tag:blogger.com,1999:blog-73124806725769803062024-03-04T21:48:26.262-08:00Flowing LeanBusiness musings for the few.Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.comBlogger23125tag:blogger.com,1999:blog-7312480672576980306.post-67052807798113263402017-06-08T06:50:00.001-07:002017-06-08T06:50:51.126-07:00The 5-minute Profluo pitch at MVP Academy 2017<iframe allowfullscreen="" frameborder="0" height="270" src="https://www.youtube.com/embed/AwfAUOxM5_c" width="480"></iframe>Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-7743804847031787652016-03-06T23:37:00.000-08:002016-03-06T23:39:59.725-08:00The Ultimate Sin in Business<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJn5eV_Te9LZBXuPkNQxy363YNCY_3rI43J33wvVgEry5Us6j6i8at8vqUTqC_k9hc7V-UiQRFDniWOyb5EA19skFMr6cx2g4GIcVDIIroxxEA6b4y-43riPmvVO_6Qli54QFwhBl96PWL/s1600/DSC_2070.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjJn5eV_Te9LZBXuPkNQxy363YNCY_3rI43J33wvVgEry5Us6j6i8at8vqUTqC_k9hc7V-UiQRFDniWOyb5EA19skFMr6cx2g4GIcVDIIroxxEA6b4y-43riPmvVO_6Qli54QFwhBl96PWL/s320/DSC_2070.jpg" width="320" /></a></div>
<br />
<br />
<br />
...is to be <b>unprofitable</b>.<br />
<br />
Sure, you'd say, that's your CFO "pedigree" talking, there must be larger sins than this.<br />
<br />
So hear me out.<br />
<br />
A bottom line (the profit) is easily dismissed as an accounting convention. Cash is king - they say. And it's true! But this accounting convention was not invented for the purpose of distracting cash-minded managers from what really matters. Profit is a long-term indication of a business's ability to turn out positive cash flow. Fail to deliver that and your cash-rich days will be over - sooner than you think.<br />
<br />
So, beyond Finance 101, a red bottom line signals a dysfunctional business model. Persisting losses in a business lead to an accumulation of damages to the organization that become increasingly difficult to course-correct:<br />
<br />
- the mindset of the organization moves from "who's building what" to "who's avoiding the next layoff round", which leads to high amount of unproductive <b>political actions </b>(lies, deceit, backstabbing) and to a very clear <b>negative selection</b> of personnel - only the weak ones (or whose only skill is organizational survival) are left, since the good ones are more likely to be hunted out of the organization;<br />
- the increasing <b>negative pressure</b> for immediate results, coupled with a weakening control environment and a rationalization of what's acceptable to do in a chronically ill organization will lead to <b>corruption</b>, red tape and other forms of non-compliant behavior;<br />
- beyond people, the <b>asset base</b> (tangible and intangible) will be <b>eroded</b> from lack of proper care and will continue to lose its capacity to accrue economic benefits to the business;<br />
- there is an <b>erosion of creditworthiness</b> as well, which leads initially to higher costs from the supplier base (as everyone prices in the business's inability to pay on time), up to the breaking point of credit default and insolvency.<br />
<br />
Some people may push some valid counter-examples, like <b>start-ups</b> - they are not yet profitable. But this may be not because of a dysfunctional business model:<br />
1/ a start-up is a vehicle in search of a valid business model so they may not have found it yet;<br />
2/ or its business model only gets validated at a certain scale<br />
<br />
And of course, there's the <b>unicorns</b>, which are heavily-funded start-ups that are expected to prove their business model (and win big) at huge scales. But these are not yet businesses, they are just more sophisticated <b>bets</b>. Extremely few of them pay off big, some of them earn some money back, most of them nothing at all - isn't that the definition of a <b>bet</b>?<br />
<br />
Throughout my career as a CFO, I have long been an enemy of <b>waste</b> - not surprisingly, my start-up actively works with visionary entrepreneurs and business leaders in fixing their most important waste baskets (inefficient and manual business processes, ossified enterprise landscapes). The results and the initial take off are amazing.<br />
<br />
So isn't an unprofitable business model, just simply, the <b>biggest form of waste</b>? All the money thrown away, all the human talent drain, all the assets blown to pieces?<br />
<br />
I believe so, but then how do we <i>repent</i> from this <i>sinful </i>behavior? :-)<br />
<br />
There is no universal recipe, but the biggest building blocks are<br />
1/ gain visibility over your waste baskets (how's your controlling, by the way?),<br />
2/ fix the easiest/biggest waste baskets first (which may very well mean scaling back)<br />
<br />
and then<br />
<br />
3/ gradually heal your business model by putting in place the right <u>people</u>, <u>processes</u> and <u>systems</u>.<br />
<br />
Sounds like standard economics textbook? You'd be surprised how few businesses go past step no 2/.<br />
<br />
The secret to a sustainable, profitable business is execute 3/ <b>every day </b>so that you don't need to execute 1/ and 2/ every now and then.<br />
<br />
Which could probably get translated as <i>more righteous living</i> <i>leads to less repentance </i>:-)<br />
<br />
More to come...Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-1724291242079620332015-09-22T07:40:00.000-07:002015-09-25T10:20:43.211-07:00Design Your Business End-to-End<br />
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<br />
<blockquote class="tr_bq">
<i><span style="font-family: Georgia, Times New Roman, serif;">The guy who invented the wheel was an idiot. The guy who invented the other three, he was a genius.</span></i> </blockquote>
<blockquote class="tr_bq">
<i><span style="font-family: Georgia, Times New Roman, serif;">Sid Caesar. </span></i></blockquote>
<div dir="ltr">
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">tl;dr:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">an idea may be worth something, but a working business model around the idea is worth many orders of magnitude more.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">How do you get from an idea to a working business model? </span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Well, first you need to fully wrap your mind around the idea and think through as many perspectives as possible: who is your customer? what is the problem that you're solving? why you and why now? what's your particular competitive advantage? how is your basic business plan going to look like? what are your particular constraints and how do you plan to overcome them? This is how you design your business model from one end to another and make sure it "holds water".</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Second, there's a lot of work involved, but that's for a different story. </span><span style="font-family: Georgia, 'Times New Roman', serif;">Let's get back to the end-to-end principle.</span></div>
<div dir="ltr">
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">During my professional life, I have witnessed some resounding business model failures that can be entirely explained by the dismissal of the end-to-end design principle.</span></div>
<div dir="ltr">
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">One that comes to mind is a proximity retail start-up in Romania who was built on a quite clever expansion model that would alleviate the investment capital burden and would ensure the P/L is scalable with the network expansion cadence. </span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">Yet, somewhere along the way, impatience or greed kicked in and the owner decided to start chasing some vanity metric (no. of new stores opened every month!) and of course this required a pivot of the business model into a very risky area, where more investment capital was needed (putting pressure on the working capital and triggering delays in payments to suppliers) and the P/L was immediately thinned by burgeoning network costs (triggering a swift departure from the committed budget). This led to a massive backlash from the suppliers and financiers and the retailer soon collapsed.</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">Choosing the wrong metric is of course not a capital sin in itself (everybody does it all the time), but the pivoting of the entire business model without a full end-to-end scenario play was what killed this ambitious project. Sadly, I joined too late - the turnaround was no longer possible without a massive capital injection, which turned out </span><span style="font-family: Georgia, 'Times New Roman', serif;">not</span><span style="font-family: Georgia, 'Times New Roman', serif;"> </span><span style="font-family: Georgia, 'Times New Roman', serif;">to be realistic.</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">I have </span><span style="font-family: Georgia, 'Times New Roman', serif;">since</span><span style="font-family: Georgia, 'Times New Roman', serif;"> then </span><span style="font-family: Georgia, 'Times New Roman', serif;">experienced several such "gut feel" business investment decisions but I was successful in stopping or blocking them before they could significantly hurt the business. </span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">While there is nothing wrong with "gut feel" decisions around great ideas, planning your entire business on the back of a napkin is crazy (and I have literally seen that!) - and most successful business models today require a bit more consideration than that.</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">So - carefully assess your business model and think it through - it will save you a great deal of pain and money later on, <i>even if your business is not successful</i>.</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">One might argue that "gut feel" is important when exploring completely new markets or business models. Yes, but then it is important to design the execution of your business model so that you start with something and grow as you learn, minimizing <i>waste</i> and <i>risk </i>(of which a new enterprise has plenty).</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">This is where the <i>lean start-up</i> thinking comes to rescue, with its famous <i>Build-Measure-Learn</i> cycle.</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">More on that, later.</span></div>
Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-26473797754505348842014-07-15T23:26:00.003-07:002014-07-15T23:26:38.070-07:00The Curse of Complexity<blockquote class="tr_bq">
<span style="font-family: Georgia, Times New Roman, serif;"><i>"Learning is any change in a system that produces a more or less permanent change in its capacity for adapting to its environment"</i></span></blockquote>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;"><b>Herbert Simon</b>, <i>The Sciences of the Artificial</i></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<br />
<span style="font-family: Georgia, Times New Roman, serif;">Now more than ever, business tastes better if you put technology in it - the tasks get done faster, more accurately, employees can delegate more left-brain activities to their computing devices and can focus more on right-brain activities that nurture their humanity more. Who knows, they might even start to like their jobs.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Now let's shake off this rosy picture because, just like with any deep change, adding technology to a business model introduces its own set of challenges, like security, vendor lock-in, task commoditization etc.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">But the biggest challenge is <b>the added complexity layer</b>. </span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">As the world around us explodes into a myriad of perspectives and new voices that were, until the advent of ubiquitous connectivity, unknown to us, our quest for technological advance exposes us more and more to this new, hyper-aware, world.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Let me give you an easy example:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">1/ you build a website for your company...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">2/ then you decide to turn it into a portal that manages customer and vendor workflows (appointments, customer service, MDM)...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">3/ then you want to integrate those workflows into your IT landscape...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">4/ then you want to start proactively managing your external stakeholders...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">5/ then you realize you need social media connectors...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">6/ then you start analyzing social feeds in order to manage your social media risk...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">7/ then you decide that your website should really be a web app...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">8/ then you want that app to be managed in the cloud...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">9/ then you want to outsource the app development lifecycle...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">10/ then you want to mitigate the vendor and cloud risks...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">And of course you need people to manage all this new complexity and they need to interact in new ways that need to be managed as well...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">This brings me back to my early days </span><span style="font-family: Georgia, 'Times New Roman', serif;">(when artificial intelligence -AI- was a bit more than an exciting academic topic) </span><span style="font-family: Georgia, 'Times New Roman', serif;">when I was researching AI techniques for the forecasting of financial time series. We were back then using as main tool a custom-built back-propagation neural network (NN) and we were struggling to optimally size the number of layers in order to give the NN the maximum predictive capability.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">For those new to this, NN's are software programs that mimic the way the human brain learns (</span><span style="font-family: Georgia, 'Times New Roman', serif;">by altering the chemical information in the synapses - the links between living brain cells), </span><span style="font-family: Georgia, 'Times New Roman', serif;">by non-linear error-correction algorithms that alter the weights of the connections between software constructs that imitate brain cells. </span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">Nowadays, NN's have gone mainstream and are at the core of any pattern recognition software: OCR, photo and video recognition, voice recognition (Siri, Google Now, Cortana etc).</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">The training procedure for a NN is that you <b>train </b>it on a dataset, then you <b>test</b> it on another similar (but different) dataset, then you <b>validate</b> it on another similar (but different) dataset. The performance in the validation phase measures the NN's predictive ability.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">As we built the NN, we could witness what was called in the literature <b>"the curse of complexity"</b> - as we added more layers, the NN just became dumber and dumber - the validation performance was </span><span style="font-family: Georgia, 'Times New Roman', serif;">dropping </span><span style="font-family: Georgia, 'Times New Roman', serif;">abruptly. This seems counterintuitive - you'd expect that, as you add more layers with more neurons and more connections, the NN gets smarter. </span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">It turns out that, when you have too many layers, the NN overlearns the training dataset, to the point of learning the data itself rather than the underlying non-linear equation that generated that data.</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">To draw an analogy to business, when you have too much complexity embedded in your business, your organization tends to learn best how to manage the current set of activities, but without being able to anticipate new business opportunities and without being able to closely follow the business strategy as set forth by its leadership.</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">So, how does a business entity reconcile the unnatural need for it to grow (i.e. increase complexity) with the natural need that it remains within the computational limits (or <i>bounded rationality</i>, as Herbert Simon calls it) of its decision making layer (i.e. contain complexity)?</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">There are no easy answers to this question - large corporations have gone through great pains in the 80's and 90's to keep the business manageable by establishing strict and rigid business rules, by delegating decision making abilities, and by deeply embedding business logic into systems and procedures. This approach, however, brings its own set of complexity, leading ultimately to ossification, which is the enemy of adaptation and economic survival.</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">My personal belief is that the answer revolves around the enterprise's ability to <b>upgrade and pivot its business model</b> based on the changing environment.</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">Enterprise strategists need to develop an uncanny ability to always ask themselves the excruciating question: </span><br />
<blockquote class="tr_bq">
<span style="font-family: Georgia, 'Times New Roman', serif;"><i>"If I add this to my business, what else should I remove in order to keep it sane?"</i></span></blockquote>
<br />Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-88075504211866623392014-02-21T01:48:00.001-08:002014-02-21T01:48:15.921-08:00A Review of the "jBPM5 Developer Guide"<span style="font-family: Georgia, 'Times New Roman', serif;">Those who know me, know that I am passionate about business processes and about open-source software.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">I was asked some weeks ago to review a new book called "jBPM5 Developer Guide". I am no developer, but I consider jBPM as one of the key components of a lightweight, flexible and ultimately inexpensive technology stack that seriously addresses business processes.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">So I was easily excited to talk about it, especially since the book, available at Packt Publishing <a href="http://www.packtpub.com/jboss-business-process-management-5-jave-developer-guide/book" target="_blank">here</a>, is written by two of the biggest contributors to the jBPM project: </span><br />
<span style="font-family: Georgia, Times New Roman, serif;">Mauricio Salatino and <span style="font-weight: inherit;">Esteban Aliverti.</span></span><br />
<div>
<br /></div>
<div class="separator" style="clear: both; text-align: center;">
<a href="http://1.bp.blogspot.com/-YhCzxSYi6Fs/UwcgtqA0ewI/AAAAAAAAE6U/fO9r2d_q8Zk/s1600/JBPM_logo.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="http://1.bp.blogspot.com/-YhCzxSYi6Fs/UwcgtqA0ewI/AAAAAAAAE6U/fO9r2d_q8Zk/s1600/JBPM_logo.png" /></a></div>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">jBPM is <b>THE open-source BPM suite</b>. It provides a <u>workflow engine</u>, a <u>visual modelling tool</u>, a <u>process repository</u>, a <u>visual forms editor</u> and an integration with the Drools <u>rules engine</u>. I am sure it provides a bunch of other stuff, being an open architecture, but for a tech-minded business person like me, these are the must-have components. It is also compatible with the BPMN 2.0 standard, which is useful since BPMN 2.0 incorporates, most significantly, the process execution logic. A lot of commercial BPMS's still struggle to incorporate BPMN 2.0, just for perspective.</span><br />
<br />
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;"><br /></span></span>
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;"><br /></span></span>
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;">The books starts off with a smooth introduction into the world of BPM, just to familiarize new developers with the key concepts they ought to be manipulating by playing with the jBPM framework.</span></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;"><br /></span></span>
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;">The following chapter describes the structure of the suite, with introduction to critical components: the core, the semantic module, the process engine, the rules engine, the API's, the WS-BPEL and other service orchestration concepts, SoA, ESB, the audit / logging facility, the identity management component etc. All very important, to <a href="http://flowinglean.blogspot.ro/2013/12/the-cfo-as-chief-business-architect.html" target="_blank">anyone concerned with Business Architecture</a>. </span></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;"><br /></span></span>
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;">The next few chapters go into a lot of details for developers, I'm sure all are highly useful but frankly a bit obscure to me :-)</span></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;"><br /></span></span>
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;">But one key takeaway for business people from this book is how well jBPM tackles complex event processing and the proper design of business rules in a separate rules engine rather than by implementing them in the process logic. This is such a critical aspect and I have seen so many cases where business people struggle to embed an inherently changeable rules logic into a hopefully persistent process logic, leading to frequent redesigns followed by lots of debugging...</span></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;"><br /></span></span>
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;">I think we are witnessing the dawn of highly intelligent, highly customizable business processes that are built </span><b>for change</b><span style="font-weight: inherit;">, not built to last. </span></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;"><br /></span></span>
<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-weight: inherit;">By its modern design, jBPM is correctly addressing forthcoming development challenges related to this new BPM paradigm and for that the book is worth reading and gifting to your developers and IT managers.</span></span>Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-16461910074522426542014-01-27T07:04:00.000-08:002014-01-28T05:49:02.698-08:00On Waste<span style="font-family: Georgia, Times New Roman, serif;"><i>The most abundant thing in the world is waste.</i></span><br />
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;">When I was still junior and somehow struggling with deadlines and deliverables, my mentor gave me a stunningly simple advice: </span><br />
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<blockquote class="tr_bq">
<span style="font-family: Georgia, Times New Roman, serif;"><i>"If you don't have time, you make time"</i></span></blockquote>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">First, this advice looks impossible, obviously. You even don't have time to make time!</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">Then, you let it sink and realize you can make time by prioritizing and letting unimportant things off the hook. </span><br />
<span style="font-family: Georgia, Times New Roman, serif;">Then, when it really grows on you, and you realize it's about carving your life around the activities, events, people that you most care about and make that part as meaningful as you can. Meaningful is here the limiting factor.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">Today's world, in all its social-techy splendour, competes aggressively for our attention span and for our time. Because now it is seductively easy to consume irrelevant news and social feeds, we tend to ignore the decades-old Habit 1 of Stephen Covey (in his highly-regarded "The Seven Habits of Highly Effective People): Be Pro-active.</span><br />
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<span style="font-family: Georgia, 'Times New Roman', serif;">Always ask yourself if you should be concerned by, if you are able to influence or control events that come to your attention and based on this test decide what action is appropriate.</span><br />
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<span style="font-family: Georgia, 'Times New Roman', serif;">You would be surprised just in how many cases you should decide not to continue to read some news or to browse your Facebook stream. In those cases, make sure you curate your social and news feeds to those fields that will help you grow your influence and control and weed out the blabber.</span><br />
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<span style="font-family: Georgia, 'Times New Roman', serif;">You will easily get your wasted time and energy under control and you can focus on meaningful activities.</span>Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-31740770752863701822013-12-01T23:48:00.002-08:002013-12-01T23:48:37.656-08:00The CFO as the Chief Business Architect<blockquote class="tr_bq">
<span style="font-family: Georgia, 'Times New Roman', serif;"><i>Few enterprises today have descriptive representations that depict how the enterprise works. Therefore, change can only be accommodated by trial and error. As complexity and the rate of change increases, risk of trial and error increases. Architecture provides the structure to predict the impact of change, reduce the risk and maintain enterprise viability in a changing environment.</i></span><span style="font-family: Georgia, 'Times New Roman', serif;"><i>-John Zachman</i></span></blockquote>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAg5wSAqOyKV2cp1yZSRpSuQjYXtF-vstfAEupfcjKcSoqexZlRZQ_1Hrb_2fMMVzMca7JDfK_ZL9mYj7FTHfxnbFcM3WhgyLDnLLq7v8BU4CGleUnPEtqCYrQ6ICMFRhKUR93H9O14Ojx/s1600/origin_4325390829.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="290" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAg5wSAqOyKV2cp1yZSRpSuQjYXtF-vstfAEupfcjKcSoqexZlRZQ_1Hrb_2fMMVzMca7JDfK_ZL9mYj7FTHfxnbFcM3WhgyLDnLLq7v8BU4CGleUnPEtqCYrQ6ICMFRhKUR93H9O14Ojx/s400/origin_4325390829.jpg" width="400" /></a></div>
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</span> <span style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span> <span style="font-family: Georgia, 'Times New Roman', serif;"><b>Enterprise Architecture</b> is a complex framework that has emerged from the IT world as a way to clearly describe the enterprise IT environment to now represent an impressive tool for orchestrating enterprise behaviour and change.</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;"><br />
</span> <span style="font-family: Georgia, 'Times New Roman', serif;">I would not go into the intricacies of what Enterprise Architecture really means, there are enough experts to battle it out forever. I only have a simple perspective and I enjoy keeping it that way.</span><br />
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<span style="font-family: Georgia, Times New Roman, serif;">It is no secret that the business world has already shifted its expectations for CFOs from being the guys in charge of the financial model and perhaps of the control environment to the guys in charge of the integrity of the entire business model of an Enterprise. </span><br />
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<span style="font-family: Georgia, Times New Roman, serif;">Therefore, a CFO is uniquely positioned to take on the Chief Business Architect role because s/he is at the nexus of all business model perspectives. Let's examine them one by one:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br />
</span><span style="font-family: Georgia, Times New Roman, serif;">1. The <b>motivation model</b> - <i>the markets the Enterprise operates in, the goals, the strategies, the external change vectors</i>.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">A CFO is required to scrutinize and keep abreast of all these. SWOT analysis? Check. PESTEL? Check. Macroeconomics analysis? Check. Competitive intelligence and benchmarks? Check.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">2. The <b>organizational model</b> - <i>the org chart, the motivation systems, the functional design of departments, the </i></span><span style="font-family: Georgia, 'Times New Roman', serif;"><i>roles and responsibilities</i></span><span style="font-family: Georgia, Times New Roman, serif;"><i>, the back-up systems, the outsourcing / partnership strategy</i>.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">A CFO must contribute to the organizational model because maximizing the return on the human capital is the most comprehensive way to maximize enterprise value. Yes, it is rarely measurable and therefore not obvious, but that is precisely why the CFO must be involved. </span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span><span style="font-family: Georgia, Times New Roman, serif;">3. The <b>process model</b> - <i>the process taxonomy, the task successions, the business rules matrix, the data model (the master, the transactions, the unstructured data), the adaptation strategy</i>.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">4. The <b>technology model</b> - <i>the technology stack, the IT architecture, the support and services model</i>.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">The CFO is the best positioned executive to drive the internal innovation agenda, both in terms of how things get done (the process model) or what tools are appropriate to support the Enterprise (the technology model).</span><span style="font-family: Georgia, Times New Roman, serif;"><br />
</span> <span style="font-family: Georgia, Times New Roman, serif;"><br />And of course all the business model perspectives but be tied together into something that holds water, and that is done by linking everything to the <b>financial model </b>- <i>the P/L, the balance sheet, the capital mix, the investment & dividend policies</i>.<br />
</span> <span style="font-family: Georgia, Times New Roman, serif;"><br />One could argue that it is the CEO's job to reconcile the business model perspectives. But there is a lot of in-depth work and understanding that is required by a Chief Business Architect role and in my opinion this can only be accomplished effectively by the CFO.<br /><br />
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photo credit: <a href="http://www.flickr.com/photos/purecaffeine/4325390829/">NathanaelB</a> via <a href="http://photopin.com/">photopin</a> <a href="http://creativecommons.org/licenses/by-nc-nd/2.0/">cc</a>Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-60240301755364534372013-11-26T02:46:00.000-08:002013-11-26T02:46:02.799-08:00Profit Driver #3: FUNCTIONS<span style="background-color: white; color: #181818; font-family: Georgia, Times New Roman, serif; line-height: 18px;"><i>“Capitalism has turned human beings into commodities. To the owner of a restaurant: the cook and a bag of potatoes are equally important.” </i></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><i><span style="color: #181818;"><span style="line-height: 18px;">~</span></span>Mokokoma Mokhonoana</i></span><br />
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<span style="font-family: Georgia, Times New Roman, serif;">Well, of course a cook is much more profitable than the sum of the meals that could be cooked from all the potatoes in the bag (even if they may, sometimes, cost the same... :-) ). And this is because they fulfill radically different <i>functions</i>:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- a cook's function is to ensure quality meals, to manage a team of aides, to come up with new recipes, all in order to secure a repeatable positive customer experience etc.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- a potato's function is to be cooked and served in one single customer experience event.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">That is the reason why a law firm will always earn more profits than a construction company with similar headcount - the market pays better for a perceived higher function that drives more value throughout the value chain.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Also, this is the reason why education is expensive - education amplifies a function so that it may earn more for its carrier.</span><br />
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<span style="font-family: Georgia, Times New Roman, serif;">Translating this to a lean start-up world, this gets very difficult to crack. A lean start-up has to make very tough choices not only about the <i>risk</i> priorities, about the <i>assets</i> to build, but also about the best <i>functions</i> to perform.</span><br />
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<span style="font-family: Georgia, Times New Roman, serif;">The original Business Model Canvas captures the <i>function</i> on the left-hand side: the <b>Key Activities</b> and the <b>Key Resources</b>.</span><br />
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<span style="font-family: Georgia, Times New Roman, serif;">The Lean Canvas instead replaces this with a different, more focused approach: the biggest areas on the left side of the canvas are called Problem and Solution. So a clear proposition emerges: split your start-up into a Problem Team and a Solution Team. </span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Now, strictly in terms of business functions, Ash Maurya argues that a lean start-up should only employ the 3 most critical ones:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- Development (solution engineering)</span><br />
<span style="font-family: Georgia, 'Times New Roman', serif;">- Marketing (customer understanding)</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- Design (embeds design thinking into the functions above and makes them "sing" together in harmony)</span><br />
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<span style="font-family: Georgia, 'Times New Roman', serif;">Not coincidentally, the three quoted functions have the highest profit potential of all functions. </span><span style="font-family: Georgia, Times New Roman, serif;">Any other support function (finance, administration, legal etc), at the lean start-up stage, should be carried out by the founders.</span><br />
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<br />
<span style="font-family: Georgia, Times New Roman, serif;">So, don't start up by stocking up on your cafeteria supplies, by renting out the nicest office space or by buying that ever-present ping-pong table :)</span>Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-84521428321762169222013-11-11T01:43:00.001-08:002013-11-11T01:43:23.318-08:00Profit Driver #2: ASSETS<span style="font-family: Georgia, Times New Roman, serif;"><i>If I collected all the diamonds in the world, I'd have no 'income' but I'd have a lot of 'assets'. Would my company be worth nothing because I have no income? A lot of Net companies are collecting assets. They have to be measured with a new set of metrics.<br />~Vinod Khosla</i> </span><br />
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<i><span style="font-family: Georgia, Times New Roman, serif;"><br /></span></i>
<span style="font-family: Georgia, Times New Roman, serif;">Such is the case with a start-up. More specifically, a <b>lean start-up</b> collects a lot of diamonds: these are the nuggets of insights, knowledge and wisdom that are the main outcome of the experiments conducted on their business model.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Everything, in a lean start-up, is targeted at maximizing <b>learning</b>:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- formulation of falsifiable hypotheses</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- splitting into problem team / solution team (same thing for the interviews)</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;">The <a href="http://spark59.com/leanstack" target="_blank">lean stack</a> promoted by Ash Maurya is a very useful tool by which the knowledge gathering process is managed.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;"><b>Knowledge</b> may be the most important asset in this stage, but there are others too:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- <b>the recruiting process</b> is not merely important, but fundamentally vital - it can literally make or break the start-up;</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- the <b>ability to pivot</b> the business model, to continuously weed out potential waste.</span><br />
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<span style="font-family: Georgia, Times New Roman, serif;"><u>One more thing</u></span><br />
<span style="font-family: Georgia, Times New Roman, serif;">You may have noticed that I have not included in here the "classic" assets: IT infrastructure, patents, products already designed / built etc.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">That is because I believe that, at a start-up stage, such "hard" assets are actually liabilities - they hinder innovation, they are a trap of past thinking and habits, they entice you to reuse sunk (and maybe failed) efforts, they force your solution into an already existing mold.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">This is the <b>innovator's dilemma applied to start-ups</b>: you may become captive not to your existing market (because you don't have one yet), but to your existing asset base.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">You have to keep pivoting your asset base and you best do this when your asset base is intangible. Your "hard" asset base should, for the time being, stay on your P&L (as a rental cost), not on your Balance Sheet.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">
<br />Next week, on Profit Driver #3: Functions!</span></div>
Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-28653378483089170272013-10-28T04:24:00.000-07:002013-10-28T08:51:03.659-07:00Profit Driver #1: RISK<i><span style="font-family: Georgia, Times New Roman, serif;">“To get profit without risk, experience without danger, and reward without work, is as impossible as it is to live without being born.”<br />― A.P. Gouthe</span></i><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">This first profit driver is a no-brainer for everybody and common wisdom is full of references about risk as an important way of accruing future gains in business.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">In particular, start-ups are, by their nature, extremely risky undertakings. If you ever doubt this, try getting a bank loan based on a start-up business plan. Ok, I'm glad we've cleared that up :)</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">In a start-up, uncertainty is the only well-known attribute: you don't know exactly who is your customer, you don't know what is the actual need of that customer, you don't know how will you satisfy that need, you don't know if your product will ever work, you don't know if your team will hold during the runway phase, you don't know how long your runway really is.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Let's take the possible risk responses according to the <b>T-A-R-A</b> framework:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- <b>T</b>ransfer - can you really transfer the start-up risk? Not really. I'm not aware of any insurance policy for this, other than the normal practice of ringfencing the start-up from other profitable endeavours you might have (if possible, protect your personal assets in the same way).</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- <b>A</b>void - sure, you can simply cop out and forget we ever talked.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- <b>R</b>educe - you can share the risk by going through seed rounds and accept contributions (cash and advice) from other VC's or investors. Since you know this will dilute your equity, you know then that reducing risk means also reducing possible future benefits.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">- <b>A</b>ccept - and that's the only interesting scenario that I want to bring up in this blog entry.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Once you've chosen to accept the risk of entrepreneurship, you might as well just manage it!</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Strictly from that point of view, the <b>lean start-up methodology</b> is just that: a very smart <b>risk management methodology for start-ups</b>.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Let's just look at the main chapters of <a href="https://plus.google.com/117474046366796299654/posts" target="_blank">Ash Maurya's</a> excellent book, <a href="http://www.amazon.com/Running-Lean-Iterate-Works-Series/dp/1449305172" target="_blank">Running Lean</a>:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">1. Document your plan A</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">2. Identify the riskiest parts of your business model</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">3. Systematically test your business model</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, 'Times New Roman', serif;"><i>If you want to build a low-burn start-up (and who wouldn't?), you have to read Ash's book. This is one book that compels you to take notes as you read it :)</i></span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">The lean start-up methodology is grounded in the scientific method: you formulate falsifiable hypotheses (i.e. formulate them in a way they can be explicitly negated as a result of experiments), continuously test them (if possible, in caeteris paribus conditions), learn about customer responses from those experiments and seamlessly incorporate them in your next product iteration.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">The more you can rinse and repeat this learning cycle, the less risk and waste will be incorporated in your start-ups early life. The lean start-up methodology teaches you to systematically navigate through the start-up's unknowns, discover them and translate them into your unique advantages in the newly discovered marketplace. Your assets.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">On Assets (as Profit Driver #2), next week.</span>Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-81523573855089688362013-10-22T01:53:00.003-07:002013-10-22T01:53:58.107-07:00A Lean Start-up Perspective On Profit Drivers<i>Profitability is what makes a company real.</i><br />
<i>~Elon Musk</i><br />
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When I was still a relatively junior Finance Manager, I have learned from my dearest mentor that, for a business to be profitable, it must have a combination of three key drivers:<br />
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<b><u>RISK</u></b><br />
Any business needs to venture in the unknown. There is no money left where the markets have already priced in all the information, opportunities and events. Conceptually, the more risk you take, the greater the return you should expect.<br />
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<b><u>ASSETS</u></b><br />
By definition, an asset is something of a long-term value that is held by a business with an implied expectation that the asset will accrue future benefits to the business. Again, theoretically, the more assets you can leverage (and think of assets in the broadest way possible), the more profits you should expect as an entrepreneur.<br />
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<b><u>FUNCTIONS</u></b><br />
It also matters what type of activities the business undertakes. The more sophisticated the activities, the greater the likely return. For example - engaging in basic web design will earn you far less than creating a web platform with an embedded network effect.<br />
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I will tackle, in the next few posts, some opinions on how to maximize the combination of the three drivers to reach profit as a <b>lean start-up</b>.<br />
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By the way, the 3-driver concept is now a major methodology used in international tax planning.Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-23746793991143803872013-10-14T23:12:00.001-07:002013-10-14T23:20:45.192-07:00Process Re-design, Challenge #03<b><u><span style="font-family: Georgia, Times New Roman, serif;">Re-design Around Roles, Not Persons</span></u></b><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<i><span style="font-family: Georgia, Times New Roman, serif;">Democracy is the process by which people choose the man who'll get the blame.<br />~Bertrand Russell </span></i><br />
<span style="font-family: Georgia, Times New Roman, serif;"><i><br /></i></span>
<span style="font-family: Georgia, Times New Roman, serif;">In many business process re-design projects, there is a strong temptation to start re-thinking the processes while having an eye at your current employees as process actors, in terms of capabilities, possible performance considerations, possible conflicts of interest, possible personality clashes etc.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">This is the wrong way to go, because you will be designing your new process around specific people or personality traits and this kind of structure is guaranteed to be unstable.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Rather, once the ideal process sequence is established, think hard about the <b>ideal</b> roles that should perform the process activities: how does information flow most naturally (i.e. with the least waste) to their role? how do they get the authority to perform those steps? how are their organizational objectives aligned with the process objectives?</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">In a smart process, work must occur where it makes most sense<i>.</i></span><br />
<br />Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-48494455007691533372013-10-06T23:56:00.001-07:002013-10-06T23:56:41.246-07:00Process Re-design, Challenge #02<b><u><span style="font-family: Georgia, Times New Roman, serif;">Always an art, never a science?</span></u></b><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;"><i>Art and science have their meeting point in method. <br />~Robert Bulwer-Lytton</i></span><span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">What makes BPM different than scientific management approaches (like project management, six sigma etc)?</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<i><span style="font-family: Georgia, Times New Roman, serif;">1. There is no global optimum</span></i><br />
<span style="font-family: Georgia, Times New Roman, serif;">There is no best way to execute a process, it all depends on availability of resources (time, money, talent) for execution. It is an illusion to think that one may ever reach a global optimum in any process.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<i><span style="font-family: Georgia, Times New Roman, serif;">2. BPM is a continuous deployment framework</span></i><br />
<span style="font-family: Georgia, Times New Roman, serif;">There is no best time to improve / change / upgrade a process. Or rather, the best time to do that is "as soon as possible". A business process must be agile, i.e. must be able to adapt to new conditions (shift in strategy, legislative changes etc). Therefore on-the-go tweaking should be part of the process design philosophy.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Hey, this sounds a lot like the lean start-up philosophy!</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">1/ start small with a minimum viable process and with a few process metrics that matter,</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">2/ continuously test your model's falsifiable hypotheses along the way until you get it right and avoid local optima,</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">3/ tweak it on-the-go based on the learnings above.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">Actually, there are at least two major differences:</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<i><span style="font-family: Georgia, Times New Roman, serif;">1. Approach on customer problem</span></i><br />
<span style="font-family: Georgia, Times New Roman, serif;">A lean start-up defines how a <b>new product</b> solves an <b>existing / emerging customer problem</b>.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">A business process redefines how an <b>existing organization</b> addresses entire <b>classes of existing problems</b> (effectiveness, efficiency, segregation of duties, activity cost, information distribution, asset / function redundancy etc).</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<i><span style="font-family: Georgia, Times New Roman, serif;">2. Build-Measure-Learn cycle</span></i><br />
<span style="font-family: Georgia, Times New Roman, serif;">A lean start-up <b>iterates the product</b>. One product iteration may be deployed almost instantaneously. Customer reaction can measured reliably in direct relation with that specific iteration.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;">A business process iteration <b>manages the change to the process</b> (employee education, transition, organizational feedback, integration into an existing business model). Therefore, a business process iteration needs a <b>significant soak period</b> before it starts to perform as intended.</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">So... how do we reconcile this?...</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<span style="font-family: Georgia, Times New Roman, serif;">More to come :-)</span><br />
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span>
<br />Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-30314052102419885522013-09-30T01:02:00.001-07:002013-09-30T01:09:35.916-07:00Process Re-design, Challenge #01<b><u>Re-design From a Blank Slate</u></b><br />
<span style="background-color: white;"><br /></span>
<span style="background-color: white;"><span style="color: #330000;"><span style="font-family: inherit;"><i>A relentless barrage of "why’s" is the best way to prepare your mind to pierce the clouded veil of thinking caused by the status quo. Use it often. </i></span></span></span><br />
<span style="background-color: white;"><span style="color: #330000;"><span style="font-family: inherit;"><i>~Shigeo Shingo</i></span></span></span><br />
<br />
When you hire BPM consultants to help you redesign your processes, they will usually start with a presentation of the implementation methodology, a recommendation of the software package to use for modelling and a timesheet estimate for the blueprint project (AS-IS, TO-BE and gap analysis)<br />
<br />
As a result, many organizations start a process re-design by having a look at their current process, the <b>AS-IS</b> situation.<br />
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<b><span style="color: red;">My challenge: this AS-IS approach is <u>a waste!</u></span></b><br />
<br />
When starting from the current situation, you are basically throwing resources back at yourself, ending up either:<br />
1/ being convinced that you were right to start a re-design project or<br />
2/ getting comfortable with the current status quo.<br />
<br />
So, get over your legacy mindset and take a completely fresh view of what you do - you might be surprised about how many bright ideas are lurking in your -apparently dormant- organizational layers.<br />
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I would even argue whether a proper methodology is needed! Of course you need clear steps on how you <b>execute</b> the re-design (as in: how do you manage transition?), but business process design does not work best with a methodical approach.<br />
<br />
More on this next week :-)Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-2798558834822826352013-09-23T06:51:00.003-07:002013-09-23T16:35:55.801-07:00Process Re-design - the lean way!<h4>
<i style="font-weight: normal;">"A corporation is a living organism; it has to continue to shed its skin. Methods have to change. Focus has to change. Values have to change. The sum total of those changes is transformation"</i><br />Andrew Grove</h4>
<div>
In the next few weekly entries I will be focusing on a <u>process re-design approach</u> that doesn't go well with the current thinking around Business Process Reengineering - the approach will be centered around <u>Lean Start-up notions</u> (minimum viable product, build-measure-learn cycle etc) instead.</div>
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<br /></div>
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I do admit that the two approaches do not fully reconcile, so I will be careful to point out the differences. The Lean Start-up is a very seductive concept and once you fall in love with it (as I did), you tend to apply it to everything!</div>
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<br /></div>
<div>
I will be challenging classic approaches like AS-IS / TO-BE analysis, never cutting corners, focusing on organizational aspects etc.</div>
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<br /></div>
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The main scope of the following entries will be to understand how we can eliminate waste from the Business Process Reengineering process itself :-)</div>
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More to come :-)<br /><span style="background-color: #e5e5dd; color: #330000; font-family: georgia, 'bookman old style', 'palatino linotype', 'book antiqua', palatino, 'trebuchet ms', helvetica, garamond, sans-serif, arial, verdana, 'avante garde', 'century gothic', 'comic sans ms', times, 'times new roman', serif;"><br />
</span> <span style="background-color: #e5e5dd; color: #330000; font-family: georgia, 'bookman old style', 'palatino linotype', 'book antiqua', palatino, 'trebuchet ms', helvetica, garamond, sans-serif, arial, verdana, 'avante garde', 'century gothic', 'comic sans ms', times, 'times new roman', serif;"><br />
</span></div>
Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-30715516382901145882013-09-16T02:00:00.002-07:002013-09-16T02:00:39.754-07:00Lean Processes, Tip #04<b><u>Reduce the Batch Size</u></b><br />
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<i>"We are what we repeteadly do. Excellence, then, is not an act, but a habit"</i><br />
- Aristotle.<br />
<br />
We have discussed previously (Tip #02) how minimizing the number of handoffs will make your process more agile and more straightfoward. Today we'll be discussing the virtues of minimizing the size of the handoff - and, since the handoff contains a batch of work done, the size of that batch.<br />
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Historically, companies have built up manufacturing systems to be efficient in terms of cost-per-product. Traditional management science views the products as cost collectors and therefore one of the way of minimizing unit costs (like overhead) was to increase batch size. More products in the same batch accumulate same absolute overhead (say, for QA), therefore less overhead per unit, right?<br />
<br />
Not necessarily. Toyota has long time ago turned this concept upside down with their TPS (the predecessor of the lean manufacturing concept). The actual cost drivers are the activities, if you want to reduce costs per unit, you are better off optimizing activities within processes.<br />
<br />
By minimizing the batch size you get several key benefits, crucial especially in an intangibles production system (like, services and software):<br />
<br />
<i>1/ smaller batches = faster feedback</i>. In a lean start-up, the build-measure-learn cycle needs to run many times before the invention of a valid business model. Ability to iterate as fast as possible is vital to success. Ideally, the batch size should get as close as possible to 1. If we build excellence by repeating what we do, then let's repeat what we do <b>a whole lot more</b>, and then we'll be excellent much earlier.<br />
<br />
<i>2/ smaller batches = less overhead</i>. You will find that, with the right batch size (depending on your size of business), your QA/testing overhead will actually decrease significantly. That's because the QA/testing function will get much more responsive, much more automated, much faster in identifying issues - you would need less QA resources overall, and they will be more evenly allocated across your product cycle.<br />
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<i>3/ smaller batches = less risk</i>. You will be able to check your work much faster and correct errors much earlier in the process, before they become ticking bombs in your value chain.<br />
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More to come :-)Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-2733516506343511302013-09-09T00:06:00.000-07:002013-09-09T00:06:18.044-07:00Lean Processes, Tip #03<b><u>Morph Your Handoffs Into Teamwork</u></b><br />
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I discussed last week about the need to minimize the number of handoffs, as they build up cycle time and noise in the organization.<br />
<br />
When we cannot reduce anymore the number of handoffs, we should try to optimize the handoff process, so that we enable process roles to be more aware of each other in their quest to fulfill the common process goal:<br />
<br />
<i><b>1. Make your <u>upstream</u> roles proactive on the <u>downstream</u> information needs.</b></i><br />
This way upstream roles can design templates and checklists before they push the info downstream.<br />
<br />
<u>Example</u>: an efficient salesperson (what is that, anyway? :-) ) would follow a predefined checklist when finding out about a new customer to ensure the lead is fully qualified (do they have the budget / the authority, the pain / the urgency to buy?) before proceeding along the sales funnel.<br />
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<i><b>2. Promote <u>downstream</u> roles <u>upstream</u>.</b></i><br />
Sometimes you just need to redesign the whole process and have your downstream role take up upstream responsibilities.<br />
<br />
To note, this "tip" requires quite a bit of proper transformation within the organization:<br />
- cross-functional trainings;<br />
- setting up stand-ins / back-ups for all process roles;<br />
- setting up systems to automate data validations (in templates and checklists) wherever possible;<br />
- have a Business Process Lifecycle Management practice in place.<br />
<br />
I never said it would be easy! :-)<br />
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More to come :-)Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-22931232747395432992013-09-01T23:57:00.000-07:002013-09-01T23:59:14.741-07:00Lean Processes, Tip #02<b><u>Minimize the number of handoffs</u></b><br />
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<i>If you want a fast and reliable process, cut the middlemen.</i><br />
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A <u>process handoff</u> is an intermediate step in a business process where work and information passes from an upstream player to a downstream player.<br />
<br />
Handoffs are the usual suspects for a slow process. Here's why:<br />
<br />
<i><b>1. a handoff is an opportunity for cycle time build-up</b></i><br />
Prior to a handoff, the upstream employee usually prepares the information, the documents, the action history or any other data that will assist the downstream employee in performing future work.<br />
After the handoff, the downstream employee will consume the data prepared by the upstream employee, will seek clarifications and / or further guidance and will then proceed with work.<br />
<br />
These additional activities create additional time in the process, only for the sake of the process.<br />
<br />
<u>Example</u>: most Sales people abhor doing paperwork - especially when they create a new sales transaction. If they have to bring complete cases to the Legal Department, they have to spend time building them. Under pressure, they will deliver incomplete cases just to hand them off quickly and then the time waste is moved in the Legal Department. This could be redesigned through a technique I am going to discuss about next week.<br />
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<i><b>2. a handoff adds noise in the information flow</b></i><br />
With signal, comes noise. The more we communicate, the more likely we are to be misunderstood. When handing off multiple activities multiple times, the noise can get out of control.<br />
<br />
In the SCRUM methodology (an agile software development methodology), an estimated 50% of knowledge is wasted <a href="http://scrumbytes.wordpress.com/2011/06/06/seven-wastes-4-of-7-handoffs/" target="_blank">after 5 successive handoffs</a>. Therefore, a<i> </i>handoff is a significant opportunity for mistakes and misplaced work, to the point you could reliably measure its cost.<br />
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<u>Example</u>: a purchasing employee obtains an additional rebate deal for a complex Purchase Order, gets approval of Management in one form, then passes this to Contract Management, who then passes this to the Warehouse (if it's a goods deal) or to a Service acceptance function (if it's a service deal), then somehow this info needs to come to Invoice Passing (maybe other functions, like Engineering or Tax). The more complex the deal is, the more likely it is to get misunderstood, to get stuck, or to get executed very differently from what has been approved - and generate lots of waste.<br />
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If you cannot minimize the number of handoffs (especially in large organizations), there is a solution: morph your handoffs into teamwork.<br />
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More on that next week :-)Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-16977151087382112832013-08-25T23:50:00.000-07:002013-08-26T06:40:03.493-07:00Lean Processes, Tip #01<div dir="ltr">
<b><u>Design Around Customer Interactions</u></b></div>
<div dir="ltr">
Your value chain processes should be designed with the end in mind: <i>attract and delight your</i><i> customers as fast and as friction-free as possible</i>. They will be more than willing to then pay for whatever they perceive as valuable in your offer.<br />
<br /></div>
<div dir="ltr">
Think about a <b>high-touch</b> sales process:<br />
1/ establish initial contact (meeting, business cards)<br />
2/ execute sales pitch<br />
3/ follow-up for decision to enter into business together<br />
4/ negotiate contract T's&C's<br />
5/ acquire customer master data to set them up in transactional systems<br />
6/ sign contracts<br />
7/ get order<br />
8/ deliver<br />
9/ wait for the payment term<br />
10/ cash in<br />
11/ if not cashed in, follow-up on overdues through a dunning process<br />
<br /></div>
<div dir="ltr">
At the opposing end, you have the <b>no-touch</b> sales process (the so-called <i>freemium model</i>), where you first give some of your product's features away for free and then try to upsell your initially acquired customers to your paid product.<br />
<br /></div>
<div dir="ltr">
Between these two extremes, you can imagine a plethora of accelerated sales processes, by asking some of the following questions:<br />
- <i>can you execute your sales pitch proactively?</i> Create marketing, webinars, YouTube presentations, grow an audience.<br />
- <i>can you make your business case extremely clear in how you deliver value?</i> Your product landing page should be like a Mafia offer: so good they can't refuse!<br />
- <i>can you make your standard T's&C's extremely friendly to your customer?</i> This way you will remove upfront a massive class of typical customer objections.<br />
- <i>can you skip some</i> c<i>ustomer master data on the first sale?</i> Can you collect the non-critical data after the sales closure - I bet you can.<br />
- <i>can you automate your collection?</i> Remember, your objective is to part your customers from their money as fast as possible for you and as fun as possible for them.<br />
<br /></div>
<div dir="ltr">
Take a look at already existing examples of excellent frictionless customer interaction examples: Amazon Web Shop (and 1-click payment), Mobile Ecosystems (Google Play or Apple App Store). These examples have almost completely turned the classical sales process on its head.<br />
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<div dir="ltr">
I'm eager to learn from you some other fascinating examples of brilliant processes that simply look at every aspect of enhancing customer interaction.</div>
Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-64728454043849475122013-08-20T23:01:00.000-07:002013-08-20T23:01:31.039-07:00On The REAL Social Web<div style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; line-height: 20px; margin-bottom: 10px;">
<i>The social networks of today's internet (the Facebooks, Twitters, G+, LinkedIns - FTGL) have barely scratched the surface of our real-life social web, the one we weave everyday.</i><br />
<br />
I believe that in real-life (IRL) social web has three fundamental components:<br />
<br />
<b>Roles</b><br />
IRL - our society's <b>tribes or communities</b> have specific <i>roles</i>, <i>statuses</i> and <i>identities</i>.<br />
FTGL - we know where our acquaintances work, their siblings, we may organize all of them by groups. That's a low-resolution (dyadic, triadic), individual perspective of our <b>social framework</b>.<br />
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<b>Rules</b><br />
IRL - our actions are guided by <i>norms</i>, <i>laws</i>, <i>taboos</i>, <i>customs</i>, <i>shared paradigms</i>. <br />
FTGL - you may have community rules and Terms of Use, but they're not modelling social relationships. They're just there for the legal protection of FTGL.<br />
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<b>Interactions</b><br />
IRL - we <i>give</i>, we <i>take</i>, we <i>negotiate</i>, we <i>barter</i>.<br />
FTGL - Sharing / tweeting / liking / +1'ing are just basic, lifeless, data points, modelling our attention span and browsing patterns for the monetization of the advertising industry. Again, a very low-resolution view on how we act in the <b>social framework</b>.</div>
<span style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; line-height: 20px;">So what, you say? Entertainment has always been the first monetizable content of any new communication medium. Why should this be different? </span><span style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; line-height: 20px;">Well, because you can go much deeper on social modeling, in ways that are incredibly more relevant to our real-life environment - and much more monetizable.</span><br />
<span style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; line-height: 20px;"><br /></span><span style="font-family: Helvetica Neue, Helvetica, Arial, sans-serif;"><span style="font-size: 14px; line-height: 20px;">Let's take - </span></span><span style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; line-height: 20px;"><b>doing business</b>. To me, this is <b>the</b> fundamental social behaviour of humanity. </span><span style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; line-height: 20px;">After all, business is one of those very few things you can't do alone - you need at least one other person to act as your customer :-) </span><br />
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<span style="font-family: Helvetica Neue, Helvetica, Arial, sans-serif;"><span style="font-size: 14px; line-height: 20px;">So, why is no one modelling <b>the social process of doing business</b>, in all its splendour? It is complex and painful - of course - business entities must be <i>orchestrated internally</i> as well as <i>choreographed externally</i>. But it's doable. The brain and the brawn are there. But there is no compelling vision.</span></span><br />
<span style="font-family: Helvetica Neue, Helvetica, Arial, sans-serif;"><span style="font-size: 14px; line-height: 20px;"><br /></span></span>
<span style="font-family: Helvetica Neue, Helvetica, Arial, sans-serif;"><span style="font-size: 14px; line-height: 20px;">You see BPM (Business Process Management) providers choking on competing methodologies, struggling with emerging standards, crowding the training curriculae, selling overblown tech stacks and expensive consulting timesheets... and then you realize how much of an opportunity has been missed by this industry.</span></span><br />
<span style="font-family: Helvetica Neue, Helvetica, Arial, sans-serif;"><span style="font-size: 14px; line-height: 20px;"><br /></span></span>
<span style="font-family: Helvetica Neue, Helvetica, Arial, sans-serif;"><span style="font-size: 14px; line-height: 20px;">There is a better way.</span></span><br />
<span style="font-family: Helvetica Neue, Helvetica, Arial, sans-serif;"><span style="font-size: 14px; line-height: 20px;"><br /></span></span>
<span style="font-family: Helvetica Neue, Helvetica, Arial, sans-serif;"><span style="font-size: 14px; line-height: 20px;">More to come :-)</span></span><br />
<span style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; line-height: 20px;"><br /></span>
<span style="font-family: 'Helvetica Neue', Helvetica, Arial, sans-serif; font-size: 14px; line-height: 20px;"><br /></span>Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-65726921131475427432013-08-18T23:26:00.002-07:002013-08-23T04:18:25.459-07:00The Process Shall Set You Free<em style="background-color: white; border: 0px; color: #333333; font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23px; margin: 0px; outline: 0px; padding: 0px; vertical-align: baseline;">“If you can’t describe what you are doing as a process, you don’t know what you’re doing.”</em><span style="background-color: white; color: #333333; font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23px;"> </span><br />
<span style="background-color: white; color: #333333; font-family: Georgia, 'Bitstream Charter', serif; font-size: 14px; line-height: 23px;">– W. Edwards Deming</span><br />
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In emerging markets, having clear business processes in a company is seen, more often than not, as a sign that bureacracy and narrow-minded control freaks have kicked in and it's time to leave towards something more fun.<br />
<br />
This is mainly due to several <b>objective</b> factors, economic and cultural:<br />
<br />
1. <i>emerging markets had cheap, relatively well trained, workforce</i>. So whenever more work had to be done, it was easy to just tap into the cheap labour pool and call it a day. Back in the days, cheap was smart. It still is, in some cases.<br />
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2. <i>emerging markets were tough to plan</i>. They were highly volatile and anyway they were growing so fast that your elaborate business plan would have been left in the dust in a few months. I remember that, in one of my positions responsible for the whole Balkans region, we used to call our region "the CNN countries", because at that time there was always something in the international news about them: wars in Bosnia or Serbia, ethnic tensions in FYROM or Albania, an economic meltdown in Bulgaria, a political turmoil in Romania, an army standoff in Moldova. Good luck doing anything else than surviving.<br />
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3. <i>the prevalent emerging market business model was</i>: "start doing something, doesn't matter how because you are anyway one of the firsts, grow it fast and sell it to a multinational that wants a quick way into an unknown market without the trouble of setting up shop". There is no room for business processes in such a gold rush.<br />
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There are also lots of <b>subjective </b>factors that stem from the negative-bias management style (particularly specific to former Eastern Europe dictatorships), the social pressure to quickly perform and achieve a desired status (which leads to corruption) etc..<br />
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They all lead to the same conclusion: <b>educating </b><b>local businesses </b><b>about the need for business processes is one tough nut to crack</b>.<br />
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Nevertheless, in the following weeks, I'll be trying my teeth at this seemingly monstruous task, but not in the usual "consultant's way", preaching incessantly about optimization and automatization and standardization and return on investment.<br />
<br />
Instead, I'll be giving out specific tips & tricks, from my own experience, at the same time putting them into the overall framework of "lean mentality".<br />
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Feel free to chip in with your own tips & tricks.... as of next week. :-)<br />
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More to come :-)<br />
<br />
<br />Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-9814661351580692952013-08-01T23:30:00.000-07:002013-08-20T23:01:47.052-07:00On Goals That Matter<i>Defining your goal is the first significant waste-avoidance measure of any start-up.</i><br />
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Part of my effort to catching up the full chain of thought behind the Lean Start-up philosophy, I am reading just now an older book, <a href="http://www.amazon.com/The-Goal-Process-Ongoing-Improvement/dp/0884271951" target="_blank">"The Goal" by Dr. Eli Goldratt</a>.<br />
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The book, written as a novel from a main character's perspective, addresses the problem of defining overarching goals for an enterprise so that they immediately relate to everyone in the organization.<br />
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The main character's conclusion is that those goals are (in a manufacturing context, in the book):<br />
- maximization of <i>throughput</i><br />
- minimization of <i>inventory</i><br />
- minimization of <i>operating expenses</i> (i.e. overheads)<br />
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While I'd argue that an overarching goal would be to maximize shareholder value (or stakeholder value, if you're more into the modern theories), I agree that this set would be a common-sense proxy for shareholder value maximization.<br />
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+Ash Maurya (my favourite Lean author) is about to publish a new book called "The Customer Factory" (I am really looking forward to this!) and one of the striking statements there is the following:<br />
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<b><span style="font-size: x-large;">"Everyone is in the manufacturing business"</span></b><br />
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I love this quote - the goal of any value-chain process is to manufacture <b>happy customers</b>:<br />
<b>Customers</b> pay you - they bring <b>revenue</b>.<br />
<b>Satisfied customers</b> pay you more - they bring a <b>healthy margin</b>.<br />
<b>Happy customers</b> pay you most <i>and</i> refer you to others - they are your <b>growth engine</b>.<br />
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So how do you translate the three manufacturing goals to a service business in a lean start-up philosophy?<br />
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Here's my take:<br />
- minimization of <i>customer friction</i>: make it easy and fluid for your customer to use and get benefits from your service, automate your client workflows - this way you use your servicing capacity faster and increase your throughput;<br />
- minimization of <i>waste</i>: write the minimum amount of code, iterate (instead of plan) your business model scientifically (make intelligent assumptions about what drives your customers happy and validate them through experiments), maintain a minimum batch of work to focus on what matters most to the customers.<br />
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More to come :-)Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0tag:blogger.com,1999:blog-7312480672576980306.post-52757601008333773692013-07-29T08:16:00.000-07:002013-07-31T20:00:48.173-07:00On Growth<p dir="ltr"><i>There are two things that grow for the sake of growth: cancer and business.</i></p>
<p dir="ltr">Every business paper I read nowadays talks about how Company X have been budgeting a growth of Y% this year and they are (or most likely are not) on track to achieve it.</p>
<p dir="ltr">Why are we so obsessed with growth when it comes to our businesses?</p>
<p dir="ltr">I have recently read the excellent book <b><a href="http://www.amazon.com/Economics-Good-Evil-Economic-Gilgamesh/dp/0199767203">Economics of Good and Evil</a></b> by the brilliant <b>Tomas</b><b> </b><b>Sedlacek</b> (I had the privilege of meeting him in Bucharest at the Romanian launch of the book). It is a dense, scholarly book, by any means, but he brings excellent insights into the historical chain of economic theories that brought us in this growth craze mindset.</p>
<p dir="ltr">In many developed countries around the world, stock market cap is higher than GDP. On a worldwide level, in 2012, stock market cap was around <a href="http://www.aei-ideas.org/2013/01/world-stock-market-capitalization-at-54-6-trillion/">55 trillion USD</a>, while the GWP (Gross World Product) was around <a href="https://www.cia.gov/library/publications/the-world-factbook/geos/xx.html">72 trillion USD</a>. Since the stock market is usually made up of the few elite companies, it must be that there is a strong disconnect between the real economy and its financial representation.</p>
<p dir="ltr">I know I am not comparing apples to apples here, but precision is not needed to spot the disconnect. </p>
<p dir="ltr">The financial representation is based on future cash flow valuations, inherently based on a growth assumption. When growth doesn't come, we panic and heavily discount for reality. </p>
<p dir="ltr">So, let's all act surprised when the next financial crisis happens.</p>
Anonymoushttp://www.blogger.com/profile/16144363648550080322noreply@blogger.com0