Friday, May 15, 2015

Three Steps Bring Agility to Corporate Services

If you want to increase the agility of your back-office functions, you need to consider three essential steps. All are a bit on the immature side in the market today, but all are also evolving quickly.

1. Adopt a Services Catalog. While the term may conjure images of a restaurant menu, a Services Catalog enables informed decisions around service design, sourcing, and lifecycle management. A Services Catalog applies the disciplines of product/category management to the world of back-office support functions.

A well-designed Services Catalog provides an assortment of building blocks. These blocks represent capabilities that are managed through a holistic lifecycle. By this I mean that they are created, deployed, scaled and eventually retired in response to competitive requirements in the markets you serve, even if those markets are frames by internal business units.

We are still early in the adoption of a Service Catalog governance model for IT or for a Shared Services organization. There is, however, an obvious nexus for the application of a Service Catalog – it’s the point of intersection among the demand-side business and the supply-side support functions.  This is not a tool, but rather a management discipline.

2. Embrace and empower the role of DevOps in their support for business partners. This is a cultural shift, not a technology job description. Firms that adopt such a mindset are demonstrating true progressiveness in capitalizing on a generation of knowledge workers who are central to innovation. 

The Service Catalog has the potential to conjure fears of overly structured and tightly disciplined constraints that restrict innovation; DevOps is the perfect offset to such fears.

I ask every one of my clients whether their organizations utilize DevOps techniques to accelerate the business-to-IT agenda. Over the past several years, I’ve seen the positive responses increase dramatically.

The DevOps role is to make change happen both quickly and efficiently within the operating parameters of business expectations for resilience. Those are tough hurdles to meet: rapid innovation, with positive effect, without undue risk. But the mission of DevOps is to drive speed to effect.

3. Create a mature and transparent Charge Back mechanism. This is another term that evokes images of bureaucratic cost allocations within the hairball of corporate structures. In reality, it’s actually an essential discipline for effective governance through a program of change. 

Most companies recover the costs of back-office operations by applying allocations of those costs to their market-facing business units. The most common techniques for making the allocation decisions are to spread the costs based on such factors as net revenue, or headcount, or office locations. While the accountants might favor the mathematical ease of these algorithms, most business leaders detest allocation-based cost recovery approaches.

Achieving progressive capabilities in back-office support functions demands high correlation between the needs of the business and the form of the associated support. That fidelity implies choice. Those choices – such as the quality of the office space, the speed of response, etc. – carry varying costs.

A modern Charge Back mechanism empowers innovation by making clear the effects of decisions around business options. A business unit that can lower costs and/or increase revenues will enjoy those benefits directly.  Like the prior points, this is less about a tool than it is about a management philosophy.

When combined, these three ingredients – Service Catalog, DevOps, and Charge Back – will improve your organization’s agility. Without them, agility is just a pipe dream.

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.


Image: dark_ghetto28/Flickr

Thursday, April 9, 2015

Who Could Want Me As a Mentor?

Over the years, colleagues have approached me with a request that sounds benign and that has been increasingly common, “Would you be my mentor?” For reasons I haven’t fully understood, I find these requests uncomfortable; recently, I have been trying to understand why.

It’s not the time commitment that bothers me. I am more than happy to help, and am willing to invest in the development of a colleague. 
Rather, it’s the presumption that I have any wisdom worthy of sharing that nags at me. I interpret the question with more formality than it likely deserves, but can’t seem to think otherwise.

To find the most effective way to diffuse my anxiety, I’ve recalled mentoring situations from my own past.
In my first job out of college, I rose through the ranks of an ultra-scientific firm doing research on the early forms of computer networking. I wasn’t smart enough to discover new science, so I focused on the management side of the business. 

Bill Dlugos was a recently retired USAF Colonel and he was hired into a role that oversaw my scope of responsibility. While I reported to Bill, he also served as a coach and mentor to me, without either of us ever using those words. 
Over the next few years, Bill would ask me how I was approaching problems and generously offered his time to give me advice around how I was thinking about the tasks at hand. The projects I was leading were cutting-edge and complex: deploying a communications capability to the FBI, connecting NATO’s operating locations across Europe, and working on sensitive intelligence programs.

I listened intently to Bill because he was experienced in the business and thoughtful about me. I can’t recall him ever directing me. He always asked what I was thinking about a situation, and what alternatives might be practical. Being a junior manager leading my first complex assignments, this was uplifting because of the confidence it showed Bill had in my abilities – even when my judgment was poor.
A few years later, in a job for which I felt similarly unprepared, Don Bowen (retired USAF Brigadier General) recognized my anxiety and reached out with an offer that we have coffee once a week to talk about what I was experiencing. No agenda, just coffee.

Both of these men initiated the mentoring relationship. They didn’t wait for me to ask for it. Both of them were in positions of authority, but never used their positions as the framework for our conversations.
Bill and Don were career military officers, accustomed to structure, discipline, planning, and order. For whatever reason, they saw in me a potential that warranted the investment of their precious time.

I hadn’t thought about Bill Dlugos or Don Bowen for many years. I lost touch with them long ago.
As I place these memories in the context of being asked by colleagues to serve as a mentor, I am ashamed. I should not need to be asked, I should initiate. There does not need to be any formality to the act; it ought to be natural and casual.

In fact, much later in my career when I carried considerable management responsibilities, the CEO of my firm said to me one day, “Your value is much greater by BEING, rather that DOING.”
I work today with a great group of young professionals, and maintain a rich network of past colleagues. I will be offering coffee more often than before. I may just be old enough now to overcome my insecurities.

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.

Image: wallyg/Flickr





Monday, April 6, 2015

To Go Digital, Go Find Excellent Partners

For four years I led global sales and marketing for a large IT Services company, and experienced first-hand the powerful impacts of digital transformation. To deal with digital initiatives, many of the CIOs with whom I worked grappled with the choice between buy/subscribe versus build/operate.
This experience really emphasized for me that digital transformation redefines the nature of any underlying business, and changes the nature of services partnerships. This is not outsourcing as the industry previously defined it. 
In most cases, companies must increase their proficiency in the use of services partners (i.e. buy/subscribe), because the very nature of Digital business models demands agility and networked ecosystems. 
Getting comfortable with the structuring of external partnerships and a central strategy for driving a Digital agenda is no small feat. Here are five lessons I tallied during my operating experience:
1)    Digital is a Business Model, not a Technology. Companies that are well established in their markets recognize that digital enables new operating structures. This doesn’t just mean mobile; many others are emerging quickly, including social networks, multi-modal communications, edge computing, sensor-based data models, in-memory database processing, and others. 
Beyond the established organizations, look at the new entrants that are building their operations around a digital ecosystem. Both start-ups and carve-outs, many fueled by venture capital and private equity, insist on running their business via digital operating models; they are leaving behind the organizations and systems that defined business of yesterday.
The Internet-of-Things (IoT) conversation is a business model discussion, not a technology discussion.
2)    Digital is Everyone’s Business.  Even the most mundane industry segments are faced with digital threats and opportunities. If you’re a manufacturer, or a distributor, or a maintenance company, or a services entity … you’re likely spending time considering new ways to develop, sell, and service your customers using digital techniques. 
I’ve been impressed by some otherwise traditional business segments that have teams of people working to conceive new sources of operations through the use of emerging digital techniques. Many are using crowd-sourcing ideation programs to engage their employees in this process – a testament to the urgency of bringing everyone along on the journey of change.
3)    Digital is a New Muscle. Most of the companies that I work with readily admit that they are lacking in the expertise to transform their business via digital. The expertise they need is well beyond technological skills. They are missing a fundamental understanding how to conceive and operate new digital business models.
In most case, two realities fuel a burning ambition. First is the competitive threat that exists across industries from more nimble entrants who are more aggressive in embracing digital operating models. But the more powerful forcing function comes from reimagining how customers want to do business. When you apply an outside-in perspective, it’s often a liberating experience for employees who can see new ways to operate the business.
4)    Digital is Holistic. Unlike the era of Enterprise Resource Planning (ERP) platforms that focused on efficiencies in back-office operations, the digital promise touches on every aspect of the business cycle. It’s about how you win the right to serve your customers, all the way through the management of your supply chain.
5)    Digital Requires Partners. If you buy into the shift to digital in how business is conducted, then you are implicitly buying into the need for a robust eco-system of partners. Digital, by definition, implies the knitting together of buyers and providers through platforms and channels of commerce. 
This last point resonates most intimately with my own background in shared services and outsourcing. Executives are looking to their existing back-office service resources through the lens of enabling a digital ambition. Can the current shared services organization acquire the skills, orient the service model, and reach forward through the business?  Can the current outsourced service providers bring purposeful investments to bear through leveraged services in a digital business model?
It is the responsibility of executive leadership to mandate service partners to foster innovation in the delivery of front-office, mid-office, and back-office innovations. They can do this through automation, analytics, interconnectivity, and all of the other features of a digital business model. Digital is as much how as it is what.
The excellence of your service partners, and in the dynamic use of built-for-purpose solutions, is what will enable your business to be a leader in digital transformation.
Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.
Image: sachman75

Thursday, March 19, 2015

When Activist Investors Knocked on the Door

A few years ago, I was on the Board of Directors for a NYSE-listed public company when an activist investor appeared at our doorstep. These investors are individuals or groups that purchase large numbers of a public company's shares - or seek to obtain seats on the company's board - with the goal of bringing about major changes.

In our case, the investor bought 8% of the company and over several weeks increased his holdings to almost 20%. As the lead director for our company, it was my duty to understand this investor’s motivation and intention.

Thus began my education in the tactics of outside investors who fundamentally disagree with the strategies of incumbent management.
Today, there are scores of such investors who are persistently scanning the performance records of public companies for opportunities to force change of strategy, direction and/or execution.  Here is a good summary of some leading activists.

These investors commonly look for one or more symptoms:
  • Low P/E multiples vs. peers, indicating a valuation disadvantage
  • Trend of missed earnings guidance
  • Clubby board composition
  • Companies going through a major change in leadership and/or market conditions
  • High levels of cash/assets that can be better monetized
  • Persistently under-performing divisions or operations; candidates for divestiture
  • History of accounting irregularities/governance issues
  • Declining investor sentiment

The common thread here is the indictment of current management strategies and practices.
In our case, the activist implemented a proxy fight and secured for himself both the CEO seat and half of the Board positions. At this point, the shareholders voted to give the activist the reigns to drive the company forward.

As activism has become increasingly common across industries, companies have become adept at interacting with these investors in ways intended to avoid loss of control.  Boards of Directors tend to communicate more readily with these investors, consider their questions and ideas, and gauge the degree of shareholder sentiment that these investors represent.
Sometimes the intervention of an activist is just the sort of forcing function that a company’s leadership needs to appreciate the seriousness of shareholder dissent. Too often, the motives of the activist are described as merely a selfish desire for seats on the Board. 

I am hearing this topic more and more in the hallways of the companies I serve. Many perceive the potential for an activist as a call to arms. Many leaders have the motivation to undertake value-enhancing steps themselves, rather than waiting for an activist to seize control of the agenda. 
Progressive CEOs are encouraging their leadership teams to challenge the comfortable and conventional doctrines of their business by asking, not entirely rhetorically, “What would an activist do to drive improved shareholder value?” Some of the more common avenues of inquiry that I experience include:

     Do we have a strategy to win in an increasingly digital market?

     Are our operating units best positioned to perform as part of the enterprise, or as stand-alone companies?

     Are our business support processes sufficiently agile to flex with an increasing pace of change in our markets?

     Is our talent contemporary with the issues and opportunities of our markets?

     Are we engaging with our customers in the ways, and through the channels, that they find optimal?

     Is our structure fit-for-purpose in a world of increasingly nimble competitors?

     Are we investing in the things that make a competitive difference, and buying/subscribing to the services that are best leveraged?
I am finding that such questions increasingly frame the agenda for business units, corporate support functions, and shared services leaders at all levels of many organizations.

Complacency fuels activism. Leaders can leverage some of the same energy by bringing an owner’s mindset to all aspects of their organization’s strategy.

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.

 Image: cdx_cdx ✔/Flickr

Tuesday, March 3, 2015

Four Big Changes from the Internet of Things

As companies seek to integrate connectivity into devices that previously lacked connectivity, my clients want to understand the differences between profitable innovations and costly distractions.

We’re seeing some clever new possibilities. Connected health monitors, home automation, thermostats, and monitoring applications are already getting traction.
There are four implications to this trend that really excite me, and each of these are hairy topics for companies looking to capitalize on the Internet of Things (IoT) opportunity.

1. Upside-down Computing Architectures. Prevailing wisdom dictates that the most efficient way to operate an information-based service is to assemble the computing and data assets into the smallest possible number of locations; centralization drives efficiency. Indeed, one of the more common strategies of large companies today is to collapse their data center footprint into a smaller number of physical facilities. Smaller companies are inclined to tap into public-cloud services (such as Amazon Web Services or Microsoft Azure) that similarly operate massive computing facilities.

But IoT connects devices, not just people, leading to a greater fragmentation of software and hardware amidst an explosion of data.  All of that connected stuff is, by definition, dispersed and even mobile. We will need new ways to process information and make efficient use of communications as networks of devices proliferate.  Companies seeking to internet-enable their business shouldn’t assume that the processing paradigm of today will apply.

2.) Data Storage and Analysis. My favorite current use case is the deployment of body cameras for law enforcement. Just imagine the massive amount of data that those cameras will generate. In the vernacular of the industry, it will be unstructured data – meaning that its relevance is subject to interpretation and indexing. You can’t (yet) search a stream of video to find an item of interest in the same way that you can search a text document. We need new capabilities to efficiently store all of this digital content in ways that enable search and retrieval.  The storage requirements will be massive, and potentially expensive.  We need new storage paradigms, too, with embedded analytics for all of that digital content. 

3.) Multi-platform Collaboration. The deployment of connected devices is merely the next step in our evolution towards an information-based society. It’s not the end state. Every new device brings with it the potential for collaboration with other devices and platforms. There will be great value created by being able to find and combine data from different source platforms. But, before this can be accomplished, we will need common software and interoperability standards that others can work with and build upon. Connecting personal health monitors with the healthcare system (hospitals) and insurance carriers is still a significant challenge. The most powerful applications will be those that unify platforms.

4.) Services Over Products. The most profound implication, in my view, is the shift of product-oriented companies to become services companies. Once you internet-enable a refrigerator, oil field monitor, or baggage locator … you are setting expectations with your customers that their product is now part of an ecosystem of connected devices. Most product companies aren’t geared around the services business. Fulfilling the ambition of being a player in the world of IoT will require new muscles and, likely, new partners.
The best partners to enable these service models will not just take orders and fulfill requirements. Rather, they will have vested interests in the solutions. They will see the potential to become ingrained in the fabric of industry services. They will bring investments and intellectual horsepower.

Most of my clients recognize that IoT is bringing new opportunities, along with risks of obsolescence.  But they don’t all fully appreciate that many of today’s accepted operating principles - such as centralized processing, ordered storage of information, islands of platform autonomy, and product-oriented expectations - are fading as the innovation ramps upward.
Business models are quickly moving to the edge - into cars and homes, and onto the wrists of consumers. These are not trivial changes. Innovation is not just a technological endeavor; it’s a business model shift.

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.

Image: horstjens/Flickr

Wednesday, February 25, 2015

The Status Quo = Steady as She Sinks

There are many metaphors describing the human tendency to avoid making hard decisions.  My favorite is “steady as she sinks.”
One of my earliest bosses taught me the meaning of that catchy phrase, and the importance of provoking decisiveness. Our business unit was trying to break into a new market. We had assembled a team of diverse people, each bringing strengths without much overlap. The theory of our leader was that we needed to cover a wide front with expertise in order to detect, assess, and react to opportunities.

Our modis was to collaborate as a team to pick our battles, and then to adjust the profile of our unit to respond accordingly. But, not knowing which battles would be presented to us, we needed a generalist orientation.

In many ways, we acted like a startup business, even though we were part of a much larger organization. The market we sought to penetrate was polluted with entrenched competition and a client base that tended to stay within a known community of service providers.

We had to work hard to gain recognition. Our targeted clients were comfortable with the familiar, and we were a new entrant. How could we challenge the status quo and the perceived lower-risk of doing business with the old guard?

We adopted "steady as she sinks" to provoke our clients into asking themselves whether the old guard were the right partners for the next era.

I liked the multiple interpretations the phrase conveys. To me, it challenged complacency and the tendency to take the easy or comfortable path. Like the boiling frog, just because everything around you feels familiar and stable doesn't mean that you're not losing.

We were quite successful with our strategy of provocation; our business unit grew with some impressive wins.

The adage holds true even better today.

I recently helped several companies think about new sources of growth for their very successful businesses. As leaders in defined markets, the executives couldn't help but constrain their thinking to the boundaries within which they'd always worked. They perceived that reaching beyond those limits would be too foreign, require new skills, and entail uncertain risks.

Most of these companies were faced with the fact the markets are changing at a pace that is unprecedented; the old boundaries are being blown away by new capabilities that are being conceived and implemented with great pace. They could fight to keep share in the markets that they knew well and were most comfortable, or look to redefine the boundaries and reset the game.

Making no decision is tantamount to refusing to change. Look at the increasing tendency of activist investors who are indicting the decision-making of incumbent management for inadequate aggressiveness around change.

On one recent occasion, as we weighed the merits of a bold move into an adjacent market, an executive asked, "If this is such a great idea, why hasn't anyone done this already?" 

The answer? Often times, fortune favors the bold.

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.

Image: born1945/Flickr

Monday, February 23, 2015

Perhaps You Haven’t Yet Escaped Y2K ...

Perhaps You Haven’t Yet Escaped Y2K...

When they were younger, my kids seemed fond of asking for a "do over" whenever they made a mistake or failed to achieve some goal. They cherished the ability to wipe the slate clear and start fresh.

You probably have the same desire in business.
Serving in various leadership roles, I commonly found myself wishing for the option to build new services from scratch, rather than wrestle with legacy encumbrances.

In 1999, I was appointed CEO of one of the world's foremost Y2K consultancies. The entire company was engineered around solving one particular problem, the millennial date change.
I leapt into the role with the belief that there were assets in that company - smart people, trusted client relationships, detailed knowledge of corporate applications and insight into complex operating environments - that would one day allow us to develop a new set of marketable services.

Sure, there might be a dip in the financial performance of the company as we re-tooled for the future ... that would be expected. Having come from a world of running complex global operations, I knew that there would be great demand for accomplished practitioners in combing the hairball of systems that most companies use to run their business.
Surely a Y2K consultancy could be relevant after the passing of that one event. Right? Those assets were to be leveraged, weren't they?

We didn’t count on the burst. Those weren't the best years to reinvent a small publicly-listed, one-trick pony. We ended up selling the firm.
Across many industries today, I sense a similar ambition for reinvention. They look to their current assets - organizations, talent, products, clients, etc. - with the hope that those can be refreshed for relevance in new economic conditions.

Almost every executive enjoys the intellectual exercise of a "greenfield" design. What would you do if you were starting your company today? Increasingly, this way of thinking is fueled by nimble competitors and even activist investors. If someone else can build a better mousetrap without the burden of existing people, processes, and business constraints, shouldn't you be able to take those same actions?
This notion reads much easier than it lives. It’s a tough ask to be able to see through the obstructions of present-day business burdens to reimagine a business that truly leverages assets in a new model. It takes hard scrutiny to recognize which of your current assets are truly valuable for the future versus being a drag on your ability to change. Blockbuster probably thought their retail footprint was an asset.

In 2000-2001, many industries rebooted. Companies failed. Others merged. Fortunes were lost. Unbridled optimism for bright and shiny new business models overtook common sense. Neither the hare nor the tortoise survived.
There's a real art in designing for the future when so much disruption and change is occurring all around us. Almost feels like a millennial date problem, doesn't it?

Peter Allen has many years of operating experience as a top executive of rapidly-growing multi-billion dollar companies and in assessing sales and marketing effectiveness. He is now a Boston-based Managing Director at Alvarez & Marsal.


Image: Mil/Flick