Friday, April 22, 2016

From Effort to Outcomes

As a 22 year-old, I was immersed into the eye-opening experience of my first real job.  While the era was long ago, well before Silicon Valley defined the meaning of a “startup” culture, I thrived at being fresh talent in a company that was buzzing with energy for the work it was doing.

Based in Cambridge, MA, just outside the walls of Harvard and MIT, the company was on a mission to change the world through the use of innovation in networking technology.  Most of the employees were casual in appearance, wore sandals, and enjoyed the free espresso that served as the focal point for conversations.

This era was one where email had not yet been deployed as a basic communication utility, so the potential of an interconnected universe of companies, research institutions, and individuals was still being formulated. The notion of connecting people via technology was at the center of the company’s focus.

With two years of experience under my belt, I was called to meet the new Senior Vice President who had joined the company to lead the business unit that I worked within.  With trepidation, I walked into the plush offices of one of the most senior people in the company.  Bob Halligan looked me over and said, “I’ve heard a lot about you.” 
My reply was a rather sheepish, “Thank you.  I try hard.”

Mr. Halligan didn’t miss a beat with his response: “A lot of people try hard.  Your reputation is framed by results.”  Some encounters stick with you for your entire life.

Fast forward to today’s highly-interconnected economy whereby individuals and businesses are able to interact and conduct their affairs with almost frictionless ease thanks to the growing fabric of technology-enabled services.  As consumers, we are conditioned to expect transactions of all forms to be effective and efficient.  We’ve lost tolerance for the well-intended best effort, and have shifted our expectations towards fast and perfect.

What matters most to us is the quality of the result, with diminished concern for the path required to achieve that outcome.

I’ve developed perspectives that I’ve been calling “The As a Service Economy” through the most recent years of a long history in the Outsourcing and Shared Services industries.  These operating conventions are used by companies to drive cost efficiency in their business operations.

Today, there continues to exist a considerable percentage of corporate spend allocated to effort-based work.  The popular use of offshore labor to execute transactional work processes has perpetuated this mode of operating.  Managers tend to define and direct work to groups of people who are well-intended, toiling to execute tasks using the collective knowledge and learnings of their work units. 

Tribal knowledge is still pervasive as the way things get done in many, many companies.

The promised transformation of work processes through the deployment of technology platforms for standardization of workflows, and consistent organization of data, has not yielded the impact that most executives imagined when they launched these deployments. ERP solutions have not materially refactored the way that business processes are executed.

There will be arguments to the contrary, but my experience leads me to believe that “As A Service” is redefining the corporate services architecture to remedy the shortfalls of offshoring, outsourcing, and ERP adoption.  There are five truths that contribute to my worldview on this:

1.     Most CIOs and heads of Shared Services are serving as the point of leadership for the adoption of platform-based, industrial-grade Services.  These are commonly components to the enterprise digital transformation, as they are built-for-purpose elements that require orchestration and integration among the service eco-system.

2.     These strategies commonly entail a migration from legacy resourcing models - people, processes, and technology - to embrace adoption of new forms of operating.  No big bang, but a purposeful evolution.  Companies are chipping away at effort-based work processes and embracing outcome-assured service utilities.

3.     There are readily-accepted proof points., AWS, WorkDay, Coupa, and others are the trailblazers for the new way of running the enterprise.  The objections to utilizing multi-tenant platforms are being overturned in favor of market-based service offerings.  Companies are dismantling their installed base of facilities and organizations in order to adopt market-defined services.

4.     This strategy is not constrained to back-office functions.  Increasingly, we are seeing the bundling of front-office applications with the attendant operating infrastructure into turn-key business services.  This is an important shift away from optimizing the horizontal service categories like storage, compute, payroll, and the like.

5.     A final summary observation - many of the companies that are employing “As A Service” techniques for how they BUY services, are also looking to apply those same mechanisms for serving their own markets.  What this means is that the essential skills for designing and implementing a buying strategy for market-based services are valued for helping companies evolve their market-facing propositions.

This transformation of business operating structures has considerable headwinds. Generations of managers have grown up believing that their value is defined, in large part, by the number of people they control, direct, supervise, or manage. Procurement leaders have been trained to advocate for unique and special requirements, not buy “standard” as a primary imperative. “As A Service” modes of operation challenge this mindset. 

Power and influence doesn’t accrue based on the scale of effort one directs, but rather the magnitude of effect that one assures. 

As I work with enlightened executives who are committed to transforming the profile of their businesses, there are many complications attendant to reorienting the functions around outcomes rather than effort.  Yet, most know they need to embrace this opportunity and are developing the roadmaps for migrating their organizations to a new form of service delivery.  The old structures and modes of operating are being chipped away.

All in all, the greatest obstacle to this shift is comfort with the status quo.  If management rewards “span of control”, then executives will seek to build larger and larger organizations. This is why, in my experience, leadership engagement is central to reimagining how the business is organized and operated, and embracing buy/subscribe over build/operate.

At the end of the day, outcomes matter.

Peter Allen applies many years of operating experience as a top executive and strategic advisor for companies of all shapes and sizes, with focus on technology-enabled business services. He is now Chief Evangelist at Peter Allen & Partners and Senior Advisor for Alvarez & Marsal.

Thursday, April 7, 2016

Beware: Robots on the Cow Paths

There’s a growing volume of chatter in the outsourcing industry circles about the breakthrough potential of Robotic Process Automation, or RPA.  I’ve recently seen RPA in action for a few major corporations and I’ve developed a concern over this trend.  It’s a concern based on successful adoption.

For those who haven’t had the pleasure of a first-hand exposure to RPA in action, I can tell you that it’s quite impressive.  Software-based “robots” (personally, I am not a fan of the term, but it’s increasingly being used) run on servers and essentially perform the identical tasks that humans otherwise would perform.  They login to various systems, review lists of tasks, lookup and correlate information from varied sources, and execute well-defined procedures.

The benefits include 24x7 operations (no coffee breaks or absenteeism), predictable quality of performance, speed of execution, and … obviously … lower labor costs.  Other benefits include the ability to audit and measure the performance of tasks that might not otherwise lend themselves to 100% verification.

These virtues have great appeal to companies that use people today to execute rather standardized processes.  Lower cost, higher quality, assured outcomes.  Sounds great, right?

Many observers are worried that the rise of robots to perform transactional business processes, such as accounts payable reconciliations, invoice verification, account change processing, and the like, has the potential to displace thousands of “knowledge workers”, leading to a greater level of social issues around employment rates.

Some of the more prominent corporate advocates among the outsourcing industry, many of which operate with thousands of employees domiciled in lower-cost delivery locations, are the most prominent adopters.  They argue that today’s labor arbitrage outsourcing models need the ability to drive greater sources of benefits to their customers.  The ability pull the lever of lower labor cost is diminished, so we must shift to automation from these delivery centers as the next wave of benefits for outsourcing.

Well, what I’ve seen of RPA in practice introduces, to me, a concern that dwarfs that of displacing workers.

I am old enough to recall the rise of Business Process Reengineering in the early 1990s.  BPR was the brainchild, arguably, of two consulting luminaries, James Champy and Michael Hammer. 

The central thesis of BPR was that “the usual methods for boosting corporate performance—process rationalization and automation—haven’t yielded the dramatic improvements companies need. In particular, heavy investments in information technology have delivered disappointing results—largely because companies tend to use technology to mechanize old ways of doing business. They leave the existing processes intact and use computers simply to speed them up.”  That was twenty-five years ago!

Back then, the BPR advocates argued that speeding up those processes does address fundamental performance deficiencies. “Many of our job designs, work flows, control mechanisms, and organizational structures came of age in a different competitive environment and before the advent of the computer. They are geared toward efficiency and control. Yet the watchwords of the new decade are innovation and speed, service and quality.”  Those are the words of Michael Hammer printed in a prominent 1990 HBR article.

Many of the RPA examples I’ve seen are simply a repaving of the cow paths defined by current systems, processes, and policies.  The RPA robots memorialize the existing procedures in ways that mimic today’s human-based operations.

While today’s RPA initiatives are designed, largely, to be proof-of-concept and pilot in nature, I think that great care should be taken to define the innovation roadmap for the underlying business processes prior to shedding the people who are the most knowledgeable about the processes being robot-enabled.  We need to know that we can redesign, replace, or retire those existing systems and processes – not be held hostage to a robot’s execution of legacy procedures.

Perhaps this assignment is a worthy repurposing of the displaced knowledge workers?
I’ll never argue against automation and the use of technology to drive efficiency, accuracy, and cost effectiveness.  Those are sacred principles in an “As A Service” economy.  Yet, we need to be sure that we don’t lock ourselves into legacy ways of running businesses as the ultimate price for near-term efficiencies.

The robots will execute; they will not redesign.  Not yet.

Peter Allen applies many years of operating experience as a top executive and strategic advisor for companies of all shapes and sizes, with focus on technology-enabled business services. He is now Chief Evangelist at Peter Allen & Partners and Senior Advisor for Alvarez & Marsal.

Thursday, March 17, 2016

Managing Service Risks in the “As A Service” Economy

The rule of thumb for services contracting, proven over the past 20+ years, was that companies tended to spend 3-5% of their services contract value on “governance.” 
When a company awarded a $100M services contract for outsourced IT or Business Process operations, they typically spent $3-5M on the people and processes focused on service management and governance.

What did these expenses provide?

  • Financial Management – handling the authorizations and verifications of the financial obligations of the parties;
    • Invoice Management
    • Performance Credits, Earnbacks, & Critical Milestones
    • Financial Analysis & Planning
    • Contract Pricing Adjustments
    • Chargeback
  • Performance Management – reviewing service level and other reporting artifacts that track attainment of committed qualitative performance;
    • Performance Analysis & Service Delivery Management
    • Service Requests and Authorization
    • Change Management
  • Relationship Management – ensuring tight alignment among the buy-side and provider-side expectations
    • Forecasting and Demand Management
    • Project Spend Pool Manager
    • Service Catalog Management
    • Customer Satisfaction Measurement
  • Commercial Management – accountable for the formal terms among the parties
    • Contract Administration
    • Contract Change Management
    • Contract Issue Management
    • Dispute Resolution
    • Service Provider Audit
    • Governance Library

Invariably, this level of expense and organizational construction resulted in debate on the value returned for such investment, the buy-versus-build alternatives, and the tendency to meddle in the delivery of the contracted services.

I am being asked more frequently about the effect that “As A Service” contracting places on the Service Management & Governance competencies of companies.  In my experience, the level of investment is holding steady, but there is a shift among the functions embodied in the progressive “vendor management” function of companies looking to subscribe to market-defined offerings as a preferred alternative to directing the build of solutions that are specific to the buyer.

The most visible new competency being promoted in this context is Vendor Risk Management (VRM).  Many companies are deploying organizations and processes for continually monitoring the viability of their supply base through the lens of “what if” analyses.  If you think about the “As A Service” fabric of internal and external service participants, the modularity features of “plug replaceable” services is an essential feature that requires active monitoring.

Regulated industries, such as Financial Services and Healthcare, in particular, are experiencing dramatic increases in the requirement to monitor and manage 3rd-party risks.  These disciplines are analogous to the rigor that other industries, such as manufacturing, have applied commonly to their supply chain for tangible materials. 

Now, these inspections are being applied to information-based services with greater rigor.

The increased investment in VRM within the Service Management framework is being offset, to a degree, by adoption of more automation in the conduct of performance management, financial management, and commercial management.  The functions identified are still required, but the implementation alternatives are more varied under a subscription-oriented arrangement.

As we see companies shift their services strategies to take advantage of the growing portfolio of market-based “As A Service” offerings, I think we will see an accelerated maturity in the professional disciplines around vendor risks, including adoption of automation, analytics, and friction-less switching among service participants.


Peter Allen applies many years of operating experience as a top executive and strategic advisor for companies of all shapes and sizes, with focus on technology-enabled business services. He is now Chief Evangelist at Peter Allen & Partners and Senior Advisor for Alvarez & Marsal.







Monday, March 14, 2016

Diligent Diligence

As companies step-up their consideration of new forms of Services contracting, with providers that are touting their “As A Service” offerings, I am seeing a revolution in the art of Due Diligence – the process whereby the parties verify that they are entering into a relationship that is aligned in its goals.

The age-old approach towards Diligence in the consummation of a commercial services agreement entails an Inbound element through which the Service Provider reviews and validates the operating environment of the Client into which its Services are meant to apply.  The Outbound element refers to the Client’s inspection of the readiness of the Service Provider to take on the scope of service being proposed.

As the market moves towards adoption of propositions built to conform to “As A Service” operating characteristics of industrial-grade, multi-tenant, subscription-oriented, and mutualized operations, the processes for both Inbound and Outbound Due Diligence are changing, and introducing new challenges.

Service Providers who are truly bringing “As A Service” offerings to a Client opportunity will use an Inbound Diligence process that is exceptionally focused on the enterprise services architecture and the flow of work between and among a myriad of internal and external service participants.  The emphasis will be in how the Provider’s built-for-purpose service solution will fit within the operating landscape. It is decidedly future-oriented in its perspective.

In the past – largely via outsourcing considerations – the Inbound process sought to verify and validate legacy technical factors, and counts of assets.  In essence, this was all about verifying information provided by the Client.  Today, it’s less about inspecting the current state, and more about ensuring that the roadmap to the future state is achievable.

As for Outbound Diligence, the burden on the prospective Service Provider is much greater today than it has been in the past.  Previously, Outbound Diligence comprised site visits, procedural reviews, and interviews with other Clients. 

Today’s buyers of “As A Service” offerings are insisting on new evidence of readiness, competence, and worthiness. 

If you’re a Provider of “As A Service” offerings – regardless of the application – you can expect to be asked to produce new forms of evidence that you’re truly bringing solutions to a market of Clients, not merely offering to solve a challenge for the next Client. 

Some of the most compelling and essential evidence includes:

1)      A Service Catalog which enumerates the service gradients and market pricing for your spectrum of offerings
2)      A Services Life-Cycle Management process that conveys your market-based understanding of demand for service features and functions, and the stages of development, deployment, and decommissioning that you apply to your offerings
3)      An Investment Model that articulates the practices you apply towards developing and deploying new capabilities to subscribers of your Services, with clarity on what’s “in the price” versus supplementary
4)      A “User Group” or similar forum for subscriber engagement that demonstrates the reach of your services across the market and which commits to continual communication around service evolution.  This commonly includes transparency around the numbers of subscribers, and changes to those figures over time, and
5)      A Business Continuity Plan that acknowledges the inherent risks to service continuity, and your plans for responding.

There are others, but I find that these five tend to be particular challenges for the Service Provider community to address when a Clients team starts its Outbound Diligence process.

Both of these dimensions – Inbound and Outbound – introduce enhanced expectations of the Service Provider to produce evidence of commitment to purposely-built Service offerings that reflect a deep understanding of target markets, competitive positioning, and readiness for scaled adoption.

Prospective Service Providers would be well-served to invest in a strong and positive Diligence experience as part of their sales process.

Peter Allen applies many years of operating experience as a top executive and strategic advisor for companies of all shapes and sizes, with focus on technology-enabled business services. He is now Chief Evangelist at Peter Allen & Partners and Senior Advisor for Alvarez & Marsal.

Friday, February 5, 2016

Evolve, or Disappear

What dissatisfies a Client of a service?

It is rarely bad service in some absolute sense of “bad.”  A customer’s satisfaction is the gap between what is expected and what is received.

Everything is relative. 

A typical service client cannot always tell when a service is performed well.  But, a typical client is very good at sensing disappointment.  In short, the central fact in the services business is a frustrating one: It is much easier to fail in a service than to succeed.

In an increasingly complex world with constantly shifting expectations, an obsession with planning and detail can be more of a hindrance than a help in sustaining high levels of client satisfaction.  It can wed your teams and business model to plans of action that are not working in the marketplace, and that are not reflective of how your business has changed.  Good enough often isn’t in the eyes of the service recipient, despite all the dashboards and metrics.

We can’t let the presence of risk, or the absence of clarity, prevent us from taking action.  Whether that action be an investment, a change of partners, or the retirement of a legacy business model.  Call it innovation if you must, but services-based relationships must evolve or die.  If you’re in the business of delivering a service, you better have a plan to evolve.

The wave across companies to adopt “As A Service” modes of operating – whereby best-effort is replaced with defined and measured service outcomes – is a fundamental transformation of how businesses operate.  It’s a lifestyle change of momentous proportions.

But, it’s a change that will occur purposefully and through phases of change.  With rare exceptions, we’re not talking about a big bang shift in how large companies organize and operate.  We’re chipping away at the familiar, and replacing it with the progressive.

“As A Service” is, increasingly, an expectation of service recipients.  It’s defining “good” for the execution of business functions.  It can’t be controlled or constrained.  It is the new normal for running businesses.

Leaders of corporate Shared Services operations, and providers of outsourced services, are challenged alike to offer new forms of service delivery that reflect the higher expectations of the service recipients.  This is not a matter of waiting for new requirements, or putting a veneer on the old service model. 

What’s expected of those worthy of sustaining services-based relationships is a commitment to market-based “As A Service” offerings.  Your customers are watching.

Peter Allen has many years of operating experience as a top executive and strategic advisor for companies of all shapes and sizes, with focus on technology-enabled business services. He is now Senior Advisor for Alvarez & Marsal, and Chief Evangelist at Peter Allen & Partners.

Tuesday, February 2, 2016

Venturing into the Gig Economy

I recently listened to a podcast by the venture capitalist Naval Ravikant, CEO of AngelList and founder of ePinions.  His comments told me that I had crossed a very important threshold, and did even know it.  I am living in the “gig economy.”

Naval was responding to a question regarding the impact of information technology in driving a new form of economic model.  As an investor in many forms of tech-enabled business services, I was intrigued by his response.

Naval remarked that the industrial revolution of the 1900s brought people together around minimal efficient scale, such as factories, to drive productive collaboration.  Today, innovations in social, mobile, analytics and cloud technologies are driving substantial reduction in the cost of basic transactions, allowing disintermediation among service participants. 

Proximity to one another is no longer required for the consumer and the producer of a service.  One example is the Uber driver who receives orders via mobile phone without any human intermediary. 
He offered a better example in describing independent contractors using Twitter and online sources (like LinkedIn) to find jobs.  The podcast referenced the “gig economy.”

Whether it’s selling your arts and crafts on Etsy or Ebay, offering taxi services through Uber or accommodating tourists in your spare room via Airbnb, the world of work appears to be changing. This is the “gig economy” — where incomes are earned or supplemented by trading individual goods and services online.

One survey issued in January suggests that some 45 million people, or more than 1 in 5 adults in the US, participate in the gig economy, also known as the sharing or on-demand economy. According to the poll by Time magazine, 14.4 million people derive a majority of their income from the gig economy, defined as "contingent work that is transacted on a digital marketplace."

Naval’s commentary went beyond the business-oriented examples to advocate for a more personal adoption of “gig living.”  He argued that each one of us has the opportunity to develop and exploit our personal brands, and our unique expertise.

This reminded me of a recent conversation with a senior executive in a large company who said to me, “We are over-run by consultants.  What we really need are experts.”  And, expertise is a personal, not institutional, trait.

Naval offered a recipe for success in the gig economy, comprising:

·         Find something you love to do, and for which you have a shot at being among the best in the world
·         Build your independent brand around it – with your name
·         Only take up creative work – providing opportunity for continuous learning, refinement, relevancy; building competitive advantage
·         Develop personal comfort with a boom-bust cycle of demand

At the heart of this is the premise that it’s best to leverage what you do best and hold tightly to your independence in the gig economy.

Peter Allen has many years of operating experience as a top executive and strategic advisor for companies of all shapes and sizes, with focus on technology-enabled business services. He is now Senior Advisor for Alvarez & Marsal, and Chief Evangelist at Peter Allen & Partners.


Wednesday, January 13, 2016

Patience is No Virtue

Most people I meet tend to think that organizations work on the principle of inertia:  structures and strategies tend to stay as they are, either at rest or in motion.

But it appears to me that organizations actually are subject to the Law of Sharks.  If a shark does not move, it cannot breathe.  And it dies.

A conversation with a senior executive of a global bank reminded me that this principle cascades to personal ambition and career management.  He is the #2 leader in a large organization, with little movement among the ranks above him.  “A shark’s gotta swim,” he said to me when I asked what was next for his career with the bank.  Enough said.

Moving organizations tend to keep moving.  Dormant ones tend to run out of air and die.

Movement takes many forms, and involves many muscles.  A continuously-evolving strategy is one form of movement.  So, too, is the insistence on lean operations and avoiding bloat that brings weight which much be carried about.  Rotation of talent, especially at the senior ranks, is an especially important form of muscle-building.

Realignment and refactoring of strategic partnerships is an area of common neglect in building the strength of an organization committed to movement.  Too often, companies tend to think that yesterday’s decision is one that seals destiny, when actually it’s an opportunity for building agility – the ability to flex and move.

To worsen this problem, not-moving rarely causes any immediate pain to an organization.  This encourages even more waiting.  “It ain’t broken, so don’t fix it.”

Not-moving begets more not-moving.  By the time the delayed consequences of all of this not-moving occur – one of which being that action-oriented people in the company flee for new situations, making the company even more waiting-oriented – it is often too late to correct them.

In the age of digital disruption, with nimble competition lurking around every coral reef, it’s essential that your organization embrace movement, change, and realignment.  Purposefully, and with a cadence of being a survivor for the long term.

Act like a shark.  Keep moving.

Peter Allen has many years of operating experience as a top executive and strategic advisor for companies of all shapes and sizes, with focus on technology-enabled business services. He is now Senior Advisor for Alvarez & Marsal, and Chief Evangelist at Peter Allen & Partners.