on energy and commodity costs and waste. These two categories are the most volatile in inflationary times. Refocus efforts to replace energy and commodity needs with information. That requires a dual focus on Just-in-Time operations as well as reducing waste in operations and processes.

There is no way to know the future, however it is always good to be prepared for the likelihood of inflation in the future. There are simply too many forces behind inflationary pressures to rule them out entirely. A suggestion is to pull your leadership team together and just go through the scenario of 7 – 10% inflation and no ability to pass on the costs. What would you do, what actions would you take. That is the start of the plan.