CHAPTER 2

The Journey: Taking the First Steps toward Transforming Your Organization

What we've learned so far: Business insights hold significant value for organizations in all industries and domains despite the fact that research suggests that 70 percent of organizations haven't achieved a level of maturity where appropriate business insight is developed and used effectively to drive decisions and validate strategies. So, the next question is, “Why?” Why are organizations not producing all the business insight they need or, even, why are they not producing sufficient insight to understand their customers' behavior and properly manage their risk using all the information they already have?

DIFFERENT APPROACHES

To answer the question of why this happens, let's think about the capabilities that exist in business units. When business units have a need to answer a business question, they typically use their business perspective and interpretation of their own performance to guide this process. They perform these tasks on a daily basis in any way they can to meet their deadlines. This may include using the IT team for some support. The same process is also completed when the organization as a whole has a need to produce, let's say, compliance reports to submit to regulators. The accuracy of these reports may not be the best an organization can produce. Furthermore, these processes are lengthy, especially if they require getting information from other business units. And, finally, these processes are inefficient. Many information management processes are duplicated over and over. The use of resources, especially analytical resources, is not optimized; neither is the use of business unit and IT infrastructure resources. All organizations are doing this today at various levels. And why wouldn't they? Business units must do something to get their work done, and using the resources they can control seems the most expeditious.

Does this sound familiar?

• A business issue becomes a priority because of a problem: a drop in sales or the erosion of profit. Everyone scrambles to react.
• A technical team is assembled.
• Data is gathered and analyzed.
• Information processes are repeated with different business perspectives leading to different interpretations and results.

Assuming the different interpretations can be resolved—and the project deemed a success—another problem emerges. Someone says, “Hey, let's do that again.” But the technical team has moved on to put out another fire. So managers figure they need to expand those technical teams, or add more technical or analytical resources, and end up duplicating many tasks that are common to these ad hoc projects and requests.

This is a particular issue in model building and deployment, which is critical to successful predictive analytics approaches. It isn't enough to compute customer lifetime value once a year or once a quarter. Many companies talk about how they loved the results they got from those infrequent modeling runs, but they took too long to build or they took so long to run that tweaking them dragged the production cycle out. It becomes a project, rather than an ongoing process. One retailer had some terrific success automating markdowns (the process of picking the right price cut to help get the merchandise out the door). But over time the model broke down and was too cumbersome to rebuild. A well-defined and repeatable process was not used to extract and integrate the information.

With the growing demand to make decisions quickly, and to automate the results so that more business users can use them, these project-driven information management practices are not efficient. In addition, they don't produce accurate results when they require input from other business functions. Consequently, many decisions are made without information validations. And many organizations using these practices are not producing sufficient business insight to support their decisions.

A much better approach is for organizations to think of information as a corporate asset to be deliberately managed using a well-structured process. The process is managed with input from all stakeholders and with careful attention to minimizing duplication of efforts and maximizing the use of all resources (business, analytical, and technical). Get away from thinking about projects and instead think about an ongoing, flexible, holistic process that treats data—and what can be gleaned from it—as a strategic entity worthy of your time and attention.

JUGGLING MULTIPLE CHALLENGES

In addition to the challenges caused by their approach to information management, organizations are also facing issues involving both the information itself and the act of organizing it. Over the past five years there has been a significant increase in the amount of information gathered. New technologies make it much cheaper to store all this information, so every customer interaction is tracked and every product development step is monitored. Vast amounts of unstructured information are available through call center notes, warranty claims, social media, and more. Information is flowing in much faster than our current processes can handle.

In addition to the increase in data volume, there is also a visible increase in the complexity of the information available to us. Finally, government regulations and risk factors are always a concern. This new reality presents information management challenges. The IT team, dealing with these issues on a daily basis, focuses on cost control and an information architecture that can scale to handle the increased demand for processing power and information requests.

Organizations focus on the cost, and the management—but not on the organization. Every business unit is busy managing its own environment, and dare we say “silo” (more on that later), with too little attention paid to collaborating or sharing with other business units. Furthermore, individual business units use their own perspective to define how to interpret information and create business performance views. If marketing is measured on how many new customers it brings in, the description of a “new customer” might be different than in a sales unit where cross-marketing to existing customers is a key performance metric. So when an executive asks a seemingly simple question—“How many of our deposits are coming from new customers?”—multiple conflicting answers swarm in.

In addition, there is typically a limited supply of analytical and domain resources scattered around in business units—and no framework to use these skills efficiently across business units. Finally, there is the classic challenge in reaching a healthy and collaborative working relationship between business and IT. Why? Because business and IT have very different priorities and perspectives that can't be aligned without the intervention of an enterprise-level executive.

These organizational challenges are much harder to deal with than the information challenges, despite the fact that the information challenges tend to consume business unit and IT time. Dealing with both types of challenges is necessary, and the approach organizations choose to use can make a difference between producing actual results and continuing to deal with the symptoms.

For instance, when organizations realize they have a data quality problem, they may purchase software to clean their data. But fixing the information quality problem by cleaning existing data will not stop more dirty data from entering the organization's information environment. The organization needs to uncover the root cause of the poor quality data. Operational data entry processes may be one possible and obvious culprit. But a lack of consensus about how business units define or derive additional data elements such as profit, household, or customer segments may be the real culprit.

What organizations need to recognize is that these two very different types of challenges are interrelated and must be dealt with from an enterprise perspective simultaneously. If you suffer from asthma, you can keep running to the emergency room to get treated, or you can take preventive medicine to get at the underlying lung inflammation. Although not quite the same in information management and organization, you get the gist. Preventive medicine for the organization is a business transformation approach supported by the executive team. The approach should develop a common understanding of various competing priorities as well as build relationships between business units and between business and IT through well-established processes, consistent communication, and alignment of efforts. This book explores these organizational maturity qualities in later chapters.

HOW TO DEAL WITH CHALLENGES EFFECTIVELY

How do you deal with these challenges in a pragmatic and effective way? By transforming your organization's approach to information: to using it, managing it, organizing it, and—ultimately—analyzing it. The objective of business transformation efforts is to evolve the organization's maturity to a higher level. Increasing your organization's maturity requires focus on four key organizational pillars: people, processes, technical infrastructure, and culture (see Figure 2.1). And it is not something that can happen overnight. It is a journey.

The three key requirements to successfully embark on this journey are:

1. Securing continuous executive sponsorship
2. Understanding the current capabilities and dynamics of the four capability pillars
3. Aligning the capabilities of the four pillars with the organization's business objectives with the support of a Center of Excellence to develop the four pillars

This book discusses many aspects of this journey. Let's start by exploring each of these key requirements in detail.

EXECUTIVE SPONSORSHIP: CRITICAL TO SUCCESS

Organizations genuinely interested in making long-lasting changes need a leader who can make them happen. Transforming an organization's approach to information affects the daily routine, the workforce, the information environment, the processes, and the operating model. It can upend the cultural paradigm. Executives need to support these efforts and give them visibility and priority. Visionary executives who believe in innovation understand the crucial role of information and analytics to transform their organizations into viable market competitors. Steve Jobs's consistent commitment to simplifying iPhone operations and using innovative new ways to communicate with users guided Apple to unprecedented success in the market. The success of Apple is an example of how a leader can develop and align the capabilities of an organization to not only achieve phenomenal financial performance levels, but to also reach a high level of market dominance.

Executive buy-in and meaningful involvement help organizations resolve conflicts and adjust course as they get their business initiatives off the ground. Executive support is also needed to monitor focus. Many organizations continue to focus on tactical work because this is the way they operated for years. When people are part of an organization with some operational history, it is sometimes hard for them to stop and ask themselves the question, “Is this work contributing to a critical organizational objective, or is it nice to have since we are so used to using the output of this task?” Business units sometimes struggle to shift to a more strategic approach. Executive sponsorship is critical to guiding business unit stakeholders and leaders to strike the right balance between tactical and strategic information management efforts.

UNDERSTANDING CURRENT CAPABILITIES

The second requirement speaks to the need to know what the organization has now, in order to understand what is needed to move forward. When we plan a trip or a project, we naturally have to define two key elements: The starting point and the destination or the final objectives. This organizational journey is no exception. Business transformation efforts focus on improving capabilities, skills, and the operating model of an organization. To figure out how to improve our organization's capabilities in developing business insight and using analytics, we need to first know what capabilities we have today. We mentioned the organizational pillars (people, process, technical infrastructure, and culture) as the structural foundation of the organization. The organizational capabilities to produce and consume business insight should be viewed from these four key perspectives. The collective capabilities of all four pillars make up the overall organizational capabilities, including strengths and weaknesses. So, the second requirement of the journey is to recognize that each organization must understand and develop the key pillars together, and then figure out the organization's current collective capabilities.

Establishing a baseline of the organization's current capabilities is the first step in the journey to a higher organizational maturity level. The technical infrastructure pillar typically gets a lot of attention in most cases. It is a critical foundation that any organization needs in order to manage its information assets and develop the insight it needs to make decisions. However, technology alone will not help an organization advance to a more mature and robust state. The other three pillars must be strong and functional to get the most from technology. In fact, research suggests the “people” component is the most critical pillar of an organization.

In summary, organizations need to establish a baseline of their current capabilities, including strengths and weaknesses in each of the four key organizational pillars, to be able to develop a strategy and roadmap to implement their business transformation. To successfully assess and determine this capabilities baseline, organizations will need a structured approach and methodology. The SAS organizational maturity model (the Information Evolution Model) is used in the following chapters to provide a structured approach to evaluate current organizational capabilities, determine the target destination, and figure out what additional capabilities are needed to get from the starting point to the target organization maturity destination.

ALIGNING CAPABILITIES WITH BUSINESS OBJECTIVES

The third requirement for this business transformation journey is actually the hardest one. If the organization knows the strategic objectives that have been outlined by the executive team and has assessed its current capabilities to establish a baseline, then the only thing left to do is to execute, right? Correct! But we need to keep in mind that this final requirement is not a one-time effort. This final requirement entails changes to the organization's operating model to align its effort in each of the four organizational pillars with the organization's business objectives. This means aligning the hiring and employee performance evaluation practices and incentives. It includes making changes and enhancements to the technical infrastructure, and developing sufficient well-defined processes and engagement models for business units and IT to use. It also must include a change management process to gradually change the organization's culture to use information and the business insight produced by analytics to support decisions and validate strategies. All these changes must be aligned with the organization's strategic objectives.

This alignment is an ongoing process. Many organizations launch these business transformation efforts and actively work on them for some time. Then some lose momentum, get too busy with tactical day-to-day requirements, and undo some of the progress they have made. This is one of the reasons that we need executive support to monitor business performance from an enterprise perspective using the organization's performance management capabilities and take corrective actions when necessary.

Achieving this continuous alignment is not an easy job, and the question is who will take on these additional responsibilities, or how can organizations accelerate this transformation process. An enterprise Center of Excellence can be a very effective method, among other recommendations, to help organizations in accelerating their business transformation effort. The structure and role of an enterprise Center of Excellence are important topics in the discussion of business transformation. These topics are covered in more detail in Chapter 6. It is important to understand that establishing a Center of Excellence is not the only required step in implementing a business transformation plan. Centers of Excellence will accelerate the internal adoption of changes and enhancements that are part of the organization's business transformation plan, and should be viewed from this perspective. Many other changes are necessary to implement business transformation plans.

Aligning an organization is like setting up a tent. Think of people, process, technology, and culture as its four poles. Each pole needs to be equally high or your tent is going to be a bit lopsided. Needless to say, if one pole collapses, you don't have a functioning tent. Or, put another way, the four pillars are like the four wheels of a car. The four wheels must be properly inflated and aligned to optimize your car's performance. And if one of your car's tires is not performing well to match the other three, you may not be able to get to your destination. Organizations don't often view these four criteria equally, and that's when you end up with a mismatch. Particularly common is the situation in which the technology purchased can't be used effectively to show business value because the people, processes, and culture aren't in place to take advantage of it. Another common situation is when organizations lose their highly skilled resources because those people are frustrated by a lack of accurate information and processes to support the business or the lack of a culture that values and uses information to make decisions and set strategies. There are lots of lopsided, partially collapsed tents out there. Let's look at how to build some sturdy tent poles and get them aligned at the same height.

LET'S START THE JOURNEY

We discussed the three requirements to structure and successfully complete the business transformation journey. Organizations will have to develop a strategy to guide them through that journey. An organizational executive will have to sponsor and own the development and implementation of the strategy. Chapter 7 focuses on how organizations can develop a business transformation strategy.

The second requirement of the business transformation journey is to assess the current organization's capabilities. This process will produce a capabilities baseline that must identify strengths and weaknesses in each of the current four key organizational pillars. This step is necessary to be able to develop a strategy and roadmap to implement their business transformation. The baseline will be used as the starting point for your journey toward a higher organizational maturity level. The second essential requirement is to figure out the target maturity level and its required capabilities. For organizations to complete this task, they need a well-structured and comprehensive approach and methodology.

Chapters 3, 4, and 5 review the SAS Information Evolution Model (IEM), which provides the required methodology to objectively evaluate organizations' maturity levels. The model provides a structured approach to evaluate current organizational capabilities, determine the target destination, and help organizations discover what additional capabilities are needed to get from the starting point to the target organizational maturity destination.

The IEM model¹ has been patented by the U.S. government and has been used effectively to develop the required details for organizational transformations. The model applies to all types of organizations in all industries in the private and public sectors. It focuses on evaluating how organizations develop and consume information and business insights and how they effectively use information to make decisions and validate strategies.

The model describes five organizational maturity levels in the context of the four organizational pillars: people, process, technical infrastructure, and culture. The levels are:

1. Individual
2. Departmental
3. Enterprise
4. Optimize
5. Innovate

Individual is the lowest organizational maturity level, and innovate is the highest. The five levels can be grouped into three key operational categories (see Figure 2.2):

1. Challenged levels (individual and departmental)
2. Foundational level (enterprise)
3. Progressive levels (optimize and innovate)

The description and characteristics of these three organization maturity categories are reviewed in greater detail in Chapters 3, 4, and 5.

TAKING THE FIRST STEPS TO TRANSFORMING YOUR ORGANIZATION

W. Edwards Deming put it succinctly: “It is not necessary to change. Survival is not mandatory.” It's fascinating to see how many of the quality guru's midcentury musings still hold true today. He was early to identify what today is called “executive sponsorship.” Deming's statistical processes for improving quality didn't gain traction in the United States, so when he had the opportunity to work with Japanese industry after World War II he wisely decided to take his ideas straight to the top.

Deming had to export his methods to another continent in order to be heard. We hope you won't have to travel so far. This book explores further the role of people, information processes, technology infrastructure, and culture, the pillars that underpin the SAS Information Evolution Model. And it illustrates the shift from using data tactically to employing it strategically by deriving as much business insight as possible to guide the decision-making process.

NOTE

  1. U.S. Patent No 7 752 070 B2.