Challenges Managing in the Knowledge Economy? The Answer is Beneath You

As children, many of us grew up with a vision of the manager as “the boss” – a key source of authority in the business who knew the answers, told others what to do and led with a firm hand.  As adults, many of us move into management and try to live that childhood vision – with disastrous consequences.  Why hasn’t the “boss as manager” model work for us today? What’s changed?  Surprisingly, the answer is beneath you.

To understand what this means, consider, first, the era when management as profession came into vogue – the industrial age.  The emphasis had shifted away from the craftsman-apprentice model before mass production, where individuals passed on knowledge one-on-one.  Instead, the secret to success in the industrial age was mass production, which required the standardization of business processes and simplification of tasks so that unskilled workers could more easily complete the work.

A manager’s primary responsibilities were to coordinate the efforts of large groups of people, so a highly regimented top-down management style fit best. The 24-hour day was broken down in to two or three shifts, people were assigned to shifts and they generally completed their assigned work. During this age, a manager’s biggest challenges were employees who didn’t show up on time, who left early or who didn’t complete their fair share of work.  A firm hand was required to prevent abuse and keep productivity up; the “manager as boss” excelled in this world and this management approach flourished.

On to the knowledge age, where knowledge is the key tool used to create products as well as the product itself.   For the first time, many products — semi-conductors, computer hardware, software, even modern phones — rely heavily on knowledge as the key inputs to their creation.  In the knowledge economy, the highest single cost in creating the product is the labor of experts – not manufacturing labor or raw materials.  In turn, making the most of the knowledge of these experts is the key to success – not necessarily making the most of their time.

With the shift from industrial economy to the knowledge economy, the storehouse of knowledge and authority are no longer in the same hands.  In the industrial age, the boss knew best; in the knowledge age, you, as a manager, still have the authority, but the knowledge is beneath you, in the hands of the experts.  To adjust for this, a change in management style is needed.

Based on my conversations with respected managers in the age of knowledge and my own experience, here’s how to succeed as a manager in the knowledge economy:

  1. Ask the experts. This sounds simple and straightforward, but it’s rarely followed.  Because many of us are former experts who moved in to management, we consider ourselves experts still.  Yet, how long does it take before our expertise becomes out-dated when we don’t use it?  As little as six months? As much as a couple of years?  Consider this: If your subordinate knows all of the features of the latest version of your software, but you know all the features of the last one, whose knowledge is more valuable?
  2. Facilitate – don’t order. As managers, we all know that the experts around us are extremely bright – in many cases brighter than we are.  How condescending it must seem, then, when we managers order our team members to execute our instructions.  Instead, help them to identify the problems together, then assist in developing a methodical approach for solving it.  In the process, it will become clear which team members should tackle each step in solving the problem.  No orders necessary.
  3. Coordinate – don’t control. As former experts, we’re acutely aware of the challenge of being “stuck in the weeds” – that desire to keep your head down and focused on solving the problem in front of you.  As much as that tendency toward isolation grips our fellow experts, we should coordinate their efforts and encourage them to work together as a team.  Coordinating the team means bringing them together, discussing key challenges and asking one expert to help another to achieve breakthroughs when addressing a challenging problem.
  4. Serve as a knowledge bridge. In many cases, the specialized knowledge of one expert on your team is very different from the specialized knowledge of another.  For example, one person may specialize in database design, while another specialized in user interface (screen) development.  Because of this, they are often working on very different tasks, even though one person’s knowledge may be needed to solve another person’s problems. As the manager of this team, we know what each team member is tackling and we should know whether they have solved past problems.  It’s our job to connect the dots across the work of our teams, to point out patterns in problems that we see, and to bring together the experts to share their relevant knowledge, solving each other’s problems more quickly and efficiently.
  5. Set challenging (but realistic) goals. Knowledge experts like challenges, so work with them to set short term and long term goals that are SMART – Specific, Measurable, Attainable, Relevant and Time-specific.  As part of the process, be certain to set goals to be a little more challenging than the person believes is possible – but not so difficult that the person ignores the goal because he or she thinks it’s impossible.
  6. Value the individual. In the industrial age, the loss of an individual team member was disappointing, but it wasn’t likely to cripple your business, your division or your projects.  In the knowledge age, there are people who are so essential that their departure could force the business to crumble.  While I would argue that it has always been important to treat people well, in the knowledge age, it’s even more important to treat each individual with respect and consideration.

In many respects, the knowledge economy has made managing more challenging.  In many management positions, “people” skills are more important than analytical abilities.  Even more challenging, your position as manager often makes you more expendable than your subordinates.  Combined, it’s critical to your success as a manager to look beneath you for the knowledge and expertise for you and your organization succeed.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.comm.


Project Recovery Success Stories

Through our Five-Step Rapid Project Recovery Process, Cedar Point Consultants have achieved a great deal of success in recovering troubled projects, spanning multiple industries and functional areas.   We quickly evaluate your project’s current state and help you to make the best decision about how to move forward — in as little as two weeks.

While your situation may differ and results can not be guaranteed, Cedar Point consultants have delivered these Rapid Project Recovery success stories:

Green Check Mark For a heavy manufacturer, a troubled multi-year, multi-million dollar product engineering and manufacturing project was recovered and the project was delivered two months early and $300,000 under budget.
Green Check Mark For a large financial institution, a trend of late project deliveries was reversed by a Cedar Point consultant, resulting in three consecutive on-time deliveries in a one year period.
Green Check Mark For a large U.S. Federal agency, a $1.25 million troubled project was recovered and successfully delivered after nearly a year of little results under prior leadership.
Green Check Mark For a small financial services firm, a troubled $600,000 strategic project was recovered and completed in eight months, after over two years of prior failed attempts.
Green Check Mark For a regional legal services company, an enterprise-wide IT overhaul project was recovered and then delivered in under six months.

To learn more about our rapid project recovery services, contact us by clicking here or call 1-866-CEDAR-34. You can also read “7 Ways to Identify Troubled Projects” and “9 Tips to Recover Troubled Projects” both written by one of our consultants.


9 Tips to Recover a Troubled Project

Dan Moore, a fellow Principal at Cedar Point Consulting, recently reminded me that, “You can’t manage chaos, but you can manage a crisis.” These are very wise words, but they reminded me of the early stages of a trouble project — one which is far behind schedule, well over budget, not delivering results, or all of the above. If anything, a troubled project is chaos waiting for a strong leader to transition it to crisis, and then ultimately to calm.

Whether you’re a C-level executive, an entrepreneur or a project manager, you may not have encountered very many troubled projects in your career, so you may not be familiar with how to transition from chaos, to crisis, and finally to calm. We consultants are often brought in to deal with just such problems, so I have a few tips that should help:

1. Don’t Panic! Douglas Adams references aside, you may have just learned that a key project is in trouble, but it’s important that you not panic. First of all, panic spreads, so you create chaos from crisis, and it won’t be long before your co-workers and your subordinates are panicked, too.Second, panicked people don’t reason effectively – they make “fight-or-flight” decisions instead of rational ones, so you’re far more likely to make a bad decision or push others to do so.

2. Be Methodical. At Cedar Point Consulting, we have a 5-step process that we follow to recover projects – Review, Recommend, Respond, Transition, Close. While this is not the only way to recover a project, it does consistently work – by step three, the project is making progress once again.Regardless of the technique or methodology that you choose, don’t attempt to solve the project’s problems until you have an understanding of their causes. Do take measures to stop the bleeding, until you’ve effectively identified root causes.

3. Read the Tea Leaves. Whether well run or not, nearly all projects have documents that tell you where the weaknesses are and whether they are being managed well. At minimum, even the smallest project should follow a consistent process ( project methodology); have a charter (with a project goal); have a project plan that includes a schedule or milestones, a budget, and assigned staff; regular meeting notes and regular status reports. If these exist, review them to assess where problems are occurring. If they don’t, find out why.

 4. Be From Missouri (“Show Me”). Reading current project documents is a good start, but what if someone is fudging the numbers or painting a rosier picture than reality? For select documents, like staff hours, project schedule and project budget, confirm that they are reasonably accurate independently. Which brings us to the next tip…

5. Use an Independent Third Party. Whether you hire a consultant or have someone in another part of your business lead your project recovery effort, they should be an independent third party. Having a friend of the Project Manager, the Project Manager’s immediate superior or one of their subordinates jump in to help is unlikely to be successful.

Is your Project Behind? Over Budget?

Cedar Point Consulting can help. Through our Five-Step Rapid Project Recovery Process, Cedar Point Consultants quickly evaluate your project’s current state and help you to make the best decision about how to move forward — in as little as two weeks.

While your situation may differ and results can not be guaranteed, Cedar Point consultants have delivered these Rapid Project Recovery success stories:

Green Check Mark For a heavy manufacturer, a troubled multi-year, multi-million dollar product engineering and manufacturing project was recovered and the project was delivered two months early and $300,000 under budget.
Green Check Mark For a large financial institution, a trend of late project deliveries was reversed by a Cedar Point consultant, resulting in three consecutive on-time deliveries in a one year period.
Green Check Mark For a large U.S. Federal agency, a $1.25 million troubled project was recovered and successfully delivered after nearly a year of little results under prior leadership.

For a free initial consultation, call 1-866-CEDAR-34, or contact us here.

6. Change Leadership or Change Process. At the most basic level, projects most often fail because either the project manager is not up to the task or the project management process is preventing them from succeeding. A good project manager controls time, scope, cost and quality on a project. If they don’t control at least two of these and influence all four, then they are likely to fail. Conversely, if they control all of these but the projects headed off a cliff, you probably need to switch project leadership.

7. Increase Communication. When you’re trying to identify problems with a project, it helps to increase communication within the team. Schedule and require participation in regular meetings – daily, if necessary, like Stand-ups or Daily Scrums. Finally, increase the frequency of status reports to key parties, such as the client, the sponsor and key stakeholders, even if the reporting is informal.

8. To Thine Own Self be True. There’s always a need for optimism in every situation, but good leaders are also honest to themselves and to others about the current state of a project. Depending upon how far behind the project truly is, consider reducing scope or resetting the schedule. Failing to do so may doom the project and the project team to yet another failure – one from which they may not recover.

9. Start Small, Review Frequently. After you’ve planned your recovery, be sure to start with small deliverables and shorter milestones, reviewing the project’s progress frequently to make sure the conservative short term goals are being met. While this is not normally the best approach with a project, starting small enables the team members to practice working together as a team before they have to tackle the larger, more challenging deliverables of the project.

The list above isn’t a comprehensive recipe for solving all the problems of a troubled project or for complete recovery, but it is a good start. In a subsequent post, I’ll provide a list of ways to minimize the possibility of troubled projects altogether.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.comm.


Seven Ways to Identify Troubled Projects

Though the traditional advice is “don’t put all of your eggs in one basket,” the celebrated author Mark Twain is famous for saying, “…put all of your eggs in one basket and — WATCH THAT BASKET.”

Whether you’re a an entrepreneur leading a small business , a C-Level executive (CEO/CFO/CIO/CTO) at a mid-sized business, the head of the Project Management Office (PMO), or a business manager watching out for your department, you are often stuck in the position of having to “watch that basket” with your most critical projects.

Even worse, many times you’re never truly sure if one of your key projects is in trouble until it’s too late.

Fortunately, there are some signs that can help you identify a troubled project early, so that you can intervene and put it back on track. I polled our project recovery services specialists at Cedar Point Consulting, and we thought of seven effective ways to identify a troubled project:


Is your Project Behind? Over Budget?

Cedar Point Consulting can help. Through our Five-Step Rapid Project Recovery Process, Cedar Point Consultants quickly evaluate your project’s current state and help you to make the best decision about how to move forward — in as little as two weeks.

While your situation may differ and results can not be guaranteed, Cedar Point consultants have delivered these Rapid Project Recovery success stories:

Green Check Mark For a heavy manufacturer, a troubled multi-year, multi-million dollar product engineering and manufacturing project was recovered and the project was delivered two months early and $300,000 under budget.
Green Check Mark For a large financial institution, a trend of late project deliveries was reversed by a Cedar Point consultant, resulting in three consecutive on-time deliveries in a one year period.
Green Check Mark For a large U.S. Federal agency, a $1.25 million troubled project was recovered and successfully delivered after nearly a year of little results under prior leadership.

For a free initial consultation, call 1-866-CEDAR-34, or contact us online.

  1. Perpetual Green Lights, Little Activity. Many of us are familiar with the approach of labeling projects green when they are on schedule and budget; yellow when the project is falling behind; and red when the project is far behind and/or over-budget. Perhaps your key project has been reporting green for the last three months, but oddly there’s been very little activity related to the project. This is probably a good signal that the project is actually in trouble.
  2. Lot’s of TBD’s. Effective risk and issue management are critical to the success of most projects, yet they are often ignored. If your key project is well past the early stages, but is reporting back a lot of TBD’s (to be determined) in the “resolution” column for risks and issues, then it’s probably a troubled project, even when the schedule doesn’t show it.
  3. Avoiders. The leader in charge of your key project may be a formal project manager or a manager of a business line, but regardless of who they are, you are getting the unsettling feeling that they are avoiding you. Perhaps they are missing at meetings, they’re head the other way down the hall when they see you, they’re not returning phone calls, or they’re not providing status reports. Unless you have a problem bathing, the project leader is likely avoiding you because the project is in trouble.
  4. Troubling Trends. Experienced project managers are familiar in using techniques like earned value management (EVM) to identify project progress by comparing actual to planned results for work completed, costs incurred and time spent. Though you may not be using EVM on your projects, you can watch for dramatic increases or drops in spending, dramatic changes to the work being delivered or sudden changes to schedule with no new schedule dates. In many cases, your key project is in a free-fall.
  5. Non-Progress Reports. You’re wise, so you have asked your project manager to provide status reports on a weekly basis. However, they’re more like “Non-Progress” reports than progress reports because no progress has been made. In particular, if you have received two weekly status reports where no progress has been made, you’re well on your way to having a troubled project on your hands, if you don’t already.
  6. Inability to Show Tangible Results. Well in to your project timeline and knowing that interim reviews are a good ideal, you ask for a review or demonstration of work completed thus far. However, your review meeting is repeatedly delayed and rescheduled, sometimes by a few days and sometimes by weeks. Even worse, you’ve tried a quick visit by the desk of the project leader and it resulted in the person shoving documents in their desk instead of sitting with you to review tangible results. If so, this is likely a troubled project.
  7. Spidey Senses Tingling. Like Peter Parker in the Spiderman comic book series, you know which projects are highest risk and every time the subject of your key project comes up, it sets your spidey senses tingling, though you’re not certain why. While I’m a big believer in science over emotion, there is surely something very scientific that you’re reading so trust your instincts. Your likely to find something amazingly like trouble in your key project.

Of course, identifying a troubled project is one thing, but recovering that project is a completely different challenge. I provided some tips to recover troubled projects in a previous article that may be of help.

However, particularly if you don’t have experience recovering troubled projects and the stakes are high, it might be time to consider getting some help.  Our firm provides project recovery services and we’re proud of our success rate, but other competent firms do, as well.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.comm.


Will Your Business Need a Turnaround Soon?

Four times in my business career I have answered a telephone and someone else on the other end asked if I could help them turn th180degreeprotractoreir business around.

I accepted the challenge each time, and have a success rate of 75%. Three of those businesses were turned around successfully; one was not. Each business was at death’s door by the time the call was made to me. Each person in charge of those businesses waited until the last minute of the last hour before deciding that it was time to “do or die”, that it was finally the right time to accept the wrenching changes that would be necessary to give their respective business a fighting chance at survival.

I don’t wish to belabor the obvious here, but it sure would have been easier to bring back the commercial concerns in question if there had been earlier recognition of problems at those businesses, as well as an earlier willingness to act to fix the problems. Believe me, I would have been happy to come on the scene earlier, be given a set of more manageable problems concerning the health of the business, and, spared the client the experience of living inside the pressure cooker of uncertainty regarding the survival of the company, even if it meant far less billable hours.

But, that’s not how it usually works. Business owners are human beings, and human beings tend to develop inertia and be resistant to change. Business tails off, but it’s not off by a lot, and then it gets a little worse, but, you know, things are still okay, and then things are just okay for quite awhile, until they’re not.

I’m reminded of the passage in Hemingway’s The Sun Also Rises, in which one character asks another, “How did you go bankrupt”?

“Two ways”, the other man says. “Gradually, and then suddenly”.

Yes, that’s how it usually happens. Businesses almost never explode and fail, a la the CFO running off to Bolivia with the company’s working capital, or an ugly public relations fiasco, or the CEO and founder perishing in a plane crash. Nope, most companies that die simply wither away slowly.

Will this happen to your business?

It’s possible; many businesses fold, and disappear under the waves of commerce every year. But, if you’re paying attention to the basics, your chances of sticking around get much, much better.

The basics include, but are not limited to:

  • Paying attention to what your competitors are doing – not only does this give you a way to match/exceed their offerings, there might be something they have that you want to emulate.
  • Paying attention to market trends – even if you’re not first with the product your customers desire most, a fast second will usually save the day (and sometimes rule the day).
  • Being cognizant of overall economic trends – if all you sell is trucks that get 10 mpg and gasoline climbs up to $5 a gallon, there is trouble on the horizon.
  • Making it as easy as possible for customers to buy what you’re selling – Example 1: Client had the national distribution rights to a product (machinery) that the target market definitely wants and needs, but the acquisition cost was high and many customers could not afford the one-time expense. The solution was to find a small-ticket lessor that would offer lease financing to prospective buyers on a private-label basis (leasing branded with the client’s name). The client not only moved more product at higher margins, they also made fee income from the leases generated through the arrangement. Example 2: Client that does custom web development wanted to sell website templates of their own design to customers that want a different look than most sites, but do not have the budget for custom work. Unfortunately, many of these prospective customers have little or no technological expertise. The solution was to offer different packages with different degrees of required customer involvement at different price points. There was no “take it or leave it” attitude in terms of the product being offered; in fact, our client offered enough different levels of “do it yourself” packages so that it the average prospect found it highly likely that they would find a package that suited their skill/desire level.
  • Conducting regular business strategy sessions – If you’re a very small company, this may seem almost laughable to you, but replacing those conversations you have after hours with your three employees over take-out food with a scheduled strategy session led by someone with experience in business strategy can usually produce better results. And, if you’re a large company, and you’re doing okay in the market, and nothing (product, competitors, size of market, etc.) has changed in five years, there probably doesn’t seem to be a pressing need for business strategy at corporate headquarters, but again, it can prove to be quite valuable to put a day aside and sit in a room with your peers and talk about just where you want the business to go in the next couple of years.
  • Always thinking about a strategic alliance – it’s a cold, brutal business environment out there, and having another ally when facing off against your competitors always helps.
  • Reviewing your marketing assets on a regular basis – there may be value in data or relationships you already have. I had a client that acquired a much larger, poorly-run competitor in order to get their retail locations and their commercial contracts, and ignored the list of 45,000+ consumer customers that came with the acquisition for over two years, despite the fact that it was a higher margin business that that the client was then trying to build up in a separate business unit. I was told, “They’re not our customers. There are some very unhappy campers in that portfolio”. Meanwhile, good money was being spent to send out direct mail pieces to new prospects.
  • Constantly improving your business processes – reducing costs, reducing cycle times, increasing profits and increasing customer satisfaction are all very good things that should be done on an ongoing basis, not just when a crisis is looming.
  • Having business financing always available – don’t wait until the moment it starts raining to get an umbrella, have one ready. Establish lines of credit before an emergency situation, not as a result of – the terms will be better, and access to the funding is immediate.

Now, all of this may seem pretty basic to all of you. It is. And, as I noted above, this isn’t even a complete list, there are more basic things businesses should do in order to not need a turnaround specialist in the future. But I think you would be surprised at how many businesses, large and small, ignore the basic blocking and tackling that they should be doing on a daily basis. Lethargy creeps in; the living organism that is the business is fat and happy, and habit takes over in terms of day-to-day activities.

Let this serve as your alarm clock if your business is one of the sleepy ones, and your senior managers are conducting their duties in a soporific trance. I’m happy to come over to your place and help you with a turnaround, but really, I think you would be happier if you didn’t need a turnaround in the first place.

Brendan Moore is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in marketing, sales, front-end operations, and strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.comm.


Acquiring New Technology? Build-versus-Buy is Dead

Still debating the build-versus-buy decision at your organization for your IT purchases?  If so, you probably aren’t getting the biggest bang for your IT dollar: Build-versus-buy is dead.  For better decision-making when acquiring IT systems, forget build-versus-buy and remember the Technology Acquisition Grid.  You’ll not only save money, you’ll make smarter decisions for your organization long term, increasing your agility and speeding time-to-market.

In this article, I describe Software-as-a-Service (SaaS), application hosting, virtualization and cloud computing for the benefit of CEO’s, CFO’s, VP’s and other organization leaders outside of IT who often need to weigh in on the these key new technologies.  I also describe how these new approaches have changed technology acquisition for the better – from the old build-versus-buy decision, to the Technology Acquisition Grid. Along the way, you’ll learn some of the factors that will help you decide among the various options, saving your organization time and money.

The Old Model: Build-versus-Buy

When I earned my MBA in Information Systems in the mid-1990’s, more than one professor noted that the build-versus-buy decision was a critical one because it represented two often-costly and divergent paths.  In that model, the decision to “build” a new system from scratch gave the advantage of controlling the destiny of the system, including every feature and function.  In contrast, the “buy” decision to purchase a system created by a supplier (vendor) brought the benefit of reduced cost and faster delivery because the supplier built the product in advance for many companies, then shared the development costs across multiple customers.

Back then, we thought of build versus buy as an either-or decision, like an on-off switch, something like this:

build-versus-buy-switch

In the end, the build-versus-buy decision was so critical because, for the most part, once you made the decision to build or buy, there was no turning back.  The costs of backpedaling were simply too high.

The Advent of Application Hosting, Virtualization, SaaS and Cloud Computing

During the 2000’s, innovations like application hosting, virtualization, software-as-a-service (SaaS) and cloud computing changed IT purchasing entirely, from traditional build-versus-buy, to a myriad of hosting and ownership options that reduce costs and speed time-to-market.  Now, instead of resembling an on-off switch, the acquisition decision started to look more like a sliding dimmer switch on a light, like this:

 

build-to-buy-slider

Suddenly, there were more combinations of options, giving organizations better control of their budgets and the timeline for delivering new information systems.

What are each of these technologies and how do they affect IT purchasing?  Here’s a brief description of each:

Application Hosting

During the dot-com era, a plethora of application-service-providers (ASPs) sprung up with a new business model.  They would go out and buy used software licenses, then host the software at their own facilities, leasing the licenses to their customers on a monthly basis.   The customers of ASPs benefit from the lower cost-of-ownership and reduced strain on IT staff to maintain yet another system, while the ASPs made money by pooling licenses across customers and making use of often-idle software licenses.

While the dot-com bust put quite a few ASPs out of business, the application hosting model, where the software runs on hardware supported by a hosting company and customers pay monthly or yearly fees to use the software, still survives today.

Virtualization

One of the first technologies to change the build-versus-buy decision was virtualization. By separating the hardware from the software, virtualization separates the decision to buy from the need for new software.  In virtualization, first, computer hardware is purchased to support the organization’s overall technology needs.  Then, a self-contained version of a machine – a “virtual” machine – is installed on the hardware, along with application software, such as supply chain or human resources software, that the business needs at that point in time.

When the organization needs a new software application that is not compatible with the first application, because it runs on another operating system, they install another virtual machine and another application on the same hardware.  By doing this, the organization not only delivers software applications more quickly because it doesn’t need to buy, install and configure hardware for every application, the organization also spends less on hardware, because it can add virtual machines to take advantage of unused processing power on the hardware.

Even better, virtual machines can be moved from one piece of hardware to another relatively easily, so like a hermit crab outgrowing its shell, applications can be moved to new hardware in hours or days instead of weeks or months.

Software-as-a-Service (SaaS)

Like virtualization, Software-as-a-Service, or SaaS, reduces the costs and time required to deliver new software applications.  In the most common approach to SaaS, the customer pays a monthly subscription fee to the software supplier based on the number of users on the customer’s staff during a given month.  As an added twist, the supplier hosts the software at their facilities, providing hardware and technical support, all within the monthly fee.  So, as long as a reliable Internet connection can be maintained between the customer and the SaaS supplier, the cost and effort to support and maintain the system are minimal.  The customer spends few resources and worries little about the software (assuming the SaaS supplier holds their side of the bargain), enabling the organization to focus on serving it’s own customers, instead of on information technology.

Cloud Computing

The most recent technology innovation among the three, cloud computing brings together the best qualities of virtualization and SaaS.  Like SaaS, with cloud computing both hardware and software are hosted by the supplier.  However, where the SaaS model is limited to a single supplier’s application, cloud computing uses virtual machines to host many different applications with one (or a few) suppliers.  Using this approach, the software can be owned by the customer, but hosted and maintained by the supplier.  When the customer needs to accommodate more users, the supplier sells the customer more resources and more licenses “on demand”.  Depending upon the terms of the contract, either the customer’s IT staff maintains the hardware, or the supplier.  In addition, in most cases, the customer can customize the software for their own needs, to better represent the needs of their own customers.

Adding Application Hosting, Virtualization and Cloud-Computing to the Mix – The Technology Acquisition Grid

Remember the dimmer switch I showed a few moments ago?  With the addition of application hosting, virtualization, SaaS and cloud computing to the mix, it’s not only possible to choose who owns and controls the future of the software, it’s also possible to decide who hosts the software and hardware – in-house or hosted with a supplier, as well as how easily it can be transferred from one environment to another.  That is, it’s now a true grid, with build-to-buy on the left-right axis, and in-house-to-hosted on the up-down axis.  The diagram below shows the Technology Acquisition Grid, with the four main combinations of options to consider then acquiring technology.

technology-acquisition-grid

 

Here’s where application hosting, SaaS, virtualization and cloud computing fit into the Technology Acquisition Grid:

technology-acquisition-grid-with-new-tech

 

Making a Decision to Host, Virtualize, go SaaS, or seek the Cloud

If the rules of the game have now changed so much, how do we make the decision to use virtualization, application hosting, SaaS or cloud computing, as opposed to traditional build and buy?  There seem to be a few key factors that drive the decision.

At the most basic level, it comes down to how much control – and responsibility — your organization wants over the development of the software and the maintenance of the system.  Choose an option in the top-left of the Technology Acquisition Grid, and you have greater control of everything; choose an option at the bottom-right, and you have far less control and far less responsibility for the system.

In my own experience advising clients during technology acquisition and leading technology initiatives, decision-makers tend to choose a “control everything” solution because it’s the easiest to understand and poses the least risk.   While this may, in the end, be the best answer, organizations should weigh the other options, as well.  Certainly, more control usually sounds really good, but it almost always comes along with much higher costs, as well as delaying use of the system by months.  Particularly for smaller organizations,  which probably need those IT dollars to serve their own customers more effectively, a “control everything” answer is often the wrong decision.

Which should your organization choose?  Start by making an effort to include software products that take advantage of hosting, virtualization, SaaS and cloud computing among your choices when you start your search.  Then, weigh the benefits and downsides of each option and combination of options, choosing the one that balances cost and time-to-market with your own customer’s needs and your tolerance for risk. A good consulting company like Cedar Point Consulting can help you do this, as can your organization’s IT leadership.  Using this approach, you’re sure to free yourself from the old rules of build-versus-buy, delivering more for your own customers at a much lower cost.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in technology strategy, project management and process improvement. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

 


Measuring the Success of Business Strategy

It’s so easy, right? A successful strategy means the business grows and is profitable. There might be other consequences that are positive that occur because of a successful strategy, but growth and profitability are the only ones the really matter.

Right?

Well, what if you have a technology company that is never intended to become profitable, but instead is intended to attract attention as an acquisition? How about another company that doesn’t grow but still manages to outlast almost all of its competitors?

I could go on and on with a lot more “what if” scenarios, but then someone from the back of the room would pipe up with this: “A successful strategy creates shareholder value. Whether it’s improving employee morale, market growth, building a brand, better HR systems, a strict business-attire dress code, netting a profit, it doesn’t matter. All those things create shareholder value.”

Okay, I can roll with that, but how in the world do you really measure the impact improving employee morale has on shareholder value? It’s more or less voodoo, isn’t it? You can measure an increase in employee morale and say that a subsequent increase in the value of the company happened as a result of the boost in morale, but I defy you to prove that beyond a doubt.

So is there a soft side to business strategy, intangible results that you intuitively believe exist, but cannot be proven? Is the checklist regarding strategy success employed by companies and strategy consultants incomplete? Should the success of strategy be measured using a large, holistic dashboard (and free crunchy granola and delicious banana bread for all)? Are we deluding ourselves with all of these rigidly-defined paths of business strategy that lead to an unalterable destiny, measured by accepted models, numerological systems and systemic markers?

Holy smokes! My world has been torn asunder and my mind is reeling right now.

No, just kidding, I’m fine.

The answer is that those measurement tools like KPI, Strategy Maps, ROC, IRR, Balanced Scorecard, ROA, Benefits Measurement, share price, etc. work very well for measuring the success of most business strategies. That’s why they’re used.

But strategy is dynamic and so are the successes attached to it. Sometimes, depending on the strategy, it’s going to be a little more Art than Science. This not going to happen very often, but sometimes you just have to let go and trust that it will pay off. Sometimes you do the right thing because it’s the right thing to do, and sometimes you do the right thing because it’s good business to do the right thing, and the positive results of the former are sometimes not as readily apparent of the latter.

Brendan Moore is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in marketing, sales, front-end operations, and strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.