All Posts in Policies and Procedures

|In: Industry Commentary|Last Updated:

Consultants are obliged to eat their own dog food, or so the saying goes. Given the high esteem in which the IT class holds consultants, being considered canine is, relatively speaking, a compliment.

So at the risk of having readers think this column is going to the dogs, I have to modify a long-held position promoted here for years. If I didn’t, I’d just have to modify a different position promoted for just as long.

What isn’t changing is a core principle — that there is no such thing as best practice, only practices that fit circumstances best. Everything depends on context.

What is changing is that internal customers aren’t pure evil anymore. There is a circumstance where the internal customer concept is a good fit.

Go back to basic economics — namely, the nature of marketplaces, which is where buying, selling, and customers reside. Marketplaces optimize the allocation of resources — the balance of supply and demand.

So here’s the syllogism: The major premise is that by having internal customers you’ve created an IT marketplace. The minor premise is that marketplaces optimize resource allocation. The inescapable conclusion is that treating the rest of the business as a collection of internal customers optimizes IT resource allocation.

To make this all work, the rest of the business has to actually be a bunch of customers. They have to pay you (and each other, when appropriate) for the products and services they use, and they have to be free to take their business elsewhere. You have to be allowed to price your services so that you can afford to deliver whatever service someone elsewhere in the business is willing to pay for.

Very important: The people running the business can’t hold you accountable for bad investments in information technology. That’s no longer your job, any more than Home Depot is responsible for the consequences of your decision to paint exterior walls with interior paint.

Even more important: End-users still aren’t your customers. That hasn’t changed, and won’t. Customers make buying decisions. End-users are consumers — a different role entirely.

If budget managers are your customers, the thorny problem of IT resource allocation — most of the IT governance process — goes away entirely. They pay, you deliver. Otherwise, you don’t get involved. Your scope of responsibility is limited to delivering working software and services that meet specifications. Whether any of it does the business any good at all is Someone Else’s Problem.

Sounds attractive, doesn’t it?

Does this mean the new official position of Keep the Joint Running is that you should make a 180 degree change and treat the rest of the enterprise as your internal customer?

Nope. The new official position is, it depends. If the enterprise’s most significant challenge is resource allocation, go right ahead.

But …

Markets optimize resource allocation and only resource allocation. They’re useless for establishing and pursuing a shared purpose, and for managing shared resources. Which is to say: The business community has done an admirable job of recognizing unmet needs and addressing them. But it took government to launch the space program. To establish the interstate highway system. To build the Internet. And to protect the environment, the stock market, and the food supply — from business.

In terms relevant to the business you serve, if everyone in the business is each other’s customer, the enterprise’s ability to act with strategic purpose will become, for all intents and purposes, nonexistent.

And your ability to maintain a coherent architecture will be severely reduced. A scenario to illustrate the point: Marketing decides to define “customer” in terms of households. Marketing is your customer; you comply. A year later, Customer Service needs its call center agents to see which callers received which recent marketing campaigns. That’s just too bad: Marketing only needs households, and isn’t willing to spend the additional money to maintain individual customer data for the benefit of a different department.

Then there’s the need to create and maintain an internal billing system — full employment for accountants, but zilcho on the value scale for the company.

If the people running the business think it can succeed by having every department in the company buy and sell services from each other like some crowded bazaar, they’ll turn internal politics into a strategy, governance into game-playing, and competition into something that happens inside the corporate organizational chart. But if that’s their decision, you have no choice.

Set up your stall and start selling.

Comments

|In: Leadership|Last Updated:

Not every CEO is a paragon of business acumen. I know it’s hard to believe. But it’s true nonetheless.

No, this isn’t a piling-on column about Carly Fiorina’s departure. That would be an I-told-you-so — an ungraceful and mean-spirited exercise. (I did, however, give you a pretty strong hint in my 9/16/2002 epistle.) This column is about a different subject: Why many CIOs, trying to institute a strong, systematic, process-driven approach to IT governance, find more resistance in the executive suite than anywhere else.

We’re going to take the long way round, though. I hope you aren’t in a hurry.

The story starts in 2000. The geniuses then running General Motors (many of whom are the geniuses now running General Motors) struck a deal with Fiat … negotiated, according to one account, over a long weekend … to swap equity and become global partners. The agreement contained a time bomb, guaranteed to win this year’s Business Bizarro Award: A “put option.” It means Fiat can compel GM to acquire it whether GM wants to or not — an inverted hostile takeover. How hostile is it? For $8 billion or so, GM will acquire more than $10 billion in long-term debt. And, even worse, a large pile of Fiats.

How could something like this happen? Unencumbered by actual specific inside knowledge of the players, I’m free to express strongly held opinions about what went wrong, namely:

  • Big-concept thinking: It’s an old joke: “The view from 50,000 feet,” translates to “Wrong.” In announcing the deal, the companies listed four opportunities: Reducing materials costs; strengthening both companies’ engine activities; increasing the efficiency of financial services operations; and exchanging technologies and using common platforms.The opportunities were certainly there. But to take advantage of any one of these opportunities, the two companies would have had to collaborate in a complex program of difficult business change. Even with strong leadership, complex programs of difficult business change fail more often than they succeed. This deal’s success relied on four of them. Executed concurrently.
  • Falling in love with the deal: As George Patton pointed out about dying for your country (let the other SOB do it), when you do big deals, you want the other side to fall in love with them. The moment you do, you’re doomed.GM is a car company, and the people running a car company should have recognized that we’re talking about Fiat — considered a joke among those who value good cars. But then, General Motors sells the Lumina. So maybe the right lesson comes from HP after all: When a company with a weakness buys another company that shares that weakness, it doesn’t create a strength.
  • Attitude of privilege: Privilege, you’ll recall, means “private law.” You can bet GM’s middle managers complete a non-optional due-diligence checklist before any major initiative can move forward. Smart CEOs understand that the due diligence process exists because it’s a good idea. Those who enjoy the experience of privilege figure it’s a good idea for everyone else. Had GM’s executives followed their own process, someone would have raised a hand to say, “Uh … boss? Did you know this is in here?”

Whether GM’s leadership suffers from these defects or some other set of defects instead is uncertain. That it’s just about the worst-performing car company in the world, other than Fiat, of course, is not. Nor is it in doubt that this criticism is entirely gratuitous, irrelevant to the point of this column. So let’s get to it:

Large organizations need strong processes to guide their major activities. If you’re the CIO of a large IT organization, you need them for more than the internal, day-to-day business of IT. IT governance — the means through which the company sets priorities and allocates resources, and which smaller companies can deal with through informal relationships and internal deal-making — needs a strong set of processes and guidelines to prevent chaos once large size happens.

Big-concept thinking and “generic acumen” can wound your attempts to institute strong, systematic processes. The attitude of executive privilege is worse. It’s frequently fatal. Business executives, including many CIOs, by the way, enjoy having the authority to help their friends bypass the unpleasantries of the corporate bureaucracy — the usual synonym for governance processes of all kinds.

More sophisticated executives understand that the best way to help their friends isn’t to help them around the process. It’s to help them work the process.

And even more important, to make sure the process is workable, and works.

Comments