Responsive Business is Strategically Focused and Tactically Agile

The Responsive Company:
Strategically Focused
&
Tactically Agile

Michael Hugos
CENTER FOR SYSTEMS INNOVATION
[c4si]

© 2013 Center for Systems Innovation [c4si] 1 www.MichaelHugos.com

Overview of Briefing

Part 1 – Business Realities

Part 2 – Moving Toward Responsiveness

Part 3 – Business Case Study


PART 1

Business Realities


A Continuum Between Two Needs
Efficiency Responsiveness

• Efficiency requires predictability and stability

• Both are now conspicuously absent

• Responsive enterprise is to real-time economy as assembly
line was to industrial economy – source of wealth creation
• Respond to changing customer needs by wrapping products in
blanket of tailored, value-added services (they are
information based)
• Use responsiveness to differentiate yourself or else participate
in “grim race to the bottom”
• Tale of evolving mobile phone… is it a phone or a fashion?

People Want More than Low Price
Products meeting
higher level needs
are worth more

Sneakers cost: $20
or >$100
Cars cost: $16,000
or >$40,000

As soon as basic
needs are met,
people want
something more


The Value-Added Paper Cup

Surround commodity items with tailored
Ordering Budgeting
blanket of value added services
Labeling Receiving Usage
Reporting
Delivering Invoicing

“Never sell a naked commodity”

Actual Item or Service
(commodity, easily
copied, low margin)
Every product has two
components
Information Component
(tailored to each customer
to achieve desired results)


Strategy is a mental tapestry of changing
intentions for harmonizing and focusing our efforts;

as a basis for realizing some aim or purpose in an
unfolding and often unforeseen world,
of many bewildering events and many contending
interests.
John Boyd,
A Discourse on Winning and Losing


PART 2

Moving Toward Responsiveness


Traditional Business Structure

The
Boss!

Information Orders
VP of VP of
THIS THAT

MANAGER MANAGER MANAGER
A B C

PAWN 1 PAWN 2 PAWN 3 PAWN 4 PAWN 5 PAWN 6

What worked well enough ONCE is way too slow NOW


Network Organization Structure

Business Business
Unit A Unit B

Network of autonomous Coordination replaces
business units control
Enterprise Business
Business
Coordinator Unit C
Unit B

Business Business
Unit B Unit D

Enterprise Coordinator says WHAT
Business Units free to choose HOW


Responsive Organizations
• Whole Foods Market
– Basic operating unit is the store team (10-20 people)
– Senior managers say WHAT, teams say HOW
– Very profitable grocery company in highly competitive business
• U.S. Marine Corps
– Basic operating unit is the platoon (20-40 people)
– Philosophy of command requires decentralized decision making
– Epitome of effective modern, mobile, military
• Network Services Company (I was CIO for 6 years)
– Network of 86 independent distributors
– Owner operators insure quick, autonomous decision making
– Profit opportunity for each distributor on national accounts


Strategy of Focus and Response
Deliver
• Three feedback Business
Success
loops illustrate how
focus and response LOOP 1
Market Awareness
works Data &
Customer
• Responsiveness is a Desires
LOOP 2 LOOP 3
blend of balance and Balance Agility
Analyze
agility with the Standardize
Non-Standard
Create New
Operating Operating
awareness to know Processes Input !!! Processes
when to do which
• It is continuous, Detect New
Eliminate
incremental Root Threats &
Opportunities
change… Causes

LOOP 1: Awareness = Observe and respond
LOOP 2: Balance = Improve existing processes
LOOP 3: Agility = Create new processes


IT Enables Responsiveness

• Maximize leverage of existing systems and infrastructure with
services oriented architecture (SOA)
• Support for responsive operations is layered on top of existing
systems (ERP, CRM, SCM, etc.) as needed:
– Data Warehouses and Business Intelligence (BI)
– Business Process Management (BPM)
– Simulation and Predictive Analytics
• Use parts of old systems in creation of new systems; grow
systems iteratively as needs unfold

• SOA + Virtualization + Cloud + SaaS + Mashups = Responsive


Company and Strategic Partners

Company out Company
Alliance
sources support Partner Data Ctr/Cloud focuses on
functions to Computing
‘A’ Customer core
strategic partners functions
Company that
Alliance
Partner Support
Support
produce
Core unique
‘B’ Core Customer
Core value-add
SaaS Apps
Support
for its
customers
Strategic partners Customer
Business
provide tailored Alliance
Partner Process
bundle of products Outsourcing
‘C’
& services


PART 3

Business Case Study
“Agility in Action”


Disruption of IT Paradigm - AGAIN
• SOA, Virtualization, Cloud Computing and Agile Development
offer new opportunities for IT infrastructure that is fast,
flexible, cost effective and embedded in business processes
• Three unequivocal standards of IT and Business Agility:
1) No Cap Ex
2) Variable Cost
3) Scalable Platform
• Those that master the use of these technologies and
techniques will set the pace for everyone else
• “I’m all for progress. It’s change I don’t like.” Mark Twain


Case Study
Office
Productivity Doing Business in Real Time
• Old-line candy company selling
ERP System through traditional low margin retail
channels
• People see opportunity to sell
Data “designer chocolate” and related items
Warehouse in cozy storefront setting
App
Servers • Company decides to quickly market
test idea by opening a few stores
• Need systems support in 90 days!
• Consider TCO of solution: lease/buy;
Inventory sunk costs; scalability; flexibility
Production Control
Scheduling • Business agility calls for IT agility…


Case Study
Office
Productivity Doing Business in Real Time
• Concept is a success
ERP System
• Accelerate rollout of new stores…
what next?

Data SOA
Warehouse Server
App Store Virtualization
Servers
Support Store POS
Ver 1.0 System SaaS

SOA
Inventory
Production Control Supply Chain
Scheduling DW


Case Study
Hybrid IT Architecture
Office
Productivity
Store The
Support Cloud
Cloud
Extend In-House Ver 2.x
Systems in Cloud
Cloud SaaS
Computing
Data CRM BPM
Warehouse Analytics &
App Simulation ERP
Servers
Store POS
System
SOA

• No Cap Ex
Production
Inventory Scheduling Supply Chain • Variable Cost
System DW • Scalable


Lessons Learned So Far…
• Web portals and mashups provide unified user interface by replacing
different system screens with common GUI front-end

• Maximize use and re-use of existing applications (ERP/CRM/SCM) with
SOA and WOA (web oriented architecture)

• Maximize server utilization through virtualization

• Split systems processing between in-house platforms and cloud/SaaS
platforms; host new system in-house or in the cloud as security and
business needs dictate (cloud computing nascent but evolving quickly)

• Extend in-house systems, improve performance of applications and
reach new users and customers via cloud computing options

• Continuous incremental change to IT infrastructure as business unfolds
(No big bang projects!)


Change is the one predictable thing in a world
where so much else is so unpredictable, and companies optimized to
deal with change will certainly be more successful than companies not
optimized to deal with change. That is why responsiveness trumps

efficiency; that is why responsiveness and the business practices that bring
it about are the basis for sustainable prosperity in this century.

Michael Hugos,
Business Agility: Sustainable Prosperity in a Relentlessly Competitive World


Learn More
Presentation excerpted from two of my books:

Join the conversation on my
blog at CIO.com
Doing Business in Real Time

Briefing management in
strategies for agility;
mentoring teams in agile
development.

Reach me at:
www.MichaelHugos.com

• Business Agility: Sustainable Prosperity in a Relentlessly
Competitive World, John Wiley & Sons publisher, 2009
• Business in the Cloud: What Every Business Needs to Know
About Cloud Computing, John Wiley & Sons publisher, 2010


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