Category: Thought of the day Page 3 of 4

Architecture Versus Management?

I’m increasingly seeing the management and architecture disciplines as being in a race to control organisations.  Both groups show behaviours that suggest they are trying to extend their own discipline to encompass more of the organisation.  Equally, both groups work hard to exclude areas they are not comfortable with from their responsibilities.  Architects want to control the organisation by controlling knowledge of the structure and value streams at all levels, while avoiding execution issues.  The management profession wants to control the organisation by controlling resources, while avoiding responsibility for technical issues.

Both the architecture and the management professions reveal their desires to control the organisation by the manner in which they grow the scope of their approach through ever increasing extensions of their disciplines.  The management discipline has grown from supervision, to general management, to strategic management, to change management, and to all of the business unit focused sub-disciplines that form the structure of a management degree (finance, HR, etc).  Conversely, architecture has grown from a technical discipline to include information architecture, solution architecture, business architecture, and information architecture.

Christopher Alexander popularised – if his ideas can be considered popular – the idea of generative sequences.  In essence, a generative sequence is the process of taking a structure and changing it through a series of structure preserving transformations. After each transformation the whole structure is then evaluated to determine if the transformation has – more or less subjectively – improved the structure.  This process is repeated.  Alexander also defines the so-called structure preserving transformations that are applicable at each step.

This is an interesting analogy to decision making in organisations.  Each time a decision is made the structure of the organisation changes.  Structure in this case may refer to anything: including the attitude of an individual team-member, the next task to focus on, or even quite literally a change in the organisation’s structure as we usually use that term.

What is interesting is that from both the manager’s point of view and the architect’s point of view the details of that structural transformation are only selectively considered.  Because managers are generally outcome focused, each transformation or decision is evaluated based on its perceived contribution to outcomes.  These outcomes may be long or short-term, or they might be project-focused, or they might relate to the entire organisation – but it’s the outcome that’s important.

While management is primarily concerned with outcomes, the architect is concerned with structure as a whole.  When decisions are made they not only impact the progress towards goals but they may also potentially impact other structural elements of the organisation.  Rather than a distinction between long or short-term time horizons, or between technical and business domains, the distinction between architecting and managing is generally about outcomes versus structure.

Currently, it’s difficult for architects to evaluate the impact of a transformation in terms of the progress towards desired outcomes because a comprehensive view of the desired outcomes is rarely shared, documented, or linked to the structural elements as defined by the architect.  Similarly, it is difficult for a manager to utilise the models created by the architect to make decisions because the models which describe the structure use technical language and contain much that is irrelevant to decision making.

This battle is not yet won, of course.  To be a successful architect you must manage carefully, and to be a successful manager you most certainly need to be an architect of sorts.  The MWT Model is driven from the theory that this battle will and is ultimately changing the practice of management itself.  This may be seen as victory going to the architects but is more likely to mean that successful architects will no longer be able to choose what issues they avoid.

While this might be interesting to professionals on both sides of the battle I’m just as interested in how important this is to the organisations that we work in.  As I’ve said before, I believe good IT is structural – when you implement an HR system that enables you to re-deploy some employees in the HR branch of the org chart, you should really hang that HR capability embedded in the IT system in their place.

As these structural IT changes are increasingly differentiating organisations and brokering their relationships with customers it is ever more important that organisations can effectively operate and enhance these technology-enabled capabilities.  Both managers and architects currently struggle to achieve this and in the organisation of the future (now?) it’s really the only game.

 

Healthy information eating

I’m looking forward to a few weeks off before I begin a new role in a technology & management consulting company (which I’m also very much looking forward to).

I’m planning on going on an ‘information diet’ during my break and have already cleared inboxes, unchecked starred items, and unsubscribed from plenty of RSS feeds.

But what sort of a diet would it be if I didn’t ensure I got enough nutrition?  So I’ve also enrolled in a course at the Mises Academy.  I’ve chosen “Networks and the Digital Revolution: Economic Myths and Realities” because I’ve always liked reading snippets of Peter Klein.

One of the features of the Mises Academy (other than that the courses are cheap and on line) is that the readings are generally available for free.  While working through the readings for my course I came across:

… They hit gold with ”The Nature of the Firm,” a 1937 paper written by the Nobel laureate Ronald Coase.

The Coase paper asked a deceptively simple question: If the market is such a great tool for allocating resources, why isn’t it used inside the firm or company? Why doesn’t one worker on the assembly line negotiate with the worker next to him about the price at which he will supply the partly assembled product?

That sort of negotiation rarely happens. Instead of using markets, companies tend to be organized as hierarchies, using a chain of command and control rather than negotiation, markets and explicit contracts. Paradoxically, the primary unit of capitalism, on close inspection, looks a lot like central planning.

Mr. Coase didn’t just ask this question; he also provided a provocative answer: it all hinges on the costs of making transactions. What economists call firms, he said, are essentially groups of activities for which it is more effective and less costly to use command-and-control than markets to have things done.

New-economy advocates found this a compelling idea. One consequence of the Internet has surely been to make it cheaper to communicate. This should, in turn, lower transaction costs and change company boundaries. Their conclusion was that companies would inevitably downsize and outsource, spin off unnecessary functions, and carry out more and more transactions using the Internet instead of internal memos.

Not so fast. The Internet lowers communication costs, that’s for sure. But that means it lowers transaction costs within organizations as well as across organizations. The internal memo might disappear, but only because it is replaced by the internal e-mail message.

It just doesn’t follow that lower communication costs lead to smaller companies. In fact, Mr. Coase himself said that ”changes like the telephone and telegraphy, which tend to reduce the cost of organizing spatially, will tend to increase the size of the firm.””

– from here with my emphasis added

I’ve read some of the original Coase papers over the years and the idea of reduced transaction costs have been at the heart of the MWT Model.  I like this idea that a key capability required in a low transaction cost world is likely to be the ability to work effectively with, and generate value from, low transaction costs within organisations and also across organisations.  To me this is the whole point of how management is changing / needs to change.

I also like that this is still an interesting idea to me.  It’s a calling of sorts and something I tend to think about even when I don’t have to. It gives me energy and purpose.

 

Note to self: do ERP vendors benefit from the sunk cost fallacy and asset specificity?

I’ve never really been very interested in ERPs – so I likely don’t know what I’m talking about…

But over the years there have been many times I’ve heard organisations saying they need to “leverage their investment” in their ERP.  This is usually after they have spent far too much money implementing it in the first place so whenever I hear that phrase I can’t help but hear “we don’t have the expected benefits from this yet so we should invest more in it because we’ve already invested too much not to get any benefits from it”.  This is clearly the sunk cost fallacy at work.

There has been talk of the end of ERPs for some time, and there are certainly many web-based alternatives, much-hyped redesigns, as well as web based versions of classic ERPs.  But at the same time ERPs aren’t going away.  Certainly the companies themselves are far too clever to not evolve.

But I’m more interested in why the benefits aren’t realised.  Because from an enterprise architecture perspective there are certain elements of the ERP value proposition that make perfect sense.  If you think of enterprise architecture as primarily being about finding the capabilities, services, and processes that you want to further integrate or standardise across your organisation (and I haven’t found a better definition) then taking disparate payroll, HR, procurement (etc, etc) processes and standardising them should delivery value.

I’m going to make a leap here and say that ERPs actually do deliver value.  In fact, any critic that suggests otherwise probably has a skewed view of why we use information technology in our organisations in general.  The problem with ERPs isn’t that they don’t deliver value – it’s that they are incredibly overpriced.

Given that organisations pay that price I have to wonder how ERP vendors are able to extract value from organisations so successfully.  Going back to my limited experience with ERP implementations I see three ways ERP vendors extract value from organisations:

1) ERP people are over specialised.  While development and support for software packages from mid-sized vendors, or custom software development can be implemented with a variety of method, tools, and resources, a SAP implementation for example must be staffed with ‘SAP people’.  There are no business analysts, developers, or project managers.  There are instead SAP Project Managers, SAP Developments, SAP Business Analysts.  This of course creates a scarcity of quality resources and the subsequent high price of those resources.

2) ERP vendors force their customers to follow an Ideal Realised Strategy which says your implementation will be simple if you don’t customise your implementation.  However, by virtue of the fact the everybody customises their implementation this doesn’t seem like a feasible strategy in practice.

3) ERP implementation partners take control of both IT change and business change.  However, rather than take the approach that business change is about delivering benefits and increased productivity they appear to take the approach that ‘business change’ is all about making sweeping changes to work practices rather than making small changes to the product.  i.e. by owning business change they are using it to the vendor’s advantage not the client’s advantage.

Long-overdue rant complete.

Motivation

If an employee presses a green button and then an alarm goes off you’ll soon have a motivation problem.

– Posted using BlogPress from my iPhone

Note to self – innovation

I think innovation requires just four things:

1. idea management process – i.e. go from suggestion box-to-value creation

2. a reward mechanism – where the ultimate reward is working in an innovative company

3. scanning – i.e. scanning internally and externally for trends and small ideas that need to be nurtured

4. a structured approach to analysing the organisation to determine where to apply innovation

I think the structured approach bit (#4) is often missed and without it how do you grow or evaluate your ideas?

As an IT guy I know enterprise [business] architecture is the answer to this.

However, for a more general audience I think this approach is very interesting (free PDF book extract to download):

http://www.businessmodelgeneration.com/

Mobile video conferencing as a safe option

Given the on-again, off-again, on-again (but we wont say) link between cancer and mobile phones, I’m surprised I haven’t seen any mention of the significance of mobile video conferencing.

Surely, the different way you hold a mobile phone when you are video conferencing will reduce the incidence of brain cancer caused by mobile phones (assuming, as I do, there is a link).

Anyway, add it to your list of reasons to upgrade your iPhone to G4 as:

iPhone Video Conferencing All But Confirmed with Latest Leak [IPhone]: “

Another day, another video chat/video conferencing bit of debugging code to throw atop the heap that’s amassed around the coming ‘iPhone 4G.’ Today’s revelation: A menu screen from a ‘field test’ that purports to show video conferencing. More »

(Via Gizmodo.)

Infrastructures

I have defined Matthew’s Law (with thanks to Arthur C. Clarke, of course):

Matthew’s Law: “Any sufficiently advanced technical advice is indistinguishable from autism”

Because I saw this…

Infrastructures: “The heartfelt tune it plays is CC licensed, and you can get it from my seed on JoinDiaspora.net whenever that project gets going.

(Via xkcd.com.)

Confessions of an aeroholic

“Airlines are notoriously cyclical because revenue is very sensitive to changes in demand. Profits are greatest when strong demand results in full planes (‘‘load’’) and high prices (‘‘yield’’), but they can disappear quickly when demand falls because costs are relatively fixed and flights can’t easily be cancelled.”

via Confessions of an aeroholic.

I’m currently working on the very edges of the airline industry (via IT outsourcing).  I can relate to the ‘aeroholic’ tag.  It’s a very compelling industry and while I don’t invest money in it I certainly invest time in it.

So, somebody important let me under his umbrella this morning.  I spoke briefly to him and it got me thinking about Boston Consulting Group (from where he had worked as an adviser to Qantas for 10 years).

I think the airline industry’s highs and lows have been managed through sophisticated financial devices (fuel hedging, for example, or deferred losses).  This is by necessity, but I think this process might have had it’s own unintended consequences.

I’m currently focusing on what those unintended consequences might have been… because that is where I will be able to have the greatest impact.  There are some non-optimal behaviors and outcomes I have noticed.  I think if I understand them in terms of the necessities above things will make sense …

Bad maths, accounting, and risk management

A brief, but interesting introductory article on the types of accounting rules that are legal but which promote bad investment in the long term appears here (pdf).   The summary, in the form of a joke, follows:

 

 Three accountants interview for a job.  When asked to evaluate 2 plus 2, the first responds “four,” and the second, thinking it’s a trick question, says “five.” But the third, whom they hire on the spot, says: “what do you want it to be?” I wasn’t laughing, however, when I learned that the behavior of candidate three lies within generally accepted accounting practice.

 

The article provides an example of the “trouble [that] can arise when single numbers are substituted for distributions.”  But I think there is likely to be a more general explaination of the problem.  Also, as the article sights there is the general problem of: 

 

  …But when they need to estimate the NPV of a project for an accountant, they will inevitably be asked for a number.

 

I can’t help but think this is an example of the ‘bad math’ that Chris Macrae keeps mentioning in his more lucid moments (1, 2, 3) when he say, for example here:

about 10 year ago … in big management consultancies through the 90s I was appalled at a maths error that was systematically devaluing trust, rewarding those who imaged over reality including conflict-makers and short-term speculators -the so called Unseen Wealth Intangibles crisis as it was then called, the Inconvenient Truth crisis as some sustainability mapmakers now call it. (typos corrected from the original quote)

Somewhere in all of this there is a lesson to be learnt from economics and the need to look beyond the short-term to the long-term impacts of the rules within systems.

Thought of the day

Mainstream economics is not the cause of the current financial crisis – rather, the cause of the current financial crisis and the cause of mainstream economics being mainstream are the same.

(article to follow)

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