Welcome, everyone, to the executive
seminar at Weatherhead School of
Management on enabling IT value
through enterprise architecture.
I think we're going to have
a great seminar today.
We have some really distinguished
speakers and panelist today.
And I want to talk a little bit
about how this seminar came out to be,
the background behind it.
I'm an enterprise architect
at Westbuilt Insurance.
And I suspect as most enterprise
architects, I did not start off as one,
I developed into the role.
[COUGH] And
as I was developing into the role,
I read up a lot on
enterprise architecture.
[COUGH] And there were glowing remarks
about it being the nexus of business and
IT, the enabler of corporate strategies
and all kinds of wonderful things.
And I thought to myself,
this is great [COUGH].
I'm going to be in a profession
that is going to be really helping
out companies realize their
corporate strategies [COUGH].
And then came across Jeannie Ross's book,
Enterprise Architectural strategy.
And there are numerous examples in this
book of companies that have successfully
leveraged enterprise architecture to
enable their corporate strategies.
Well worth a read.
However, there was an outset
of messages I also heard.
Companies that were having real
struggles [COUGH] realizing the value
from their enterprise architecture teams.
And some of the companies
that I worked for
sadly were going through that struggle.
[COUGH] I'd go to Gartner and Forrester
conferences on enterprise architecture,
and constantly the message
will be coming through.
Companies that have EA teams
are struggling to get value out of EA.
The Carter Group recently had a survey
published, [COUGH] where they showed that,
they had interviewed a number of
companies, or surveyed a number of
companies on the value that they
got out of enterprise architecture.
And only 5%, amazingly 5%,
said that they felt that they
were getting real value out
of enterprise architecture.
So, of course it begs the question,
why the other 95% have
an architecture group at all.
[COUGH]
But it creates a puzzle because here is
this function that is supposed
to be the nexus of business and
IT, and the enabler of corporate
strategies and all of these things.
And yet,
most companies are struggling to actually
realize value out of this function.
And my colleagues and
I talked about it, and we said,
how about we have a seminar
to discuss this topic.
In fact, let's invite Dr.
Ross here to talk about the companies that
she has worked with that have
actually realized value.
And then a number of other speakers
who have started some environments
in which it has worked, some environments
in which they are still struggling.
And then have a panel discussion on the
challenges of leveraging enterprise
architecture to gain value.
And I'm sure we won't answer
all the questions today, but
at least we can get a discussion going.
So, that was the basis for the seminar.
I want to thank Case Western Reserve
University for hosting this event, and
for the great spread and facilities
they have put together for this.
And the event is sponsored today,
including your free lunches and
everything by a number of companies.
I want to particularly acknowledge
them for enabling this conversation.
There's IBM, Highland Software,
Progressive Insurance,
Wipro and a company that I work for,
Westfield Insurance.
So, let's give a big hand
to our event sponsors.
>> [APPLAUSE]
>> The organizers,
Case Western Reserve University,
Dr. Kalle Lyytinen,
did a tremendous amount of work
getting this seminar off the ground.
And extended an invitation to Dr.
Ross to come and speak here.
So we're much obliged.
There is the Northeast Ohio Society for
Information Management.
I'm not sure if Laura Rusick is here.
She reached out to a number of people.
And I think we have as big a list
as we have because of her efforts.
And then the Northeast Ohio IT and
Enterprise architecture group.
Nour Laaroubi,
my colleague from Westfield Insurance.
Myself and Bruce.
Could Nour and Bruce just stand up please.
Thank you.
And since I'm with New IT,
I'm going to plug it a little bit.
It's a group that we started
out to promote IT and
enterprise architecture
here in Northeast Ohio.
And I would suggest that
you talk to Bruce and
Nour about joining this organization
if you have an interest in
enterprise architecture and promoting it,
and having a conversation about it.
They will be available during the breaks.
We got some excellent support from
Case Western Reserve University.
Some folks I want to recognize.
Stacey Manns, who did all the event
coordination, the binders and
everything you see was
coordinated by her and the room.
Laura Watt who was responsible for
the room and the audiovisual.
Veeresh Thummadi and
James Gaskin who were manning
the registration desk when you came in.
And Andy Fabian who is
doing the event video.
And I've also been told to
recognize Dan who was a director of
audiovisual who setup all the heavy
equipment that you seen in the room.
So, a round of applause for
them as well, please.
>> [APPLAUSE]
>> Next
we are going to hear
from Fred Collopy who is
the Senior Associate Dean for
the Business School.
>> I just wanna welcome you on
behalf of the faculty and the staff,
the students who have given up
their lounge to Weatherhead School.
And this kind of moment is
really our school at its best in
that when ideas that have been developed,
thought about, wrestled with in often
academic environments and contexts.
Have an impact on value in the world and
bring together large groups of people
who have to make the world work to talk
and interact and engage around those.
We think we're at our best and
we're honored and
pleased that you're here and that you
want to engage in this conversation.
We really appreciate Kalle as a long
time colleague on this faculty,
who makes things happen.
We appreciate Jeanne Ross for
making the trip here and
for her ongoing friendship
with our department.
And without any further adieu,
I give you over to her.
Thank you for being here, Jeanne.
>> Thank you.
>> [APPLAUSE]
>> Well, good afternoon.
I have to tell you I am really,
really delighted to be here,
my idea of a dream afternoon is
being in a room full of people who
wanna talk about Enterprise Architecture.
And I have to tell you, that would
surprise my mother I don't I don't think
there was any time in my childhood that
there was any indication this was going to
be my fate but
it's really a thrill to be here.
And I never really, I thought it was
interesting that Benku kinda found
the enterprise architecture and said, wow,
look what I have kind of stumbled into.
I had the very same experience when I
started studying enterprise architecture.
It was never my intention to
study enterprise architecture.
In fact, I had studied it for
five years before I gave it a name.
And thought I had come up with such
a great name only to find out that it had
been a name that had been around for
a long time.
Zachman and others had created the concept
probably ten years earlier than I had.
But it was a great synergistic moment
because we were coming at things from very
different angles and
getting kinda to the same place,
different perspectives
on the same concept.
And I do think that
enterprise architecture now,
is just out of place in history
where we got to get it.
It's time, and I agree,
Banku that we aren't there yet.
I didn't realize it was as bad as only 5%
of companies thought they were getting
value from it.
I thought it was ten.
But-
>> [LAUGH]
>> So here we are, and
I think the phenomenon is so
interesting because we in so
many ways accept that we
are in a digital economy.
We talk about it all the time.
We take it for granted, and yet companies
as a whole have not really adjusted.
Because before the digital economy,
people just got things done.
If something went wrong,
no problem somebody would figure it out,
they'd fix it.
In a digital economy, that doesn't work.
In a digital economy everything
is moving digitally, so
if we haven't architected our systems and
processes and information properly,
something goes wrong, and it's just
playing wrong, it's not gonna work.
So it's time for
companies to get serious about this.
This is not something we can think about
whether we want to get value from it.
This is something we have to get right.
I call this part competitive advantage,
you might say, for survival.
And this is our great challenge.
Those of us in the room today,
our next great challenge is
making sure everybody gets this.
Because I would say in general,
people don't.
Now, I know, I think it was Bruce last
night said that you had worked at bringing
non-IT people here, but that it was
hard to generate that kind of interest.
Can I just see whether they
had any success at all,
any non-IT people in the room?
Thank you for coming, we have three.
Okay, [LAUGH] percentage is small, but,
Bruce, I think you can pat yourself
on the back, you had some success.
And so here is the thing,
next year we want that percent up.
I think that's the simple mandate here
is that somehow we have to make clear
that as long as enterprise architecture
exists in IT, it's not going anywhere.
This is our problem.
IT people get it and they've treasured it
but they've also hidden under the barrel.
And our job at this moment in
time is to get it out of there.
So to a large stand,
that's what I wanna talk about today.
I'm gonna do a mix of all the new things.
I thought a bit about my sights and
realized I had too many.
So there a few I'm just gonna zip by,
they are the ones that are in the book and
other material I've written.
And so I wanted to get kind of up to them,
kinda through them quickly and
then close with where we're going
in our research these days.
I just wanna do a time check.
Collie or whoever is in charge,
what time am I acquited?
Am I acquitted at 2:15?
Anybody say yes?
>> [INAUDIBLE]
>> A little bit more?
Okay, all right, and the other thing
I wanna do is keep this interactive.
It's warm in here,
I'm real nervous about you falling asleep.
So just feel free to jump up and
down, say anything you want, and
we'll keep this lively, okay?
All right, so before I start,
I do have to thank my research center and
any sponsors who might be here today.
The Center for
Information Systems Research is part
of the Sloane School of Management.
We've been in existence now for
over 36 years, and
during that entire 36 years
we have studied one question.
How do companies get value
from information technology?
And I know you business people are going,
thirty-six years,
one question and
you don't have the answer yet?
That's because if we found the answer
of course, there would be no reason for
our existence.
So we just keep plugging along and
we could be around for another 36 years,
the way we see it.
But I do wanna thank our 80 sponsors and
patrons,
who have made our research possible.
And are any of you in the audience,
any sponsors out there?
>> NASA.
>> NASA how wonderful.
Okay?
>> IBM, no.
>> Microsoft, sorry,
that was really a mistake on my part.
[LAUGH] All right, so thank you all for
your support over the years.
And they make our research possible.
Okay, so here's our fundamental
dilemma as I see it.
Is that the reason architecture is so
important is because it makes us agile,
it allows us to be agile.
And part of the reason it's been
a hard sell is people don't get that.
So they get that maybe you
could save us some money.
They get that it might
mitigate some risks, but
they don't quite get that
it will make us agile.
And fundamentally,
that allows us to survive,
if not thrive, in a digital economy.
So our dilemma is we have to sell agility.
And it's not an easy thing to sell,
because people have trouble
getting their arms around it.
And note that the way we think of agility,
is just the ability to regularly use
capabilities to generate new business
value while limiting costs and risks.
So it's this idea that we
get things in place and
basically they become new habits,
successful habits for the digital economy.
That's what we're trying to get across and
it's a kind of gooey idea.
So what we're trying to do
is add some substance to it,
make it real for business people.
And as I note in the final statement here,
we cannot drive benefits if everyone
in our organizations is not on board.
And I think,
what we've tended to do is give up, okay?
I go well, okay, everybody doesn't get it,
I'll do what I can do.
Actually, wrong answer.
What we've learned from
the people who do succeed,
is they make the most important
thing getting everybody on board,
even though it is often
the most frustrating thing.
So we're gonna talk a bit about how we're
going to get everybody on board with
enterprise architecture.
Because I think you already
know once you accomplish that,
really good things are going to happen.
So let's talk about how we're
going to make that happen.
First of all, I think there's three very
important question we have to ask every
business person.
The first question is, in your firm,
how long do business strategies last?
How about in your firm?
How long does a business strategy last?
Sir?
>> Three years.
>> Three years.
Ma'am, how long does
one last in your firm?
>> Five.
>> Five years, that's pretty good.
In your firm?
>> We're not really good at
making business strategies.
>> You don't even have
business strategies.
This is also a fundamental problem.
Yes, so maybe Maybe a year,
maybe three years, maybe five years,
anybody would say twenty thirty years?
In your organization?
No, okay, so we're going to talk it,
three to five years.
In your firm, how long do you typically
use a system once it's in place?
Twenty years?
Twenty five years?
Thirty years?
Right?
Yeah forever.
Okay so
here's our fundamental disconnect, right?
How do we align IT with business strategy?
How do you do that?
Let me see if your firm is like both,
go ahead.
>> [INAUDIBLE]
>> Aha, and how do those get started?
Who has the ideas for those?
>> Generally business people [INAUDIBLE].
>> Okay.
So a business person has a great idea.
It's associated with some strategy that's
gonna last three to five years and
they have a great idea for a system
that will enable that strategy to work.
And how long will that be before
you get the system in place?
>> Three to five years, okay.
>> [LAUGH]
>> Okay,
I think I don't have to
explain that anymore.
So this is what we get.
This is what we get we get.
We get a system that delivered
on a great idea, and
another system that delivered on a great
idea, a strategy, we'll call it.
And another one and
another one and another one.
And of course this is
a very simplified picture.
And so we have all of these systems
that are aligned with strategies that
no longer exist.
We then got some more strategies and
what we realized was that this system
was gonna have to talk to this system.
And so the IT people tied it together,
they wired it and
then other things had to
talk with other things and
the next thing we knew all of our
systems are wired together, right?
They work this is the amazing thing
they work but they also are very messy.
And this is not just our system world.
This is our business processes.
This is how we do business.
And then we wonder why things go wrong.
Why is the data bad?
Because this is the way we function.
And I will argue that it
is because we align IT
with business strategy and
not the reverse.
There's our problem.
We align IT with business strategy,
not the reverse.
Now how are you gonna sell this one,
right?
Okay.
Let me give you some idea.
So obviously nobody wants this.
I once showed this picture to
an architect at an investment bank and
he said to me,
yeah yeah that's about right.
And he said 80% of our code is the wires.
80%.
And then he paused and
he said it is a miracle our systems work.
Think about it.
It's a miracle our systems work.
So all of us IT people miracle workers.
Not the fate we really want it.
So I would argue what we really
intended to have emerged
from all those systems that were aligned
with strategies was something like this,
I call it a digitized platform.
The idea being that,
we have this core underlying
infrastructure on which we have.
This set of, excuse me, shared technology,
shared application,
shared data, shared processes.
It's the essence of our organization.
The things that we just have
to get right all the time.
I mean there's nothing
glamorous about this.
This is basically our core
transaction processes, or
one way of thinking of it is the things
in our company that are not changing,
or at least should not be changing.
We have customers, we plan to have
customers forever, if we're an airline,
we're gonna put people on planes, we're
gonna be putting people on planes forever.
So there's just a set of
things that in fact is stable.
If we're in an old industry, it's
probably a lot of things, big platform.
If we're in a fairly new
technology based industry,
maybe it's new enough that the platform's
actually fairly minimalist.
But part of what we're trying to
figure out is what's stable about our
organization and
how do we wire that in very neatly so
that it just works every time?
Management shouldn't pay any attention to
it, because it works, and then they put
all of their attention on the things that
they can do to make themselves unique.
This is what we're aiming for, right?
So what we're looking for is a digitized
platform that takes care of making
us a digital business, that ensures
that our transactions will be accurate,
consistent, high quality, low risk.
That's what we're looking for.
And in some companies
this is one big thing.
I mean,
in some companies this is SAP, right?
And other companies
it's highly customized.
But in either case we should have
some kind of digitized platform,
unless we're such a new business that we
can't quite figure out how we're gonna
succeed as a business,
in which case this won't do us any good.
But once we're kind of established,
we have to be efficient and
all that, we need this to
survive in a digital economy.
Okay, so if we look at UPS,
we get a good sense of how this works.
In 1987, UPS,
which has been around for 80 years,
is being challenged by Federal Express.
Not because Federal Express is
better at delivering packages,
but because Federal Express
can track them.
And UPS goes, what a dumb idea.
What would a customer wanna know
where their package is unless it's in
their hands?
This their attitude for two, three years.
And then one day the CEO wakes up and
says, nope, our customers care.
They want package tracking.
So he goes out, hires his first CIO,
and he says Frank,
I want you to build me
a package tracking application.
Now Frank, who was actually expecting
to become the CFO, says, I don't know
anything about package tracking
applications, or IT for that matter.
I'm gonna go study this.
So he goes off and he studies it, and
he comes back to the CEO, and he says, Oz,
I have an important message for
you, and the CEO says, what's that?
He says, you don't want a package
tracking application, and
the CEO says, of course I do,
that's why I hired you.
And he said no,
you want a package tracking capability,
What's the difference?
And he said well,
a package tracking capability begins
with a package database,
one, forever and ever.
And of course, this is the first
he's ever really thought about IT.
So he goes well yeah,
good idea, of course.
And he said, no, you don't understand.
It will quickly not be just one, unless
we make sure that anybody who ever needs
information or has data that goes into
our systems, can get to the one database.
And he says, sounds good.
So that means global telecommunications,
okay, it means everybody
who is running around and needs to get to
data can get to it, handheld device, okay.
And then only then does it
need an application, got it.
Of course the only way this can work
is if everybody who puts data in and
gets data out does it the same way or
we're going to destroy the data.
And it all made sense because
UPS is the world's leading
industrial engineering company.
So they completely got this.
So off they go,
they already had standardized processes.
That's really a huge benefit
when you're putting this in.
And the next thing we know, UPS, $11
billion later, has a digitized platform.
This, we believe, is what every
company eventually wants to build.
Now UPS was lucky in the late 1980s.
It didn't have much legacy.
Now this gets harder and harder,
because most of the companies that are
trying to build this are building it in
an environment where they have
to tear a lot out and put it in.
So it's a more gradual experience.
But this, I would argue,
is what every company needs in order
to function as a digital business.
Now, here's what's gonna
challenge our efforts.
We are obviously in a world
where every day we have to be
innovating with technology.
And as we do that,
there is a real likelihood that we're
just gonna keep building
things that everybody wants.
And we're gonna create that
mess that I showed you,
I call it the cold spaghetti diagram.
So here's the cold spaghetti.
I call it that because of course
if I try to extract anything,
there's a huge risk that
I'm gonna break it.
So here's my cold spaghetti diagram,
and that does not make me agile because
anytime I need to change something,
I'm gonna have to figure out how to
extract something, put something new in,
and not break anything.
If I want this, these individual
innovations to make me agile,
I gotta go about this by taking
individual innovations that
are gonna contribute to or
leverage my digitized platform.
And the only way I'm gonna succeed at
that is if I go through an architectural
compliance process.
Figure out how these pieces fit together,
or say to myself,
I'm really talking about a totally
different part of business.
So I'm really not gonna relate it back
later to everything else in the business.
I have that option.
Okay?
So this is how we want our entire
organization to be thinking.
If we can get them all thinking this way,
we can build a platform,
we can leverage a platform.
And that means we gotta get them
thinking about architecture.
And notice, I wanna make sure that
everybody understands that architecture
is the design of our IT and
business process capabilities.
It's the blueprint for
our process and IT capabilities.
If we can get that language across as
opposed to letting people think that this
has something to do with,
say, technology standards,
which if we go deep enough it does,
but they don't even know that.
This is about designing how we're gonna
get the organization's business done.
That's what we're designing, okay?
So in essence provides the design
of our digitized platform.
That's the kind of the simple way of
thinking about enterprise architecture.
Okay, so some of you would
have seen this picture before.
Let me just explain why I
think this is important for
every business person to understand.
We want business people to understand
that when we are a brand new business,
we're looking for good ways to make money.
And we're gonna respond with any kind
of technology solution that works.
We're just gonna build it.
And that's gonna be cool because
if we're lucky like Google,
we're gonna make a ton of money
doing this kind of thing.
But after a while we try this,
we try that, we try that, we try that.
We respond to another moment.
We acquire another company.
The next thing we know we have a mess.
And then we say, now that we've
kind of figured out our niche.
We've got competitors, they're coming
in with a cheaper business model,
we've got to become efficient,
we've got to get faster.
That means, we're gonna have
to clean up our environment,
our spaghetti,
we start with a technology piece of this.
I actually thought companies were
starting with the technology piece of it,
just because it was easy.
It was a scapegoat, let's just blame IT,
our systems are a mess,
our processes are a mess.
Let's just say it's ITs fault,
we'll blame them.
But I've learned that actually
that might be part of the story,
it's not the whole story.
The rest of it is, you can't build
a company to rely on technology
if IT is not deploying world class
processes and methodologies.
So you really have to do that first.
It actually is essential.
So all the effort we see going into
ITIL and all that kind of stuff,
very well spent because it provides us
with the underlying technology capability
to be a digital business, but
it's certainly nowhere close to enough.
Once we get kind of our core technology
capability in place, then we become
a digital business by defining and
building that digitized platform.
And for some companies,
this is pretty simple.
We got the diversified businesses and
there's not a whole that we
want them all to do the same.
So we're not talking about a lot of
standardization across the entire
organization but we want to say a platform
of shared services to cut out cost and
enable requirement.
So, that's kind of the simplest into where
a package delivery company where every
single transaction could at sometime
be affected by some other transaction.
So everything in the company has
to be end to end, integrated,
standardized disciplined the whole bit.
So the third stage is very different
depending on who you are but
in the end,
you're building a digitized platform.
And then we get to this stage
where we say, all right,
we kinda got the core in place.
How do we drive benefits from it?
How do we start to find
the components that if we reuse them,
we become a really successful business?
That's our fourth stage.
And we have studied now
around 75 to 100 companies,
I've lost track,
going through these stages.
The mini and sometimes maxi
case studies of companies going
through these stages, and
they fundamentally transform.
They are totally different businesses
by the middle of the third stage, when
they really start to get their platform in
place, they are fundamentally different.
And notice, there are companies
that go out and put in SAP and
never really fundamentally transform
themselves, they go backwards.
Then there are other companies that say,
we're putting in a platform and
they behave differently and
they reorganize themselves and
they think differently,
they're ready to go for it.
Now these stages we've learned are
actually really important to understand
because if you decide you just wanna
be a componentized modular business,
you would be inclined to
go from wherever you were.
Let's say stage one to stage four.
And in fact, I had an investment banker
to tell me he was gonna do that,
he was a CIO, and he said,
I got this figured out.
I can't get the business
leaders to take any interests
in disciplining their thinking,
there's just no interest in that.
He said, they don't wanna work together,
they don't wanna share data, they don't
wanna think alike, they don't wanna
standardize any processes, but they want
a single face to the customer and they
wanna operate like a digital business.
So we're gonna skip from stage one to
stage four by putting in web services.
Because you can take these little
components and you can reuse them.
I went that's an interesting idea.
I wanna understand how that goes,
so I'll be back in two years.
So two years later, I went back,
and I talked to his successor,
>> [LAUGH]
>> And he said, yeah, those web services,
that was a dumb idea.
He said, you can make web services,
you can make thousands of web services,
the trick is getting them reused and
of course, it is.
I don't have to tell this
to an enterprise architect.
So our problem is that we have
to go through the stages but
the real Bonanza is really at the end.
That's where we get the operational
excellence, the business agility,
the managerial satisfaction.
And we have done multiple statistical
studies on this, and it's really true.
All of those things go up as
companies go through the stages.
But the good news is,
they start going up right away.
As soon as you start disciplining
an organization, and
make them think about architecture
in that second stage,
your performance does start going up,
you do not have to wait till you're done.
So I would argue that this is
a journey that is well worth while.
I did once have a CIO say to me, Jean,
I do not believe you that you have
to go through all those stages.
We were in stage one,
we put in SAP, to get stage three.
I said, did that work?
She said well you mean the first time,
the second time, the third time or
the fourth time we put in SAP?
Think about it.
This is the pain we put our
organizations through if we don't
quite get what we're doing, right?
So here's what we've learned.
Now these are our latest numbers.
We collected these last
fall with CIO Magazine.
Trying to do understand where
companies are in the journey and
you get a sense of the distribution.
This is a huge progression, I probably
should have put in the 2007 numbers,
but it's a huge progression
from three years ago.
Three years ago,
we had 2% of companies here and 27% here.
So we had fewer than a third of
the companies had really made progress
on a digitized platform.
And now we see significant movement.
The reason this is notable I think is
it means that more and more companies
are building platforms and thus,
it is becoming a competitive necessity.
The problem we run into is that
it is possible to slide backward.
You go out and acquire another company and
you probably will.
So this is not totally ensured that
you'll just keep moving forward and
you'll get really good at
reusing your components.
But this is the journey that we are on.
Okay, now I wanna go quickly
through a few slides.
Before I do that are there any questions,
comments, challenges to any of this?
Okay, I just wanna slip through
a few slides here quickly.
The main point of this slide is part
of the reason we're gonna have trouble
convincing business people about the
stages and the journey they need to go on.
And the reason they have to care
about enterprise architecture
is because it hurts.
When you are in stage one, you're a
business person that gets to go to IT and
say this is what I want,
I've got the money, you do it and IT does.
Many IT organizations have described
themselves to me as order takers.
This is our job,
in stage one that is exactly the job.
When we get to stage two,
we already have IT pushing back,
ITs saying things like well we
have our technology standards.
We can do this for you, but we can't
quite do it the way you want it, but
not to worry, it'll be good, but
in effect, we're saying, IT is
gonna push back, you're gonna get the 80%
solution instead of the 100% solution.
And the immediate reaction is,
I don't like that.
Why should I do business that way?
Now, most business people will get over
that pretty quickly when they see that
it's lower cost and faster, but
the immediate reaction is quite negative.
Then, what tends to happen, and
I think we've learned a lot, so
it doesn't always happen, is there's
this awful moment where we say, and
now that we've got the technology base in,
we're gonna put in something big like SAP.
We're gonna rip out everything you ever
knew and we're gonna put in new systems.
And you're gonna do it the way we tell
the entire organization to do it.
And it might be a lot of processes or
just a few,
it doesn't matter, they don't like it.
And so we show they're kinda
attitude there towards
architecture maturity as very
negative in this third stage.
It turns out that if you
get through it okay,
if you don't give up, you do rebound,
and we don't have enough history yet
in stage four but
we suspect that red line goes very high.
There is a sense that life is good again.
We got this base that we don't
have to worry about, and
we have these opportunities to do new and
better things.
Yeah?
>> [INAUDIBLE]
>> Yes.
>> [INAUDIBLE]
>> Yeah.
>> [INAUDIBLE]
>> Yeah,
well, so
a couple things are going Going on here.
When we get to the third stage,
we have certainly seen some corporate
decisions that are not quite sensible.
So we're just gonna put a SAP out there,
everybody's gonna behave the same,
there are no real differences,
they should just do it our way.
And in fact, it's just not enlightened,
it's not really true,
there are differences.
They're important differences, and you
shouldn't be doing that to the business.
So part of this, reflects a very real
situation situation where people
are trying to do things that don't
make sense for the business.
And I think part of the answer to your
specific question is we gotta be careful,
we gotta be careful about our reach.
And if we try to do either too much,
things that shouldn't be done,
we're gonna run into problems.
If we try to do it too fast
we're gonna run into problems.
And if we try to include things
that we could just say, well,
there's some You need things there,
let's do 80% not 100%.
Let's unusual things go on,
because we're gonna start defining
how we're gonna do business.
It's good to keep experimenting with other
options, and we should keep that straight.
So sometimes it really is that
we've defined the vision badly,
and we just kind of bulldoze in there, and
try to make it happen, and it shouldn't.
So I think that's part, I think
the answer's really more complex than
I've just given, but
in the short one I will go with that.
So sometimes for
good reason sometimes for bad reason,
the people involved in this
are really pushing back.
And when I first started studying
PRP's in 1997, I was told I was
gonna find huge resistance because
people don't wanna change.
I will tell you that is not what I found.
What I found was huge confusion,
because people didn't know what
the heck was expected of them.
That's what I found,
they wanted their company to succeed.
And sure there's exceptions to that, but
realistically people want
their business to succeed.
And to just say it's resistance is really
over simplifying the problem here.
As one business person told me,
you know, I get why we did this, I
get why we totally transform that company,
I get why we changed all our systems.
And in the future it's gonna be great,
but I have to tell you the experiences.
I have been here 27 years,
I learned a lot about this business, and
I retained it, and
I felt smart about the business, and
when there was a problem
I knew how to solve it.
They took all of my knowledge, and threw
it in a dump, it's gone, it's worthless.
And now,
they're trying to teach me new things.
They give me a week's worth of training,
they tell me to go off and do it.
I don't know what I'm doing.
I don't know what I'm doing, and
we're asking about resistance.
So part of this is effective
change management,
and I'll talk in a minute about
Campbell when we get there, okay?
This is too busy slide for
me to spend any time on.
But the point it was supposed to make
is that it will be a transformation.
We're gonna change the way we spend money.
We're gonna change the way
we think about IT.
We're gonna spend the amount
of money we spend on IT.
This number I think is stunning.
We did this on a consumer
price index basis and said,
well everybody saves money in stage two.
We spend less on IT in stage
two than in stage one.
Because in my most cases,
the reason you even went to stage two
is business got frustrated with IT,
fired the CIO, and brought in
somebody who promised to cut costs.
And so they did, and
it turned out to be a really good thing.
Because business people were told, well,
there's no budget for this, that and
the other thing, and
suddenly they had to curb their appetites.
Then we went off and we built some big
platform started spending more and IT, and
by the time we got stage four we
were spending a fortune on IT.
But here's the good news, nobody minded.
By then they're all going, wow, IT is so
valuable to this firm that they've
expanded IT's responsibilities that
includes manufacturing shop controls.
It includes operations,
it includes business process outsourcing,
it includes all kinds of things.
So we are spending more on that IT budget.
But the IT budget is defined so
differently,
we just don't think about it anymore.
It's not that we don't think
about how much we spend anymore,
we don't think about it the way
we used to think about it.
So this is what we're trying to
take our companies through, and
in the process, we are gonna learn a lot
about how to do business differently.
And I'm gonna summarize this whole thing.
I'm glad they handed it out, because
if I had to explain this whole thing,
it would take a lot of time,
but you can reference later.
The essence of this table is
that your world changes, and
you stop thinking about
one project with one ROI.
And one person leading the change to how's
our enterprise gonna behave differently.
And how are we fundamentally gonna
rethink things so that we do enterprise
strategic priorities instead of
individual strategic priorities.
How are we gonna make that happen?
Because this is not easy,
it's a learning process.
We're gonna learn it by acquiring
entirely new competencies.
So the companies then, like I said,
it's about 10% now that are good at it,
11% if you look at our statistics there.
What is companies have, are competencies
that others are just starting to build?
They actually have a competency in
architectural planning and design.
We have this concept we
call the operating model,
it says to senior management
just tell us two things.
What do you want standardized
in this company process wise?
What do you want standardized,
and what do you want integrated?
Just answer that question,
what do you want standardized,
what do you want integrated?
It turns out companies in the fourth
stage can answer that question.
Anybody in that company can
answer that question, but
most companies never
stop to think about it.
And so it's very hard to build systems
that create a platform when you don't know
what you want integrated and standardized.
That's the essence of the challenge.
The second competency they've built
is around project management.
They have a lot of discipline,
they know how much value they
are getting from their projects.
I once interviewed a CTO who said,
you know I just started this new job and
I said to the IT people.
So how did we do in this company last year
on delivering the business case for
each of the projects?
And they all said to me well,
that's not our job,
we just deliver and
then business drives the value.
And she said, yeah,
how much, how did we do,
what percent of the new systems
delivered their business case?
She said they had no idea.
So I said well,
you have to go out and find out.
We need to know this,
this is a critical metrical.
So they did, they went out and checked.
What percent do you think
met their business case?
A quarter?
Zero, zero.
Why would any of them?
Nobody was checking.
And in fact, the extraordinary companies
start measuring the business value,
and tweaking their expectations about
the day that they start the project.
Every major stage gate,
they stop and they say,
okay, is the business case still right?
Is this still what we expect?
Is it still realistic?
Do we still care?
Because if any of the answers are no,
we gotta fix something.
We either stop the project, or
we change the expectation, or
we do something different.
We've got to be watching
this from day one.
There should be no surprise
when this thing is delivered.
And yet,
when we go from company to company,
this is the discipline we don't have
in most of our organizations essential.
The CIO at South West Airlines spend
every Wednesday doing nothing, but
going through projects with stakeholders
that need to be responsible for
the ultimate outcome saying,
where is this project?
What are the problems its having, what
should we be changing, do we need help?
Let's get these things done.
50 projects,
all 50 major projects in their
company go through these stage gates.
And they don't get any surprises,
there are no surprises there.
So I think this is the essence
of what we need to be doing.
Standards management,
they know how to define standards,
they know how to retire standards, they
know how to have exceptions to standards.
These are things we all work on.
There is a qualitative difference
in the companies who do it well.
And finally, IT funding,
we really do learn how to
fund enterprise priorities,
and let the rest go.
We learn how to say no, and
we learn how to get people together.
One of the case studies we've down that
fascinated me was at PepsiAmericas,
which sadly has been bought by PepsiCo,
so I can't study them anymore.
But their CIO started in 2001 on
an enterprise architecture journey.
And I was fortunate to get to meet
him very early in his journey.
And he was describing
what he wanted to do.
And the information that he thought
that was gonna be essential
to the organization, and how the company
was gonna have to recreate itself.
Because the design of the company at the
time was around truck drivers who would
load up their trucks,
run to little stores and empty them out.
He said, the model is broken because we
used to have 30 SKUs, and now we have 300,
and the drivers can't possibly
guess right, they just can't know.
Meanwhile, you've got Walmart, and
do not bring things to the store,
bring them to our warehouse,
and only the things we want.
We're not designed to do this.
So we say, we have to totally
change the way we do business here.
So he started on this journey of working
with senior management about his vision,
about their vision,
about how they were gonna do things.
And he said, at first it was awful,
I bring people together, and I'd say,
now together, we have to define
how we're gonna do business.
And he said, we had these 13 regional
managers because the company
had been formed by the mergers
of 13 companies, so 13 regions.
And they would get in the room and one
guy would say, okay, here's what I want,
Johnny you vote for mine,
I'll vote for whatever you want.
And that was the way
the whole conversation went.
And here's this poor CIO, who really
has vision, going [SOUND] no, but
he just kept working at it, and
working at it, and working at it.
He had great technologists developing new
capabilities, and then he'd go in and say,
now look what you can do, you can do
something you could never do before.
And ten years later, nine years later,
they were phenomenal.
They had an information backbone
with great data that from which
they were developing algorithms.
That not only improved their
performance in terms of
accurate estimates of how
much Pepsi they needed.
It enabled them to price it better
to differentiate TA by customer.
It improved their customers out
of stocks from 14% down to 3.
Their customers, they were telling
their customers what to order.
And they were doing all of this because
they had stopped thinking about what
everybody wanted and said, we gotta start
thinking about what our customers want.
That's the essence of what
we have to do differently.
And then we build this capability and
we learn how to operate appropriately, and
we introduced some process standards,
and then we introduced data standards.
And then we get people who care
about those data standards, and
then we start using the data, and
that helps us improve the data.
And we just get better,
and better, and better.
And he said, it took nine years and
then he said to me,
and the most important thing it
was that there was no turnover.
In senior management.
He said, I cannot imagine what
would've happened to me if
the guys had started leaving and I had
to start over again training someone.
Because it took me nine years.
But at about the fifth year we went in and
interviewed the senior management team and
they would say things like, we were so
lucky we had put in this system
that helped us do things right.
I'm going lucky,
[LAUGH] what an interesting term.
So this is the journey.
It's about persistence.
It's about learning.
It's about sticking with it.
It's about vision and
we just don't give up.
And then everything we
do we drive value from.
We make sure somebody out
there is going to take it and
do something great with it because if
nobody's gonna do something great with it.
Here's the thing that's hard for an IT
person to believe but if nobody's gonna do
anything great with a capability
don't build it, it will be wasted.
It will be money spent and
then it will be wasted.
Now you wanna get a little
bit ahead of the curve.
So that's the tricky part.
But this is the dilemma that every great
IT person faces, every great architect.
Okay, so here's what we learned, and
I think this is kind of fascinating,
about how we progress in our learning.
We learned, we said so
what distinguishes the great companies.
And we learned that it turns out when
you're in that first stage, just building
systems so you can see what works,
you only have to do two things well.
Learn how to build a business case,
and develop a good methodology.
Now, in fact, most companies
do not do that in stage one.
But if you did,
you'd get more from stage one and
it would make the transition
to stage two easier.
Then at stage two,
learn how to manage your standards.
Start thinking about
funding infrastructure.
Teach people how to do
exceptions to standard.
If we get good at that,
we're ready to move into stage three,
where we can start thinking about process
ownership and enterprise vision and
senior executive oversight
of IT initiative.
That's going on in stage three.
I don't actually know why the things in
stage four turned out statistically there.
But I will tell you that those
are the things that it turned out
people didn't get value from.
That was the question, are you
getting value from these initiatives?
They were not getting value
from them til stage four.
Notice that one of the things in there is
full time enterprise architecture team.
That's the five percent I guess.
That data was probably when there was
still five percent in stage four.
Now, hopefully it's up to 11.
But this is the problem that
the enterprise architecture team,
until the company gets mature,
isn't really appreciated.
I would bet it's because the enterprise
architecture team is in IT.
If it was somewhere else
it would work better.
At Swiss Re, the CIO said to me,
when I realized I needed an architect,
and they already had a platform in place.
It's quite an impressive platform.
Said when I needed, I realized I had
to have an enterprise architect.
I asked the COO to hire one.
I said we need an architect
you should hire one.
And we'll tell you how to do business.
And the COO unbelievably said, good idea.
Went out and hired an architect.
Architect was brilliant.
He had all these ideas about
end to end processes and
how they could do process optimization and
how they would have process owners and
how they could componetize processes.
He was brilliant.
And the COO is just going,
wow, this is great, and
introducing really good
architectural concepts.
The CIO said to me after
they've been doing this for
about three years and he said I
could really feel the improvement.
When they came to me they
understood what they wanted.
And we could put in systems and
make a difference and
build capabilities like we'd
never been able to do before.
But he said now I'm going to
bring the architect into IT.
And I said you are?
And he said yeah,
architecture is way too important
to trust it to the business people.
>> [LAUGH]
>> It will probably work because the CIO,
is very respected, and now that they all
get architecture it's probably fine.
But it was an interesting development
from where I was sitting.
So here's what we learned
about the best firms.
This was a study of just 103 firms
where we did one on one interview,
rather than just statistical Although we
did some statistical analysis here too.
And it turns out there are just three
things that really matter if you
want to get IT, value from IT nations,
I should say the three things that matter.
Three things that matter the most.
All these things are correlated.
All these best practices are correlated.
But the three things that matter
the most will not surprise.
First of all,
senior management involvement, and
maybe we should call it leadership,
they just get it.
They take charge.
Those of you who know Charlie Feld, he's
gone from organization to organization
transforming the company with IT.
But he will only do it if
the CEO basically begs him.
If he's got a CEO who goes,
we really need this,
we really need this,
then he knows he's got the right person.
Otherwise, you gotta CIO who really cares,
when I really don't know
if it's gonna happen.
So, he makes the CEO say,
yeah I wanna lead this and
I want you by my side doing it and
then he goes in.
So, we're looking for
senior management taking charge.
And I think the inclination for a lot of
IT people is go well, I can't do that.
And I actually don't think that's true.
I think I have seen great IT
leaders bring business people on.
They just keep preaching it.
They don't give up.
They just don't give up.
And they do little things and
say we did something little for you.
You should see what you can do now.
Just go out and see what you can do.
And they just find little things.
At Toyota Europe they had 28 companies.
28 marketing companies and
9 manufacturing companies in Europe.
That's a lot of companies in a small area.
And they weren't making any money.
They were selling a ton of cars but
there weren't making any money.
And they're going this isn't right.
This is early 2000, so
it's before the recent issues.
This architect, they had a very small
headquarters group in Europe, and
the architect says, no,
we got to do something about this.
We should build some systems that help
people communicate with one another.
I don't know if any of
you are from Europe, but
the concern was that they didn't like
one another, the different companies and
that they wouldn't work together well.
And he's European so
he's kinda recognizing that this
could be a problem and he says,
okay I got a better idea.
We're gonna go to all the companies and
we're gonna say there's a new rule.
One year from today,
you have to send us every night,
electronically, the following
inventory file.
It was very detailed but it was doable.
He said, in a year, you can do this.
You've already got the data, you just
got to clean it up so it's accurate.
And you need to send it to us.
And if you need any help,
we'll come in, we'll put in SAP.
We'll take care of you.
Three of the companies
actually had them do that.
They went in.
But the 28 manufacturing, marketing
companies and nine manufacturing companies
were responsible for submitting
that file at the end of the day,
everyday, one year hence.
Sure enough they did.
A year later, they get all this data.
And the next day, they send back
to all of the manufacturing and
marketing companies the data.
So what suddenly happened
was instead of saying, okay,
I need this car, or I need this part,
I'll call a manufacturing company.
I'll order it.
They'll put it in their queue.
They'll get it to me when when it's ready.
They started looking at the data and
saying, these guys have the part I need,
I think I'm just gonna call them.
I'll get it here tomorrow instead
of lord knows when, or that car.
I can actually use that car.
I'll just take it off their lot.
And the manufacturing companies could
get more strategic about their planning.
If a car was already ordered,
it would get moved to the front
instead of people ordering.
Cars for the lap.
So suddenly, and
we're talking one year later,
they went from a lost to a significant
house of operating income.
And I used yo know the numbers,
but I'd have to bring them up.
So this is the kind of thinking that
the great architects are doing.
Let's not ask them to do something they're
all gonna say, way too much trouble,
won't have any benefits.
Let's do something little and
of course, what started happening.
Now, this was 2004 that they turned
their first profit in a long time.
By 2008,
they had become a single Toyota Europe.
It was just one company.
It had evolved very
naturally from that point.
So this is our challenge is to
get people taking the lead,
at Scissor we call it leading from behind.
You're kinda going here,
look at how you could be doing business.
Now, look over here,
you could be doing business this way and
we can build you these capabilities.
This is what the great
architects are doing.
The second thing is,
we build architecture into everything.
It just becomes part of
the way we do business.
There are a lot of architecture
teams that are off to the side,
that is as far as we can
tell pretty worthless.
We need the architecture teams
on every single project.
You go to a place like UPS or USAA and
every project has an architect.
The architect is constantly accessing
the technology, the systems,
the data and looking for
where you have to go with standards and
where you can't go with standards.
Recognizing when a standard is gonna be
needed that's never been established.
Talking to what they call their
technology fellows to go off and
establish a standard and
get all the research done in advance.
So these companies are moving systems and
capabilities through much faster than
companies that aren't doing
architecture in every single project.
So we did see a huge difference there.
And then finally the other
difference we see, and of course,
this is very exciting for people studying.
Architecture is we really did see that the
most profitable companies were those that
were more mature.
And this is actually rather amazing
given that stage one companies,
in their early years,
are going to be very profitable.
They're gonna be very successful.
It's just that they don't change
as their fortunes change.
And they tend to keep the habits that
they had, that worked for them early on.
So that's what's going on.
Stage 1 companies are really happy and
then hate to let go and then they do.
So we see Stage 3 companies
that more profitable.
So let me just tell a very quick story
about Campbell Soup because I think this
is just what companies have to go through.
I honestly believe that if you existed,
your company existed,
before 1995, and
possibly if it was created afterwards.
Because sooner or later,
even most new companies, even
if you were born in the digital economy,
you find that you did create the mess.
You did start letting things
go because you acquired or
you changed directions or
whatever the case may be.
So pretty much every company finds
themselves in this stage one environment
that's just kinda messy and
they have to transform.
And transforming is really hard.
It's very hard to just say while
you're also acquiring or divesting,
because that's also really hard.
So this is a matter of putting management
attention into building this platform,
and changing the way the company
operates as a result.
So in 2001, Douglas Conant comes into
Campbell Soup and says we're in trouble.
We have no pipeline of new products.
Financially we're performing poorly.
It's time to get serious.
They're 132 years old and
they gotta do something.
So he hires his first global CIO,
Doreen Wright.
Brings her in and
says I think we've got to think about
the role of technology in all of this.
And she starts working with him to
redefine how they're gonna do business
going forward.
And she cleans up IT first,
she centralizes it, she improves their
processes, she outsources it, and
then she just takes them forward.
And basically she says, this is what
we had, this is her spaghetti diagram.
This is what we want,
this is FAP in the middle.
And everything else
componentize because she said,
the essence of Campbell Soup is
where a global supply chain that's
basically just fulfilling order that
in any manufacturers and thing.
This is the essence of our
company if we get this right and
digitized then we can worry about new
products and trade agreements and
things that make us unique,
this is all the stuff that doesn't, okay?
And so they go through the stages there's
a first stage for their clean up IT.
In the second stage, the first thing
senior management did to really take
charge was to say,
there are three things we gotta get right.
Three things that are stable and
if we get them right,
we can function far more effectively.
And that is order to cash,
make to ship, account to report.
Just get them right and
they designed them and
they worked with SAP to configure them.
They later added hire to retire and
they put these things in,
one side at a time throughout North
America which is 60% of their business.
And they said, the way we did this is
we brought in the deployment team from
the site, we redefined all the roles.
We said who's gonna do what?
Let's take things they know.
Let's give them new things.
Let's train them on their new roles and
responsibilities.
And then we're gonna take the team out
there and then we're also gonna have
people from the prior implementation and
people from the next implementation.
And together they're gonna make sure that
this implementation is better than the one
before and they did this 25 times.
By the time they were finished,
they had it on a roll.
There were no problems,
every implementation except one
was better than the one before.
And not only that, people who had never
met one another but had the same job,
had met one another, and had started to
communicate with one another on how to
take their ideas forward.
And so they are simply getting better and
better.
Well, of course, you do this successfully,
then you say, all right,
let's do the rest of the world.
And they say, well, let's go to Australia,
they speak English there.
That actually was their thinking.
Let's pick it up, it'll be just the same.
We'll go, we're really good at this,
we'll take the people,
we're gonna drop it into Australia,
it doesn't work.
They're going, Australia is different.
This was the shock,
is like, they speak English,
they have the same products, mostly.
They have a lot of similar things.
Can't we just go drop it in
like we did in the last 25?
And they said, actually, it didn't work,
there are some things different.
And we had to slow down,
figure it out again, start all over.
We saw what we could reuse, what we
couldn't reuse and then we got it going.
There was a second
installation in Australia.
Then we were able to go to New Zealand.
And we're going, okay,
now we get it again.
And then they said, we feel like we
kinda got the international thing, but
it will be slower.
Every country is gonna be different,
we're gonna have to relearn
some things in every site.
But then the other thing they
started doing was empower their
employees to get real value
from their information.
And this is the concept that
I call Working Smarter.
So how many of you have what you would
call a platform in place in your
companies?
Some kind of digitized platform.
Should be about a third of you, I hope.
Little like you're being modest.
It's not quite in, right?
Okay, so even as it goes in,
we have to start driving benefits.
This is the mistake we're making, we're so
exhausted from getting it in it's kinda
like I'll worry about
getting benefits later.
But in fact it doesn't really go in,
if people don't quite get
what the benefits are.
So as it's going in,
we have to be driving value.
And we refer to this as working smarter.
Now, here's what, These four stages
that I described to you, look like,
to the people on the ground, okay,
they're saying to themselves,
all right, the company cares
about two things in a big way.
Efficiency, gotta get the cost down, gotta
get the risk down, and strategic agility.
We have to act faster in this new economy.
So they say, well, if we look at
there are this is kinda stage one and
into stage two, if we look at the way we
use technology, we put in these solutions.
But in all honesty,
they only solve part of the problem and
that's okay because we have all these
great people and they just solve problems.
This is your pre-digital world, heroics.
You just say to people,
if something goes wrong, fix it, and
they do, they just rise to the occasion.
So our organizations are full of heroes,
wonderful people,
who make the business work.
And why don't they love stage three?
Because in stage three,
we start implementing processes, and
we say do the standard process,
don't be a hero.
Do the standard process because
you'll mess something up,
if you don't stick with standard.
So, we introduce these enterprise
processes, they're global processes,
they're standardized.
We get all kinds of benefits, scalability,
efficiency, end to end process, or
straight through processing,
single phase to the customer.
All these great things will happen, but
we have told our people
to behave differently.
We have told them to be disciplined and
this is a very different world.
This is a, you threw all my
knowledge into a dump thing.
And that's all good stuff, but much of the
benefit has been on the efficiency side,
kinda introduce efficiencies
with these platforms.
A little on strategic agility,
but not a lot.
So the next phase from
an individual's perspective is, okay,
I used to be hero now I do what I'm told,
but
if I really wanna drive benefits,
I'm gonna work smarter.
I'm gonna take the data that the new
system generates and I am gonna use it for
better decisions for our customers.
So I'm gonna price things better,
I'm gonna deliver things better,
I'm gonna service their problems better.
I'm gonna do all of that because I
have better data because we have
disciplined processes.
Now it turns out that most
people do not have a clue how to
do that unless they
are coached on doing it.
So you cannot take this evidence-based
management culture for granted,
it is not a natural evolution from
putting it in your digitized platform.
It is not natural, it has to be taught,
and many companies don't do it.
So we see a lot of companies get
things in, they put in their SAP,
they've rebuilt their core banking
system or whatever it is, they get here.
But they start to regress in terms of
actual business performance, cuz they
don't start deriving benefits through
this evidence-based management culture.
So if we wanna go the next step,
not just get a platform in, and
I realize most of you are saying,
I don't think we have a platform in.
But bear in mind, as you put it in,
this is what you're trying to accomplish.
Your platform will be embellished
with analytical tools, and
algorithms, and constant
improvements to the data itself and
to the access, so you're building
portals and things like that.
That wonderful data allows you to identify
people who can analyze the data and
develop business rules.
And you're constantly recognizing better
and better and better business rules so
that your performance keeps improving,
and as you improve those business rules,
you get better data.
And the better data allows you to
improve the business rules, so
you've got a nice synergy going there.
Then you realize that as you're changing
these business rules, you actually
have to change roles, different people
have to be in charge of processes.
One thing that people tend to be slow
doing after they put in their platforms,
they need process owners and quite often
companies assign those too low down or
they don't assign them.
So if they're not up on the top,
nothing great is happening.
We gotta put these people in,
we give them responsibility for the KPI.
They start identifying business rules
that are working and not working, so
there's some synergy there.
And they take responsibility for
governing the data and we get better and
better data.
We have seen many master data management
initiatives by companies that say,
we need some data.
Frankly, you need some data,
you gotta build a platform.
You go out and do master data management,
you will be frustrated because you don't
have the discipline, you don't have
the platform, you don't have the roles,
You can assign the roles but
by themselves, they get nowhere.
They get nowhere.
Now this in fact is still not enough.
You're going to have to do the coaching.
You gotta coach people, and
my favorite story is 7-11 Japan.
We are talking about a company
that has 12,000 stores in Japan.
And it is convenience
stores about the size
of this area where I'm standing here,
tiny.
They are gonna succeed, and
they know this, from the 1970s.
They know they're gonna succeed
by rapid inventory turnover.
And on top of that, they know the only way
they're gonna get rapid inventory turnover
at 12,000 different stores is to put
the people in stores in charge of it.
So even if you're a part time clerk,
you own a certain part of that store and
you are responsible for
ordering goods that will turnover rapidly.
New things, old things, whatever you want.
And we will give you information.
You wanna know what sold yesterday,
we got it for you.
Wanna know what sold on the street,
we got it for you.
You wanna know what sold the last
rainy day, we got it for you.
You wanna know what the temperature
is gonna be today, here it is.
We're gonna give you information,
your job is use that information,
order things that are gonna sell rapidly.
Now, we do this all the time.
Here's all your information, succeed.
Not there, twice a week
they bring in counselors to work with
the people who are placing the orders.
And they say, well, what did you
hypothesize what's gonna sell?
And how did it do?
Let's take a look.
Did you do well, not so well?
How could you do better next week?
It's for the rest of their lives,
counseling twice a week, twice a week.
Think about how much coaching we
do at our typical organization and
how we get frustrated that people
don't use their information well.
Twice a week at 7-11 Japan,
30 years running most profitable retailer,
just now being challenged,
the last couple years being challenged.
But this was a company that was
divested from the US, 7-11, and
now went back and bought the US 7/11,
this company is doing just fine.
So, this is the evidence based decision.
The other thing that's been very
fascinating about this research,
I got to quit,
is the importance of feedback.
Pepsi America said that one thing they
thought they should do was tell the people
in the distribution warehouses
how they were performing.
Yeah, how many trucks did you fill today?
And how accurate was it?
We know this now because we have
really great information, so
we post it on the wall.
And the managers are going, my gosh people
and what their performance op on the wall.
And they're saying, really they don't?
They're going, no.
They're never gonna to want that.
So the IT people who had this idea said,
well let me just see how it goes.
And so they go into the warehouse and
people are going up to this wall and
they're going, there it is, and they
go off and it's like they are inspired.
Inspired, because they know
exactly how they're doing.
At Allstate they said, I'm sorry this
wasn't Allstate this was another insurance
company that I can't name.
They said, we checked and we found
that the number of claims per person,
per day in our claims office ranged
from three to 32 on average,
their average ranged from three to 32.
And so we said we're gonna tell them,
we're gonna tell them that they have
three, that they only have three,
the average is 18 and the high is 32.
You know what happens?
The people who are doing
three are suddenly doing 18.
Because it occurred to them they're
really slow, and they should speed up.
And somebody knows, and they should care.
The people who are doing 32,
still doing 32.
They're high performers,
they like being high performers.
But, and in fact the insurance
company said we have to do something
about quality.
Because some of these really fast
people don't have the quality.
So we have to introduce
a second metric here.
But they said, we have this idea that
people would never want to know this.
And in fact, they are starved for
this information because it gives them
all the control over their lives.
They can tell,
it's not somebody subjectively saying,
you know you're a little slow.
This is somebody saying, I have evidence
and you can do something about it,
just go do it.
So the whole concept of getting these
platforms in place and getting information
is about feeding it to people who can
use it to make the business great.
And to spread that responsibility out
across everyone in the organization, okay?
So let's wrap up then.
Four things I'd want you to take away.
First all of, maturity matters.
We cannot fix our organization in a way.
This is in a day, it's a journey.
We have to get people on that, as one CEO,
CIO said to me,
we said get on the train or get under it.
I said, okay,
[LAUGH] I guess people got the message.
But in any case we do want
everyone on the train, so
that we can make consistent progress.
The second thing is to recognize that
the impact of architecture is escalating.
If you're thinking you're gonna drive
value from process optimization efforts or
business intelligence or master data
management, collaboration, mobility.
I will tell you there's a huge
difference in how much benefit a company
with a platform in place
that knows how to use it.
There's a huge difference.
How much value they can get out of that,
versus somebody that's going let's set up
a little committee and send them out and
have them do a bunch of
stuff around collaboration.
The difference is monumental, monumental.
There are companies with
platforms that now have
enterprise initiatives
around collaboration.
There are no companies we've seen yet
that have powerful collaboration
initiatives that they don't
have the platform because people don't
know what they're collaborating about.
Once we've got the platform in there,
we got it, okay?
Architecture must move beyond IT.
I started there, I wanna end there.
IT architecture is a good thing,
but it has very limited impact.
And if we are willing to stick there
because people say I'm not interested,
we're not just fighting hard enough,
we've gotta take architecture outside.
And then finally, what we have to help
business people understand is that our
whole way of thinking about the alignment
between IT and strategy is upside down.
We have to get to a place where we do, we
start with some kind of strategic vision
of how we're going to
fundamentally operate.
That is very important.
We do start with a strategic vision.
But then we go ahead and
we start building capabilities, and
those things create opportunities.
At UPS the CEO said to me,
IT has created such a powerful
capability here that whenever we talk
strategy the IT people are in the room.
And they have ideas for things we can do
for customers and we can do them fast.
He said, I get that kind of happy
surprise from IT all the time.
Happy surprise from IT, that is what
enterprise architecture is all about.
Thank you very much.
>> [APPLAUSE]
>> Thank you Jenny, any questions for
Jenny before we take a short break?
>> [INAUDIBLE]
>> Yeah.
>> [INAUDIBLE]
>> Yeah, yeah,
actually I think having the technology
separated is just not a problem.
It does let you introduce it in
components which is so much easier.
The problem is if they're
doing that without a vision,
this is like the great danger
of software as a service, right?
If we have an architecture and
we get where we're going, we can introduce
components without messing up our data.
But, if we just say hey,
all business units go ahead and
buy software as a service, it's like
my Gosh I don't even wanna think about
what this organization is gonna be like.
And, I think with sap is the same thing,
it's just that you used to
have this hammer that was SAP.
That wouldn't let them do that and
now it will.
But I think you can use that as asset.
Just we can't let go of this idea that
we need to fundamentally understand
what our core processes are,
what we're trying to do and
what we're trying to standardize,
what we're trying to integrate.
If we.
We can come to some kind of understanding
on that, we can bring it in components and
it's a much more agreeable
way of doing it.
So, bringing in components is great,
just understand what you're trying to do.
And, yeah, it does require a certain
amount of discipline and commitment and
perseverance, that's the risk.
But, I think it can work out just fine.
Yeah.
Yeah.
>> [INAUDIBLE]
>> Yes.
>> [INAUDIBLE]
Are there
studies that show
the a [INAUDIBLE]?
>> We have a number of studies
that show positive results in
very many different ways.
So I could sent you all
kinds of statistics.
But I will tell you they are simply,
there's so many things going on,
there's too much noise.
So for example, stage one is a good stage
for as long as you ought to be there.
And that's why, if we just take data.
So my next thought is, well I should
separate out all the very young companies
because they probably belong in stage one.
Exclude them and do some more analysis.
So we will continue to do analysis but
there is a lot going on.
There's a lot of industry effects.
There's economic cycle effect.
And so,
we can do kind of general mature firms.
We get a lot of powerful
results if we just say,
can we correlate maturity with some
kind of performance, that we get.
We don't get the kind of
thing you're talking about,
which is why the case studies, I think, in
the end, are best evidence because you can
watch these companies and say,
if we're like them we could do the same.
>> [INAUDIBLE]
>> Yeah, yeah, yeah.
And you know right now Campbell is still
not what we would call a top performer.
We can only tell you they're a whole lot
better, they often they were in 2001.
And the verdict's still out.
I mean they gotta finish implementing,
they gotta learn how to use it, and
all that kind of stuff.
So it's a long journey.
I mean Pepsi America is a four
billion dollar company.
That's not heap five.
Five billion dollar company.
It wasn't huge and it took him nine years.
This is not going to happen overnight.
We have to be looking for
those intermediate metrics.
And we do have that.
We could tell you that IT
efficiency goes up in stage
two more than business impacts.
Stage three, you start seeing some
effects around efficiencies and
operating processes,
probably not in revenues.
So stage four you should see the revenues.
So we can propose what metrics
that ought to guide you but
we don't have enough powerful
statistical evidence of that.
Yeah.
>> [INAUDIBLE].
>> I think governance has so
many meanings to so
many people, I try to avoid it,
even though I've written a book about it.
[LAUGH] But I think it's essential.
I actually don't think you can
separate architecture and governance.
If you don't have architecture,
you don't know what you're governing.
And that was part of the reason that I
kinda drew aback from using the term
a lot, cuz people were off going, hey,
if we have the right committee
will do with great things.
Well only if your community all agrees and
what they're trying to do.
So if you look at that one where I said
and here is all the things that happened
over time, you would I think classify
a lot of those as governance efforts.
And yeah it's absolutely essential.
But if you aren't clear about where you're
going if you don't accompany it with
clear enterprise architecture principles
you can skip it seriously and
nobody's really gonna believe that.
But I believe it.
Yeah, you got great committees and
they don't know what they're doing.
But very important though, very important,
thanks for bringing that up, yeah.
>> [INAUDIBLE]
I'm sorry,
they're all [INAUDIBLE]
for
[INAUDIBLE]
In speaking
about agility [INAUDIBLE].
>> They figure out that what is shorter?
>> [INAUDIBLE]
multiple line.
>> Okay, yeah, yeah, yeah, okay.
>> Another line that is
an issue [INAUDIBLE].
That's an architecture
effectively that [INAUDIBLE].
>> Yeah.
I actually think that is in effect
what Toyota Europe was doing,
was just drawing a line somewhere else.
Because they didn't clean up much mess,
even though each of the individual
businesses would have had to clean up
some thing in order to deliver that.
So I think that is kind of the clever,
how do we start moving in
that direction kind of thing.
And that is the art in architecture.
What could we do that would
start making a difference.
But I hadn't thought of it
as drawing a different line,
that's what you were saying
didn't quite register at first.
But that would be a way of looking at.
We're just gonna draw this line that
describes where we are going while we
basically extract what little mess
we can kind of piece by piece.
I think that's a much less disruptive and
in a successful company
far more successful.
I mean if you're falling apart,
you just tear things out and say,
we're starting over.
If you're doing reasonably well,
then I think what you're describing
is absolutely essential.
You don't wanna disrupt the business.
Yeah.
>> You said there are many examples of
older companies or companies that have
been around for a number of years
that have gone through the cycle.
Have any of your studies
[INAUDIBLE] Many younger companies
that have resisted Systems, and
>> From the start.
>> And then,
gone to a more optimized environment?
>> You know, I haven't had a chance
to spend much time in them,
because they don't come seek us out,
[LAUGH].
But I actually think Amazon is
a really good example of that.
This is a company that didn't
worry about making money.
Wish we all had that benefit.
And, from day one,
Jeff Bezos said what we care about is
our customer and building a capability.
We're always think about the long term.
We're always gonna think
about the customer.
Their letter to stakeholders,
shareholders is worth
reading because he actually says,
we don't talk about quarterly returns.
We don't talk about our ROI.
We don't talk about our ROE.
We talk about the customer and
in the end I am sure it's better for
our shareholders.
And I think there's a lot to be said for
that, so
they are though quite exceptional.
I mean, new companies that we would
think would grow up a lot smarter
don't necessarily do so, often because
today it feels like you want to grow and
go acquire another company.
Well soon as you brought two companies
together you got two legacies.
So, and in my mind the worst thing that
ever happened to architecture is mergers.
If we stop that we are making progress,
right?
So I did promise,
my next book's gonna be called,
don't make that acquisition [LAUGH].
>> [LAUGH]
>> So, that will help all of us.
But, so I think there are a few out
there but you also have to grow.
And if you worry too much about being
disciplined and not being siloed,
you aren't going to be
around to have the problem.
So I think Amazon is the exception,
and that there are some examples like
them that aren't as high profile.
But I actually think
they're the exception.
>> I apologize.
>> We have to get going.
>> You're running a little
bit late on time.
So, I'm sure you can talk to
Jeanie during one of the breaks.
Matt, We are supposed to
have a 15 minute break.
I'm gonna try to cut it down to ten
minutes so we can try to catch up on time.
One of the issues we have is
that Doc Ross has to leave here
at quarter to five, I believe.
And so we're kinda restrained on our time.
So we'll come back here in ten minutes.
>> I just wanted to mention one thing.
Just yesterday, we sent out to our
sponsors, updates on this data.
And I thought it was really exciting,
but it was just too close in time for
me to include it here.
Normally we'd only give it to sponsors,
but I so wanted to share it with you.
That if you want it, just give me a card.
I will mail it to you.
It's just a three page briefing that
shows some updates on the data.
And I think it's very cool stuff, mostly,
we don't know what it means yet,
it's data that we think it's interesting.
But if you want me to send you that
briefing, I'd be happy to do so,
just hand me a card and
I'll send it off to you.
Thank you.
>> [APPLAUSE]
