Honestly, I don't like spreadsheets, and I don't feel like writing macro's. So, I decided to use what is now known as Oracle OLAP Option. My first job was at IRI Software, that got acquired by Oracle in 1995 (and I left the company a year before that). I haven't worked with the technology since then, 15 years ago.

But if I close my eyes, I can still remember how it used to work. The version I am using is over 10 years old, and it has progressed immensely in the meantime. So I set out yesterday evening, loaded all the data into a data model, and am ready to start analyzing.

If you still know how to operate a tool, after 15 years, it says something about the power of its logic.

Ohhhh... am I having fun. Just like old days.

frank

In this issue we discuss 'business transformation'. Business transformation has many different facets, and we discuss a number of them. Thomas Oestreich looks at the perspective of the CIO, and how IT needs to grow from a supporting function in the value chain, to a force that drives innovation at the core of the business. Kevin Narain, managing partner at European consulting firm INEUM discusses finance transformation, in an excellent article called "Learning the Ropes". If there is one thing we (should have) learned from the economic situation, is that risk and performance management should be transformed to be more integrated, and Brian Gregory describes how to do that. Kathy Horton describes cultural transformation, using two case studies. Dr. Bill Stratton of Dixie State University of Utah takes a wider approach, and expands the idea of business transformation to the complete value chain. Jim Gurowka of the Institute of Management Accountants introduces the idea of a Performance Architecture. Sandeep Banerjie describes the relationship between eliminating IT complexity and business transformation. And as always, Mark Conway provides some interesting pointers for further reading.

It seems to me, looking at all the articles, that business transformation itself has transformed over the years. Gone are the days of reengineering the complete business in a big bang project style. Business transformation today is a series of smaller steps, gradually and in a controlled way leading to a new desired state. Most transformation is driven by the external world, by political, economical, social, technological, environmental and legal change. These external forces change, and it is not always possible to drive them yourself. Agility is the key to successful business transformation. The goal may be clear, the grand vision may still stand, but the way is continuously reevaluated.

Lastly, I'd like to introduce you to my colleague Toby Hatch, who will drive the next phase in the maturity of the Journal of Management Excellence, as the next editor of the Journal. The theme for the next issue will be "creating options". Send your contribution to toby.hatch@oracle.com.

frank

PS. All issues of the Journal can be downloaded here.

It's that time of the year again. Running season. Every year I write in my blog on my jogging efforts. Yesterday I ran the "Singel loop" in the City of Utrecht ("Singel loop" does not translate as "single loop"! Loop = Run, Singel = a canal surrounding a city), a 10km run.

Last year in my blog I used this run as an example of how measurement can tell you anything you want. Last year:
• I improved my personal record for the 10K (great!)
• ... as no. 570 I came in last anyway (hmmm... not so great)
• ... but the system didn't register the people who gave up and never finished (at least I did!)
• I started front row, and came in last, so I must have seen every single runner (social indicator?)

While running yesterday, I found some other examples in running that help understand the subjectiveness of measurement. (Yes, measurement is far from objective!)

Everything is relative
KPIs are used to express one measure of success against a certain base, like revenue per employee. A great way to fluff up your performance. In my case, if I correct my time of 1 hour 16 minutes (1:16) with my overweight, it compares to running 10k in about 1 hour, which is really not bad! Also, it was hot. Does that count for something, comparing performance to other occassions in better circumstances?

Measurement system
I use the Nike+ system that counts every step and sends the data to my iPod. Distance, speed, etc. is based on the average step-size. I reckon the system has about a 7.5% margin of error. So when my measurement system said I did run 10km, I still had 750 meters to go. According my definition of 10 kilometer, I did that in about 1:11, which is nicely on target of what I usually run. And as long as that is the only system of measurement, it is fine as long as the margin of error is consistent. One measures improvement (or not), even if the basis is wrong. So in a sense I did make my target of 1:11, as it was based on a different system of measurement.

Measurement tells you about the person measuring
Measuring a subject itself already causes a change in behavior of the subject. Also, any measurement system shows the hand of the person measuring. Choice of metrics (objectives), or relative position (from where was something measured). For instance, I measured that in the beginning of the run I was mostly overtaken by men. Later on, I measured I was mostly overtaken by women. What does that tell? That on average men run faster than women. But it also tells you something about me. I don't run terribly fast (in fact, I was amongst the last to finish).

Rhythm helps driving performance
I have been writing many times about how quarterly closings are a completely artificial event, that should not impact discounts, etc. The shoemaker charges the same price for fixing your shoes, whether it is March 31st, or April 1st. However, I have noticed there is something to be said for a periodic pace of business. A rhythm helps. I noticed that one song particularly (Eminem - Lose Yourself) kept me going. The rhythm was perfect, it gave me energy and the beat really drove me forward.

Synergy
My time this year was worse than last year, when I ran the race in 1:14. Then again, I didn't train that much, as I have spent most evening and weekend hours on writing on my new book. Ironically enough, the book is on dilemmas. So is this a dilemma? Spending time on writing versus time on training? The book actually argues it is important to find the and/and situation. How can you do both at the same time? Being so energized working on the book that I automatically run more as well? Alas, practice turned out to be different. Time truly has proven to be a constraint. Then again, synergy was achieved, I did come up with the content for this blog while running...

Lastly, measurement is about learning, closing the loop. That means this blog is about learning how to learn, which in terms of Argyris and Schoen is called 'double loop' learning. Another reason why "singelloop" doesn't translate as "single loop"...

frank

The start of the conference couldn't have been better. I check into the hotel, get into the elevator and am standing next to... Henry Mintzberg. He is one of my heroes, his work "Strategy Safari" was one of the best strategy books I've ever read. I was so perplexed I didn't say "hi" or anything. Then again, can the gentleman please have 30 seconds of peace and quiet in the elevator, people are bothering him all the time.

The number of presentations was overwhelming, covering every conceivable management topic. I was happy to see that the conference guide has contact details of all presenters, so we can ask for their papers.

So Pietro, Toby and I showed our work on scenario-based strategy maps in a bit of a different style. Not a formal presentation, but almost a market. We had an 8"-4" board where we attached a number of slides to, and people were wondering around, stopping at stands they thought were interesting. We got good traction, have been busy all the time.

The bookstore was unbelievably big, with a full range of books from most large publishers. Shopped till I dropped!

Oh, and lastly, Henry Mintzberg did a book signing, so I got my autographed copy of his latest book and was even able to give him a signed copy of my book. Silly, but I had to...

frank

Data warehouse architectures have greatly evolved the last years. Where they used to aim at providing the management information for the managers in an organization, now they serve a multitude of stakeholders, also external to the organization. It is very common to give customers access to parts of the data warehouse, so they can manage their customer relationship with the organization better. The same goes with suppliers, who have access to information to improve their administrative and logistical integration. In short, the data warehouse has become a platform to service the complete value chain. This means that all of a sudden, database security becomes a major requirement. Not every database has the same capabilities here.

The second trend in data warehouse architectures has been to support closed-loop integration. Instead of weekly or daily batch updates, data is flowing in continuously, and is being integrated continuously. Moreover, the transactional systems that feed the data warehouse also become a target for the data warehouse, feeding back integrated information. Think for instance of call center and e-business systems that need integrated customer data coming from multiple product systems. The data warehouse increasingly serves as that central data hub. Updating and querying at the same time asks for database capabilities such as multi version read consistency and fine grained locking (an advanced form of row locking, originally meant to support transactional systems), that ensures that users get consistent results from queries even during updates to the data.

Further, with data warehouses becoming more operational of nature, performance tuning becomes a different game. It is no longer acceptable to have a star-schema-based structure without at least a normalized layer underneath. Closed-loop architectures require normalized data to match transactional data models, when data is denormalized the link with the operational data is lost. Further, performance tuning shouldn't come from denormalization, but from more advanced database and hardware techniques.

At the same time, traditional uses of the data warehouse, analytical queries requiring massive table scans, haven't gone away. The type of queries has become much more mixed of nature. Sometimes short random records are needed, sometimes large joins. Query management has become much more versatile.

Both trends combined (greatly expanded user constituency spanning the complete value chain, as well as operational use) also demand high availability techniques. Database does matter.

Interestingly enough, these exact points are made by vendors of specialty databases optimized for data warehousing only. They use specific techniques such as column-based storage, and proprietary hardware to deliver 'appliances', allowing what is often called 'active data warehousing'. Active data warehousing comprises the forementioned continuously inflow and integration of data. Still, the reasoning that this requires a proprietary database is flawed.

First, and I mentioned this already, because of closed-loop architectures. Transactional systems need to access the data warehouse as well. The data warehouse is not a one-directional street, or an information silo only accessed by BI tools. It has become an integral part of both the IT infrastructure, as well as IT operations processes and skills. Having non-standard hardware and database makes it harder to integrate the data warehouse in such an environment.

The second problem with specialized databases is the need for specialist skills. DBA skills are rare. And with growing demands for scalability, availability, and performance tuning, the required skills have become more advanced. Building specialist skills for the data warehouse only isolates the data warehouse DBAs, and makes it even harder to integrate the data warehouse in the IT infrastructure and IT operations. Having mutually exclusive DBA skills for operational databases and the data warehouse places a burden on IT budgets, headcounts and skills that are under pressure already. Advanced self-management techniques in the database helps bringing the ratio DBA per terabyte of data down. Again, database does matter.

The trends in data warehousing (more types of users, and a mix of operational and analytical use) favor Oracle. With extensive experience in both operational and analytical use, mixed query loads, security, availability, self management and advanced row locking applied to data warehousing are not a problem. That leaves one thing: the advantage of an optimized hardware appliance, for advanced performance tuning. And that's the Oracle Exadata Database Machine, however running the same Oracle database, leveraging the skills you already have.

One example that was given was the process around customers moving house. Simply optimizing that process is simple: once you know the customer's old and new address, you can immediately change that in the system, and send out a confirmation letter or email. Process optimized, costs saved, unnecessary steps eliminated, on to the next process. But hang on, what if you think this through? How to add customer value? Moving house from an health care insurance point of view is much more impactful. If you move to another city, you may need a new dentist, a new general practioner, new specialists, etc. Why not offer the customer to register them at a new doctor, and point them to the web site where other customers rate their doctor, dentist etc. Customers become a community. Another innovative thing, was that in its scorecard the insurer doesn't only measure the improvements in time, cost and quality for the company itself, but it actually has performance indicators on what it has achieved from a customer perspective. As logical as this sounds, this is a rare thing.

Lean and Six Sigma do not always have to be 'in the box', and simply about cost savings and operational excellence. Really thinking through what adds customer value is the key to innovation, and this presentation I attended showed that clearly.

Usually when we use the word innovation, it refers to improving products or services. Sometimes this is a gradual process, like adding functions to a software product or adding more customer service options (like self-service check-in for airlines). Sometimes innovation can be radical, such as the Nintendo Wii, which changed the game console market almost overnight, or flying cars that are currently being prototyped (a process that will take many years).

But innovation doesn’t always have to be products and services. Business models can be innovative as well. Look at the Apple iPod. Although the design and the user interface are very slick, the true innovation is not in the hardware, but in the integration with iTunes. Apple solved a fundamental dilemma in the music business. The existing business model in music--selling CDs--was declining in popularity. The alternative model, downloading music via peer to peer networks, had legal issues. Apply made downloading easy and integrated enough for people to actually prefer this over downloading music for free.

Another example of business model innovation is software-as-a-service (SaaS), or on demand. The true innovation is not in the license versus subscription structure (Capex vs Opex), but in opening up of new capabilities. Traditionally, only large companies can manage full-functionality software and deal with the global complexity. However, globalization and regulation do not differentiate between large and smaller organizations. The software that a smaller organization could manage would not provide enough functionality to handle their own complex globalization and regulatory issues. SaaS and related models allow smaller organizations to run fully functional software. The dilemma has been ‘broken.’

Business model innovation usually is about ‘breaking the code,’ where code would mean the way you usually do things--how you believe things work. Innovation is finding a way to eliminate those limiting beliefs.

This is the same way of thinking I’d like to apply to strategy, which is full of limiting beliefs as well. One of the most common misconceptions about strategy is that it's about making choices, about the either/or questions. As Porter says, either cost leadership or differentiation. Or, according to the value disciplines of Treacy and Wiersema, either customer intimacy, product innovation or operational excellence. Strategy innovation is about finding ways to do and/and, and eliminate those limiting beliefs.

I believe the Oracle strategy has done so. Remember the ‘$1 billion saved’ advertisements from a few years ago, where Oracle saved that much money by implementing its own software in a single instance? The cost savings turned out to be not even the most important result. Oracle’s efforts turned out to be the basis for the current innovative product strategy: ‘best of breed from a one stop shop.’ A complete and open product set, integrated using a common middleware layer. Choice for customers, without the burden of having to integrate yourself. Another dilemma broken. And with the single view of the customer that Oracle has established in its own business, we have global insight into what customers are doing.

There's operational excellence and product innovation and customer intimacy, and we can’t say one is more important than the other. They’re all equal parts in the Oracle mix. Strategy innovation in action.

"Executives are treating the financial element of the four as an outcome, rather than an essential and fairly equal indicator to the other three dimensions, we should agree that financial performance, over the course of developing the remaining tree elements should take a parallel growth, hence finance should become a forth indicator rather than an outcome"

I agree. In fact, how you describe the four perspectives was exactly the way how they were visualized in the original balanced scorecard between 1992-1996. Four perspectives grouped around the overall objectives. Then it changed, when the strategy maps came, and the perspectives were visualized as having cause-and-effect relationships. Growth/Learning is needed to keep your processes up to date, which leads to happy customers, and financial results are the outcome.

What I like better about the original visualization, is that the 4 perspectives can have conflicting requirements, instead of cause-and-effect relationships. There is a clear conflict between growth/learning and process, called "innovation vs optimization", or between financial and customer, called "value or profit".

Thinking about these conflicts is much more profound than figuring out the cause-and-effect relationships (if these even exist, instead of correlations). This is one of the main topics of the book I am currently working on. Interested? Check www.frankbuytendijk.com and take the survey.

frank

So what’s the good news? I think performance management will play a leading role in weathering and solving the crisis too. The economy, despite all the mathematics, in the end is a social science and is influenced by human behavior. What was damaged the most in the beginning of the recession was ‘trust’. Financial institutions trusted the mathematical models too much. When the economy collapsed, the banks didn’t trust each other anymore. This impacted consumer confidence and trust, and the financial crisis impacted the real economy.

Rebuilding trust is the key to ending the recession. Consumers must regain trust to buy houses and cars again, which will fuel the real economy and restore the financial system. The path to trust is transparency; which is exactly what organizations should invest in.

Claire Carradice shares valuable trust lessons from Siemens. Mike Malwitz describes the role of XBRL. John O’Rourke will discuss IFRS. Thomas Oestreich looks at reputation risk, as part of risk management, and Angela Enyeart discusses how to ensure sustainability within your operations. Toby Hatch and Mike Haley discuss an interesting concept called ‘collaborative scorecarding’. Mark Conway will – as always – provide some interesting links to enable you to further dive into the subject. In my opening article, I will explore the concept of trust itself.

Download the Journal of Management Excellence here.

frank

PS. Previous issues of the Journal can be downloaded at http://www.oracle.com/solutions/business_intelligence/resource-library-whitepapers.html

A few weeks ago, I had the pleasure of meeting Howard in London again, and it wasn’t all friendly chit-chat, I also did a hard-hitting interview with him. As he is the father of BI, he also has a few things to explain! As I wrote in an earlier blog, you could argue BI partly caused the credit crunch. Analytics on risk portfolios that weren’t understood, performance measures linked to extreme bonuses that caused irresponsible behaviors and too much focus on compliance reporting as the business case. I wondered what Howard had to say for himself ;-). Furthermore, I was curious if Howard felt if all his predictions had come true!

If you want to watch the interview, go to www.epmtv.eu!

I wasn’t in the room during those workshops that led to defining the four perspectives, but I have a hypothesis how it could have happened. In figuring out which non-financial areas to pick, someone may have mentioned the three value disciplines from Treacy and Wiersema: operational excellence, product innovation and customer intimacy. Treacy and Wiersema state that organizations need to score sufficient in all these areas, and need to excel at one.

These three value disciplines map 3 of the balanced scorecard perspectives perfectly: process, growth/learning (innovation) and customer. The fourth perspective had to be the financial outcome of those perspectives.

If it didn’t happen this way, at least it shows the logic of the four perspectives, as they align with other established management theory.

PS. Please take the survey that is part of the research for my new book on www.frankbuytendijk.com.

But what about the opposite of analysis, called synthesis? Where analysis helps with straightforward problems taking them apart until you understand all elements (per definition an in-the-box activity), synthesis helps connecting different elements and create something new (an out-of-the-box approach). This is particular helpful when the business problems we deal with are not that straightforward and clean anymore, like dilemmas often are.

Sure, we all find this important, but think this is "creative" and "unstructured". But the process of synthesis is equally structured, and there are techniques that help dealing with dilemmas.

This is the topic of my new book, that I am currently writing. Taking business intelligence into an entirely new direction. Please take the survey at www.frankbuytendijk.com, and share anonymously how you think your company is dealing with its strategic dilemmas. As a "thank you" you can download a paper that was recently accepted by the Academy of Management, and was also accepted by the Performance Management Association (PMA) earlier this year. And if you contact me directly, I'd be delighted to share with you the thinking that led to the survey. But I wouldn't want to bias you responses too soon.

So please take the survey first, at www.frankbuytendijk.com !

Best regards, frank