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.