The Perspective Of Management Excellence

Published Date: 02 Nov 2017

Introduction

So much has been said about business and IT alignment (BIA), what could possibly be added? There are IT governance principles, IT architectural concerns, areas of IT innovation, IT key performance indicators, and IT cost saving elements. However, ask ten people for a definition of what business and IT alignment means, and you will get twelve answers. What about the business side? Although the business often challenges IT to show their benefits and overall value, most of the BIA discussions take place within IT. Alignment can only be successful if it comes from both sides. Is there an equally structured discussion taking place on the business side about how to receive the benefits from IT? Is there a discussion on the business side on how to adapt corporate strategy to IT-driven innovation? Most CIOs have plenty of business performance indicators on their scorecards, but how many business executives manage their business with IT performance indicators? BIA doesn't seem to be as reciprocal as it should be. And, while we are at it, what about business-to-business alignment? IT can only be efficient and successful in the long term if it is based on a decent architecture. Long term success is difficult to achieve if the business treats IT in a stove-piped way, forcing business cases to focus on departmental benefits only.

You could even argue that BIA should be a discussion from the past anyway. Organizations routinely outsource activities; they rely on many partners throughout the value chain creating what is often called an extended enterprise. A successful business today is based on a performance network of all stakeholders, such as channel partners, suppliers, innovation partners, investors, customers and even competitive relationships. In other words, stakeholder alignment should be front and center to organizations today. In this paper, we present our view on BIA based on the goal of alignment; running an excellent organization. We distinguish three areas of excellence: operational excellence, management excellence, and technology excellence.

The three pillars of operational excellence are cost, quality, and speed. Cost-efficient organizations have higher margins, and therefore more investment capacity. A focus on quality gives them competitive advantage, offering a superior price-quality ratio, and speed is of the essence in a best-in-class supply chain. Operational excellence has a focus on an organization’s business processes such as order-to-cash or procure-to-pay.

Management excellence is based on three characteristics as well: being smart, agile, and aligned. Smart organizations have deeper insight into what is happening in the market and in their organization as compared to their competitors. They have the ability to act upon those insights better than their competition as well. These improvements should be shared across the entire value chain as alignment is needed to prevent sub-optimizations from occurring. Management excellence focuses on management processes such as plan-to-act and analyze-to-adjust. Finally, technology excellence is also best described using three keywords: complete, open, and integrated. A complete IT strategy is part of an overall business strategy, in a reciprocal way.

Corporate strategy aligns with IT, as much as IT strategy focuses on reaching the strategic goals. As we cannot predict tomorrow's needs, an excellent IT strategy also needs to be open, anticipating the use of applications, technologies and devices that are not in use at the moment that users may bring to the table, or that do not even exist today. As no organization stands alone, it must interact with many stakeholders; therefore, an IT strategy needs to be integrated. Technology excellence is needed to achieve operational excellence and management excellence, while operational excellence is needed to be successful with management excellence.

The Perspective of Management Excellence

Operational Excellence should be a primary goal for all organizations; however, the source of competitive advantage decreasingly comes from being the cheapest, or the fastest to respond to the market. There is always a competitor who is willing to offer even lower prices, and consumers have come to expect an immediate response. Furthermore, over time it becomes increasingly difficult and expensive to improve cost, quality and speed, to the point where the investment does not provide a good return anymore. Competitive differentiation today comes from being smarter than the competition; being able to see what is happening in the market, and within the organization, with a deeper understanding than anyone else. Most of the innovation today comes from technologies you didn't invent yourself. Most business opportunities now come from new political, economical, social, technological, environmental or legal trends and changes are not simply from your own marketing campaigns.

Today's economic pressures, in many cases, are not caused by Mismanagement, but are inflicted by the global economy. Business success is not always within our circle of control, or even our circle of influence. Being smart is being able to understand change, and what that means to you. But, being smart can only help you if you are able to act on it. The life-cycle of products and services is decreasing dramatically, so capturing the first-mover advantage, or being a fast follower, is crucial to business success – until the competition catches up and a new cycle begins. Strategies, plans, processes, and organizational structures need to be flexible, so that they can be fine-tuned as you go along. That is why agility is the second source of competitive differentiation. Agility only works if it can be copied and applied throughout the complete value chain. If you are more agile than the rest of the value chain, you have created a sub-optimal organization. Others can't follow, and new smart insights never make it to the bottom line. Being smart and agile hinges on the third element of business success; being able to align the complete value chain. Being smart, agile, and aligned are the three attributes of what we call management excellence.

Where operational excellence usually focuses on optimizing operational processes to create a so-called PESTEL-analysis (political, economical, social, technological, environmental, and legal) reveals those opportunities.

Management Excellence and the Role of IT

Technology can play an important -- even leading -- part in being smart. In Competing on Analytics, Thomas Davenport describes the four common characteristics of analytical competitors. First of all the analytics deployed in the organization support the organization's strategy and distinctive capabilities. This can be about customer intimacy, product innovation, post-merger integration, mastering the brand, or any other strategy. For analytical competitors, technologies such as data mining, multidimensional analysis and simulation are at the forefront of strategic success.

The second characteristic is that these technologies are spread enterprise-wide, and are not just in the hands of a small group of knowledge workers. All levels of management and all lines of business have access to the technology, yet it is managed in a central way to avoid fragmentation and improve alignment. Third, there is a strong commitment from senior management to make sure enterprise-wide adoption is realized, that there will be one version of the truth, and that new insights, touching multiple parts of the business, are indeed implemented. The last characteristic is to have a high level of ambition. Analytics are not a controlling activity for the back-office; they are seen as the key to strategic success. They can transform the organization, the business itself, and ultimately the market.

Most organizations do not suffer from a lack of business intelligence (BI) and other types of analytics. In fact, in most cases, there is too much and it is too fragmented including different tools, incoherent data, and conflicting definitions. In order to get smart, organizations should rationalize their management systems first. This is needed to filter out the noise, and to clearly and immediately see any exceptions, opportunities, trends at the edge, or weak signals, In order for organizations to become agile, their operational systems and management systems need to be integrated. In most cases, operational business processes are not very well connected to the tactical and strategic management processes. Operational plans and financial budgets are based on different grounds. Changing conditions are often detected first in operational processes (order-taking, campaign response, payments), but there are multiple layers before these signals reach the top. Meanwhile, this information is often being filtered by the various levels of management on its way to the top

When enterprise performance management (EPM) systems are connected to other business applications, such as enterprise resources planning (ERP) and customer relationship management (CRM), strategic course-changes and tunings are implemented instantly, and operational feedback is escalated immediately. When CRM, ERP and supply chain management (SCM) systems are connected, changes in demand or supply can immediately be translated to the best use of our resources, through a new operational plan.

Information is the key to creating alignment. Business processes are often originally designed with the organizational boundaries in mind. However, today's business is organized as a performance network. Information and processes cross multiple organizations. Information and processes are the only things that connect all elements in the performance network. And information needs to lead the way to avoid any surprises in the value chain. Messaging, reports, dashboards, analytics, and other forms of operational and management information need to be available not only in the vertical sense -- within the organization (aimed at top management), but should be actively deployed between organizations. In many cases, the majority of information exchange taking place between organizations is a reality already.

In short, an IT strategy enabling management excellence should rationalize existing management systems, tightly integrate management systems with operational systems, and provide open access to relevant information to all stakeholders throughout the performance network.

Conclusion

As business innovation becomes increasingly dependent on technology, the IT needs of the business users continue to evolve and change. This also impacts the area of responsibility for IT. To provide technology excellence, the responsibility of IT appears to be evolving from choosing and supporting complete applications, to choosing an ecosystem of technology which will support the functionality and capabilities needed by each business area. IT is moving from a state of being the custodians of applications and infrastructure - providing what participants need currently - to being a supplier of tools and technology to enable the participant’s needs now, and into the future. As business moves at a faster pace, and business users become more technology savvy, IT must anticipate the needs of participants, and enables them. An effective IT strategy, fueling technology excellence, needs to be complete, open, and integrated.

A complete IT strategy supports all elements of the business; not only administrative systems, but also collaboration, decision-making, mobile needs, stakeholder relationship management, and business innovation. Moreover, a complete IT strategy goes beyond the IT department and is included in the business strategy. It describes for each business function how the business value of IT is being received, used, and is being leveraged by the business. The governance structure, as part of a complete IT strategy, goes beyond a mere steering committee, making technology excellence a joint responsibility. Business and IT are mutually aligned.

The value of IT has changed from just removing technological barriers to doing business, to being part of a strategy that creates options to fuel business requirements that are not even known yet. That is why an excellent IT strategy also needs to be open, anticipating the use of applications, technologies and devices that are not in use at the moment, or those users bring to the table, or that do not even exist today. Technology excellence cannot be measured based on return on investment on a project-by-project basis, or on multi-year programs, but must be measured on real options.