CHAPTER 10
Strategies to Foster Innovation
We cannot manage and capitalize on complexity if we cannot close the wide and costly gaps in our business practices. A very important—and, too often, missing—component of the business environment is the ability of executives to select, prioritize, and provide oversight to a valuable portfolio of projects. Although many leadership teams are attempting to do just that, enterprise analysis, facilitated by the business analyst and culminating in the business case, is often shortchanged or totally missing. As a result, decisionmakers do not have the information they need to make informed decisions.
But organizations must not shy away from the challenge of determining the most effective structures, processes, and practices for executing complex projects just because they don’t have a total solution right away. Senior managers, project managers, and business analysts all possess the power and influence to make the needed changes, and only they can build and nourish the empowering organizational culture and flexible infrastructure needed to deploy complex, creative, innovative solutions.
STANDOUT COMPANIES HAVE PAVED THE WAY
Standout companies, those businesses that have flourished in spite of the financial crisis of late, have learned to capitalize on complexity to drive innovation. The first thing they did was to admit that:
Projects execute strategy by implementing the changes needed to respond to the relentlessly changing dynamics of the marketplace.
Successful projects are critical to organizations’ economic survival.
Strategy execution is the job of everyone involved in projects, especially the leadership team of a complex project: the project manager, business analyst, solution architect/lead technologist, and business visionary.
Projects are investments and part of a portfolio that has an investment strategy. The portfolio needs attention, support, and expertise.
Complexity is here to stay and is only going to get worse, and we must learn to not just manage complexity, but also capitalize on it to remain competitive.
It is through creativity and innovation that we will enable our company to capitalize on complexity.
So how do we establish an organizational infrastructure to accommodate the challenges we face and to effectively support complex projects? Implementing the business practices needed to support complex projects is a learning process that demands an understanding of complexity, a focus on creativity, and business practices that are adaptive and flexible. For senior management teams, the objective is clear: risk reduction and increased return on project investments (ROI). For complex project, program, and portfolio management teams, the objective is no different.
Four professional disciplines must converge to bring success on complex projects: project management, business analysis, business process management, and information technology (see the core project leadership team presented in Chapter 6).1 Through a real collaborative effort relying on the synergies of these four professional groups, whose members have different expertise and different perspectives, the complex project team will have the technical skill and leadership prowess to bring about innovation.
A new definition of a requirement relates it to something that generates business benefits, either in the form of value to the customer or wealth to the organization. Once we understand that business benefits are the only real measure of project success, we can more easily establish critical business requirements early in the project—requirements that the Standish Group refers to as “firm basic requirements” that are not expected to change.2 Approaching business requirements in terms of their business value makes it appreciably easier to make important decisions about a project’s scope.
The complex project team, and particularly the business analyst, is uniquely positioned to transform the way we do projects. In this chapter we will explore the BA role on three levels:
THE NEED FOR CHANGE
Transforming your organization into one that focuses on innovation can require significant changes.
A Word to the Wise
As you hone your ability to influence others, work with BAs and PMs to foster innovation at three levels:
Project
Portfolio
Project support offices and centers of excellence.
Projects—the hotbed of creativity
Portfolios—the strategy-execution framework needed to achieve innovation
Project support offices and centers of excellence—the hub for mature practices that foster creativity.
TRANSFORMING PROJECTS INTO HOTBEDS OF CREATIVITY
As the core complex-project leadership team comes together, the first order of business is to diagnose the complexity of the assignment, whether it is a project, program, or portfolio.3 The business analyst or the project manager typically facilitates the complexity analysis. The same small expert team, the core complex-project leadership team, also must participate. You may want to augment the group with other SMEs to ensure that the team understands the business area undergoing change and the technology that enables the business to operate.
Before diagnosing the level of complexity, the expert team should take these steps, which are essentially a review of the analysis of the enterprise, so the members can fully understand the task at hand.
1. Review the business case for the initiative. If it is deficient or out of date, update the business case. Be sure the business need, problem, or opportunity is clearly defined.
2. Revisit the solution approach outlined in the business case. Guide the team in identifying all possible options to meet the business need. Conduct a feasibility analysis for all options. This is where the business analyst can foster creativity. She must facilitate a “creativity zone,” an atmosphere that helps the team engage in real dialogue. The business analyst should encourage all ideas, challenge and build on them, and even experiment with, model, and prototype ideas. (For more on creativity-inducing skills the business analyst needs, see Chapters 5 and 7.)
3. Review the current-state business and technical architecture for the area of the business to be changed to gain an understanding of its complexity and scope.
4. Develop a high-level work breakdown structure and product breakdown structure to understand the scope of the project.
5. Develop a context diagram to help the team visualize the scope of the project.
6. Develop firm basic requirements in terms of business value. These should be the critical business requirements that are not expected to change. Approaching business requirements in terms of business value helps to minimize the scope, keeping it to only what is sufficient to meet the real business need.
7. Develop quantifiable business measures of success, in terms of adding value for customers and wealth to the organization.
At this point, your expert team is ready to diagnose project complexity and determine which management strategies to use to capitalize on complexity and foster innovation (see Figure 10-1).
APPLYING COMPLEXITY THINKING TO MANAGE PROJECTS
Applying complexity thinking to projects involves selecting methods and techniques and assigning project leadership to suit the project’s profile and complexity dimensions. Here I suggest a three-step process, which is also described in detail in Managing Complex Projects: A New Model.4
FIGURE 10-1. Project Complexity Model 2.0
© 2011 by Kathleen B. Hass and Associates, Inc.
1. Select the project cycle to suit the project profile. Based on the project profile, the project team first determines the appropriate project cycle to use. All projects pass through a cycle or sequence of stages. Typical cycles have a series of periods and phases, each with a defined output that guides discovery, requirements, design, construction, and/or acquisition of goods and services. As projects have become more complex, project cycles have evolved to address the various levels of complexity.
2. Select appropriate management techniques to suit the project’s complexity dimensions. Projects sometimes fail because of a misapplication of good methods and techniques. Applying complexity thinking to determine which techniques to use is the key to success when managing complex projects. Successful managers use situational project management by adapting their leadership style and project management, systems engineering, and business analysis techniques to manage the project’s unique complexity dimensions.
3. Assign project managers and business analysts to suit the project’s profile. A project can fail if its leadership doesn’t adequately suit the characteristics of the project. The project’s manager and business analyst have critical project leadership positions. Once an organization chooses a project cycle and identifies project complexity dimensions, it should also apply complexity thinking to project leadership assignments.
FOSTERING A CREATIVE PROJECT TEAM ENVIRONMENT
Once the complexity of a project is well understood, there are a number of specific activities that the complex project team in general, and the business analyst in particular, can engage in, including matching project staff to the complexity profile; securing the physical space that is needed for the team to collaborate and interact; minimizing the key team leaders’ distractions and other assignments; and understanding, accepting, and informing management and business partners that the team will adapt its approach as more is learned.
For more on fostering creativity and building a high-performing innovation team, revisit Chapter 4, on creative leadership; Chapter 5, on fostering team creativity; and Chapter 6, on igniting creativity in complex distributed teams.
EXECUTING STRATEGIES THROUGH VALUABLE PORTFOLIOS
Organizations often have to undergo significant changes to improve the way they select projects, develop creative requirements, and manage projects while focusing not only on business value, but also on innovation. Even today, many organizations still pile project requests onto IT and new-product development groups with only sparse requirements and then wonder why those groups cannot deliver.
Conversely, mature organizations devote a significant amount of time and energy to conducting enterprise analysis and encouraging experimentation and creativity before rushing to construction. This means selecting and prioritizing projects only after performing rigorous competitive analysis, problem analysis, and creative-solution-alternative analysis. This also means spending more time up front to make certain that the solution is creative, innovative, valuable, and even disruptive.
As a key leader of a project or program, the business analyst should periodically (usually on a quarterly basis) conduct rigorous analysis of the enterprise, including the current state of the project or program and the current state of the business. She should review the value expected from the project or program and the other benefits forecasted in the business case. The business analyst is responsible for continually validating the business case throughout a project. If the assumptions and forecasted benefits are no longer valid, the business analyst needs to alert the project leadership team and facilitate working sessions to determine the most appropriate course of action through analysis of alternative options. These discussions result in a recommendation for a course correction to the portfolio manager and often to the senior decision-making team.
Portfolio oversight is the “sweet spot” of the senior management team. It is how they capitalize on complexity to achieve innovation. It is through complex project portfolios that strategy is executed, innovation is achieved, value is added for the customer, wealth is earned for the organization, and competitiveness is maintained or advanced. However, the senior team cannot do its job without good, solid information, which the complex project team leadership presents after robust enterprise analysis facilitated by the business analyst. We can see, then, that the business analyst is critical to effective portfolio management.
ESTABLISHING PROJECT SUPPORT OFFICES AND CENTERS OF EXCELLENCE
Most standout organizations maintain and support some kind of office or center that provides a collection of services to the enterprise and to complex project, program, and portfolio teams. The goal is for the senior team to tolerate and encourage different project-support models, depending on the complexity of the team structure, the number of different business lines, and the impact to key business applications. For the senior team to tolerate and encourage different models, it again needs project leaders to provide information that is based on structured analysis, which is most often facilitated by the business analyst.
Over the last two decades, we have made progress in improving project performance, which is mostly due to improved project management and to reducing the size of projects (smaller projects are much more likely to succeed). But as we’ve learned from the Standish Group’s CHAOS research, even with these improvements, nearly two-thirds of IT projects continue to fail (nothing of value is delivered) or are challenged (they run over time and cost and likely do not deliver the full scope of functionality).
These problems are significantly affecting our ability to compete in the marketplace. We know that failed and challenged projects often have significant negative effects on companies’ finances. A study by TechRepublic, Inc., and its parent Gartner Group, Inc., revealed only 32 percent of IT projects are successful, which is extremely costly. The annual cost to the U.S. economy is around $1.22 trillion per year. Worldwide, we are losing over $500 billion per month on IT failure and the problem is getting worse.5 Clearly, we must do better.
So what is the root cause of our continued inability to flawlessly deliver new business solutions that hit the mark and add significant business benefit? Many experts have made the case that our gap in business analysis and complex project management capabilities and competencies is at the heart of the problem (Figure 10-2).
The challenge to close the gap in BA capabilities and competencies is formidable, and at the same time, we need to build complex project management capabilities. To make the systemic improvements that are needed, an entity needs to be responsible and accountable for advancing BA and CPM practices. It is through this entity, often called a project support office or center of excellence, that the needed improvements can be made.
FIGURE 10-2. Why Businesses Cannot Manage Complexity
WHERE IS THE BA PROFESSION HEADING?
Clearly, BAs who are focusing on multiple roles and tasks involving diverse disciplines cannot devote the time and attention needed to build a mature BA practice and a world-class BA workforce. The current hybrid role is tactically focused, deep into project tasks. How can the BA transition from a tactical player into a more strategic asset (see Figure 10-3)?
According to a 2008 study conducted by Forrester, the BA will retain the current tactical roles that are both IT and business oriented.6 IT-oriented business analysts mostly improve operations through changes to technology. These are mostly generalists, but some specialize as data analysts, process analysts, or rules analysts. Business-focused analysts are usually functionally focused and mostly improve operations through changes to policy and process; they specialize in business process management, business rules management, or Six Sigma.
FIGURE 10-3. The BA’s Transition from Tactical to Strategic Asset
At the same time, the industry is expected to begin grooming and fielding more strategic BA roles, driving BA practice maturity to meet our organizations’ needs for innovation. These roles include the business architect and the enterprise analyst. The business architect makes the enterprise visible through diagrams, models, and rich pictures. As the current-state architecture comes into view and the future-state architecture takes shape, the gaps in capabilities to meet business strategies become clear. The enterprise analyst then conducts rigorous enterprise and competitive analysis, works to convert business opportunities into innovative business solutions, and translates strategy into breakthrough process and technology change.
Experienced and influential business analysts should champion the transition from a tactical to a strategic focus for their business analysis practice. Developing compelling business cases that are stated in very simple business terms, identifying the outcome to be achieved, and linking the outcome to implementation strategies can help them make this transition.
As businesses acknowledge the value of business analysis, they must ask themselves four questions:
What are the characteristics of our current BA workforce?
What kind of BA workforce do we need?
How can we build a mature BA practice?
How long will it take to get there?
As you can see in Figure 10-4, many elements need to be in place to implement a mature BA practice. This comprehensive maturity framework describes the elements of a mature business analysis practice. The journey begins by acknowledging that business analysis is a critical business management practice in the 21st century. It will take an investment of resources, a structured approach, and expert change management skills. The framework involves a three-pronged approach to build a mature BA practice, develop a competent BA workforce, and establish a BA center of excellence to plant the seeds and steer the course.
FIGURE 10-4. BA Practice Maturity Framework
THE LIVING BUSINESS CASE: A VEHICLE FOR INNOVATION AND STRATEGY EXECUTION
In most organizations, the business case is treated as an annoyance, not as a critical component of strategy execution. It is typically created as quickly as possible (if it is created at all), not as a product of serious enterprise analysis, and is simply used to secure resources and funding. Once funding for a project is secured, it is often discarded, never to be looked at again, so only enough effort, expertise, and analysis to get the funding are expended.
It is the responsibility of the business analyst to conduct rigorous enterprise analysis, which then culminates in the development of a sound business case. According to the BABOK® Guide, the BA drives creation of the business case, through leadership, coordination, and facilitation of these steps:
1. Defining the business need
2. Assessing capability gaps
3. Determining the solution approach
4. Defining the solution scope
5. Defining the business case
6. Assessing the proposed solution
7. Validating the solution
8. Evaluating the performance of the solution.
USING THE BUSINESS CASE TO ESTABLISH A STRATEGY-EXECUTION FRAMEWORK
Controlling costs is still a major business pressure. But cost cutting alone doesn’t foster growth, energize employees, or attract new customers. Investments do—if they’re well-conceived, solid, and deliver results. Brilliant business cases can facilitate that.
—GARTNER GROUP, INC.
How well do organizations actually execute strategy by making investments that are well-conceived, solid, and deliver results? Research shows that less than 10 percent of well-formed strategies are effectively executed. Why would this be so?
85 percent of executives spend less than one hour per month on strategy.
95 percent of the workforce doesn’t understand the strategy.
60 percent of organizations do not link strategies to budgets.
70 percent of organizations do not link strategies to incentives.7
The root cause behind these statistics is this: executives do not have a framework for strategy execution. An effective framework for strategy execution would look something like this four-step portfolio management process:
1. The executive team receives critical information in the business case, which is based on strategy and goal decomposition, enterprise analysis, research, competitive analysis, benchmark studies, analysis of business problems and opportunities, and the generation of moral ideas to faster innovation.
2. The business case serves as a new-project proposal during strategy, project selection, and prioritization sessions, when project investment decisions are made. Investment decisions are only as good as the business case.
3. The strategy-focused program and project teams execute against goals, objectives, and business benefits described in the business case. Therefore, the business case needs to be high caliber to serve as a solid guide for the subsequent work.
4. Project, program, and portfolio managers continually validate information updated in the business case to ensure that the investment is still warranted, desired innovation will be achieved, and the business benefits will be realized.
The business case is, of course, the common element in these steps. It is the foundation for a strategy-execution framework. Only after the business analyst facilitates the development of a solid business case can the portfolio management team prioritize projects based on innovation, value to the customer, and wealth to the organization.
OVERCOMING BARRIERS TO INNOVATION AND STRATEGY EXECUTION
Figure 10-5 lists some of the barriers to strategy execution and symptoms of a defective strategy, as well as what the BA can do to eliminate them.
BRINGING THE BUSINESS CASE TO LIFE
Without a living business case, several unintended consequences can affect the project’s chance of success:
Project creep sets in.
FIGURE 10-5. Barriers to Strategy Execution
Project leaders are appointed by accident.
Training is seen as a cure-all.
Conflicts develop between project teams.
Few projects are completed in a timely manner.
Project investments continue even when the return on investment becomes marginal.
Business benefits are not realized.
It is evident that a living business case is vital to project success and strategic direction. We suggest nothing short of a full-court press to elevate the importance and use of the business case. It is the business case that provides direction for project teams, drives all decisions, improves inter-project cooperation, and drives focus on innovation and strategy execution. A living business case has three distinct phases or “lives”:
1. Life before project funding
2. Life during solution development
3. Life after solution delivery.
Life before Project Funding: Charting the Course
As discussed, the business analyst leads the enterprise analysis activities. With an expert team of SMEs, including an experienced project manager, a business visionary, an architect and/or lead developer, and a financial analyst, the business analysts facilitates:
Competitive and benchmark studies
Current- and future-state business architecture and gap analysis
Business problem and opportunity analysis
Cost/benefit analysis and business case development
Review/approval by executive sponsor; the sponsor uses the business case to propose investment in a new project.
Life during Solution Development: Managing Changes
The second phase (after approval) focuses on maintaining momentum, keeping the project positioned in a proactive and positive light, and conditioning stakeholders to accept the changes the project’s implementation will deliver. It is during this “life” that requirements are managed to minimize the scope of the solution, while still innovating, which will allow the business to reap benefits as quickly as possible. The business analyst continually validates assumptions and forecasts in the business case during:
Requirements definition, when the BA and the requirements team elicit, analyze, and specify business requirements
Solution validation, to ensure the solution continues to meet business needs and is truly innovative
Requirements communication, to constantly relate requirements to strategy and value
Change management, to welcome changes that add value and to determine the cost versus benefit of change requests
Business case validation, in which the expert team reviews changes to the business case and determines any needed course corrections to recommend to the sponsor.
Life after Solution Delivery: Measuring Benefits
During solution deployment, the business analyst focuses on the organization’s readiness to accept the new business solution and do its work in a new way. The BA documents any needed organizational changes as change management requirements. In addition, the business analyst develops any required business artifacts, including procedures, processes, skill requirements, position descriptions, and an optimal organization structure.
After the solution is operational, the business analyst captures actual business benefits as compared to those forecasted in the business case. If actual business benefits fall short of expectations, the BA conducts root cause analysis to determine why the benefits were not achieved and to identify corrective actions and process improvements to ensure benefit realization on future projects.
DELIVERING THE BUSINESS CASE TO ALL STAKEHOLDERS
There is value in a living business case for virtually all stakeholders, including business analysts, project managers, business units, and the executive team. A living business case benefits the business analyst in several ways:
The BA is elevated to a strategic role.
The BA becomes a key player in strategy execution.
The BA is able to focus the team on business priorities.
The BA clearly documents the business-value basis of her decisions.
A living business case also benefits the project manager in various ways:
It gives the PM clear business-benefit information on which she can base decisions.
The PM transitions from a tactical solution developer to a strategic implementer of change.
The PM can rely on the BA as a strong advocate for the business, and each party understands what she is accountable for:
PM: to deliver the solution on time, on budget, with the full scope of features and functions
BA: to meet business needs.
A living business case benefits executives, too. It:
Gives them confidence that they are investing in the most valuable projects
Helps them make decisions about projects based on business value throughout the project life cycle, allowing them to “protect their investment”
Shows them the expected value of the portfolio of projects, as well as the actual value of the benefits that were realized through newly deployed solutions.
Finally, a living business case benefits the business itself by:
Showing the ROI for the project
Helping the organization meet business objectives and achieve business strategy
Helping the organization salvage, maintain, or greatly improve its competitive position.
BEST PRACTICES FOR BUSINESS CASES
We present three best practices for building “brilliant business cases” suggested by Gartner Group, Inc., the research and advisory firm.9
1. Develop business cases collaboratively. Use a business-driven inclusive process that:
Involves all stakeholders to ensure approval and ongoing support
Focuses on how the business will achieve innovation related to both processes and people
Identifies all potential benefits and who will achieve them.
2. Fully document business cases. Clearly present the information decisionmakers need.
Link the business case to business plans.
Describe the major risks and how they will be mitigated.
Package the business case well, boosting its credibility.
3. Leverage business cases after approval. Use the business case throughout the project to:
Guide and assess project execution
Track how well process and people changes are being institutionalized, as well as the realization of benefits.
PUTTING IT ALL TOGETHER: WHAT DOES THIS MEAN TO THE BUSINESS ANALYST?
The challenge for you as a business analyst is to become a key player in your organization’s efforts to implement a center of excellence or project support office, an entity that will be responsible and accountable for transforming process, product, and service-development practices to deliver the smarter solutions that your employees and customer demand—before your competitors do it.
In addition to fostering creativity throughout the organization and honing your leadership, relationship-building, and influence skills, we recommend that business analysts focus on working with a support office or center of excellence to institutionalize the following practices.
RIGOROUS ENTERPRISE ANALYSIS PRACTICES
Enterprise analysis comprises the critical practices that the business analyst performs to ensure that a project is innovative and will deliver real business value. In too many organizations, these activities are not considered part of the business analyst’s scope of work, but when they are performed before project approval, after project funding, or throughout the project, enterprise analysis is the very heart and soul of business analysis.
Once again we prevent enterprise analysis activities.
Building the current- and future-state business architecture
Conducting rigorous opportunity analysis and problem analysis with a small expert team to ensure an understanding of the business need
Conducting feasibility analysis with a small expert influential team to identify the most valuable, feasible, and innovative solution to propose
Developing a business case with a small expert team to propose a new project to build the solution
Continually validating the assumptions and forecasts made in the business case throughout the project; recommending course corrections when the ROI elements of the business case have changed
Conducting solution assessment and validation throughout the project
Measuring the business benefits of the deployed solution as compared to the forecasts made in the business case; business benefits can include increased value to the customer and/or increased wealth for the organization.
Experienced business analysts should champion the transition from a tactical to a strategic focus for their business analysis practice. This requires a compelling business case for a mature BA practice, stated in very simple business terms that identifies the outcome to be achieved through business analysis practices, linked to strategies, along with the associated investment.
As we’ve seen, a living business case serves as a tool for the business analyst to drive the project team from a tactical focus to a focus on innovation and strategy execution. What should you do if you don’t have a business case? Facilitate an expert team (probably your core project leadership team) to help you develop one. If your current project does not have an executive sponsor, recruit one and ask him to review and approve the business case. If your business case is no longer valid, facilitate a team of experts to update it.
INNOVATIVE REQUIREMENTS MANAGEMENT PRACTICES
Requirements definition and management comprise the traditional activities thought to compose business analysis. The business analyst and the rest of the complex project management leadership team must focus exclusively on value, creativity, innovation, and competitive positioning when performing these activities, which include:
Planning the requirements approach and activities
Eliciting requirements using multiple elicitation techniques that encourage creativity and innovation and validating the requirements
Defining and specifying requirements, using multiple techniques to make the requirements visible (e.g., text, models, tables, matrices)
Analyzing requirements to ensure they are creative, leading-edge, innovative, accurate, complete, and testable
Validating that the emerging solution meets the business need and that it will add value for the customer and wealth to the organization throughout the project
Managing changes to requirements; welcoming changes that add business value; reducing the cost of change through iterative development
Communicating requirements to stakeholders, customizing the message as needed.
THOROUGH CHANGE MANAGEMENT PRACTICES
Change management is a critical practice that is too often inadequately understood and poorly implemented. The business analyst is the ideal person to work with all key stakeholders, including suppliers, employees, external partners, and end customers, to ensure the new solution will meet their needs, be deployed effectively, and return value to the customer and wealth to the organization. Specifically, the business analyst should:
Ensure the organization is ready to operate the new business solution efficiently and effectively
Manage the organizational changes required to ensure the new business solution is implemented efficiently and effectively
Develop the necessary business artifacts: business policies, procedures, rules, training, retooling, restructuring
Implement an effective benefits measurement and management program.
NOTES
1. Bob Wysocki, The Executive Guide to Project Management (Hoboken, NJ: John Wiley & Sons, Inc., 2011): 91–101.
2. James H. Johnson, “Micro Projects Cause Constant Change,” Extreme CHAOS 2001 (West Yarmouth, MA: The Standish Group International, 2001): 5.
3. Kathleen B. Hass, Managing Complex Projects: A New Model (Vienna, VA: Management Concepts, 2009).
4. Ibid.
5. Roger Sessions, The IT Complexity Crisis: Danger and Opportunity (Houston, TX: Object Watch, Inc., 2009): 2.
6. Carey Schwaber, Rob Karel, and Forrester Research, Inc., “The New Business Analyst,” April 8, 2008. Online at http://www.forrester.com/rb/Research/new_business_analyst/q/id/43178/t/2 (accessed April 2011).
7. David Norton, “Project Balanced Scorecards—A Tool for Alignment, Teamwork, and Results,” a presentation given at Project World & The World Congress for Business Analysts Conference Proceedings (November 2005).
8. Gerald I. Kendall and Steven C. Rollins, Advanced Project Portfolio Management and the PMO: Multiplying ROI at Warp Speed (Boca Raton, FL: J. Ross Publishing, 2003): 73.
9. Gartner, Inc., “Building Brilliant Business Cases,” EXP Premier Report (January 2004).