The Greatest Innovation Since
the Assembly Line
Powerful Strategies for Business Agility
Michael Hugos
CIO at Large
Center for Systems Innovation
www.MichaelHugos.com
© 2008 Michael Hugos 1Overview of Briefing
PART 1 - The Greatest Innovation
PART 2 - Becoming an Agile Enterprise
PART 3 - Real World Agility: 30-Day Blitz
Summary / Questions & Answers
© 2008 Michael Hugos 2PART 1
The Greatest Innovation
© 2008 Michael Hugos 3Global Economy - New Reality
• Formerly separate national and regional markets now
electronically connected into single global market
• Global market does what free markets do so well; it's called
"efficient price discovery"
• Gross margins under constant pressure; many companies in
USA operating on 10-15% gross margins and heading lower
• Profit in hyper competitive real-time world comes from many
small adjustments & some big wins as companies respond to
constantly changing environments - requires agility!
• Global economy is like global stock market
© 2008 Michael Hugos 4Innovation = Responsiveness and Agility
Companies exist on continuum balanced between two needs
Efficiency Responsiveness
• Efficiency requires predictability and low change
• Responsiveness to continuous change now creates value
• In high change world responsiveness trumps efficiency!
• Responsive, agile enterprise is to global economy as
assembly line was to industrial economy - source of wealth
• Respond to changing customer needs by wrapping products
in blanket of tailored, value-added services
• Earn extra 2 - 4% (and sometimes more!)
© 2008 Michael Hugos 5Responsiveness Requires Agility
• Three feedback
loops illustrate how Agility is a Process
responsive, agile
Deliver
organization works Business
Success
Market LOOP 1
• New business Data &
Customer
processes that
Demands
LOOP 2 LOOP 3
deliver success
Standardize Analyze Create New
Business Non-Standard Business
become part of
Processes Input !!! Processes
standard business
processes Eliminate Detect New
Root Threats &
Causes Opportunities
• Agility is
LOOP 1 - Monitor and Decide
continuous,
incremental LOOP 2 - Improving Existing Process
change!
LOOP 3 - Create New Process
© 2008 Michael Hugos 6Definition of Business Agility
BUSINESS AGILITY = (MOTIVATION + VISIBILITY) x TRAINING
Agile business earns at least 2-4% above market
Agility
4% times TRAINING
3%
2%
1% plus VISIBILITY
MOTIVATION
Resources
MOTIVATION is the heart of agility; VISIBILITY improves the results of
motivation; TRAINING shows how to put motivation and visibility to best use.
© 2008 Michael Hugos 7Systems for Agility
• IT infrastructure for agile operations is built on top of existing
transaction processing systems (ERP, CRM, SCM, etc.) -
leverage legacy systems that work well enough!
• Agility calls for adding new systems such as:
- Data Warehouses and Business Intelligence
- Business Process Management or Business Activity Monitoring
- Simulation and Predictive Analytics
• Combine new systems with existing systems using SOA, host
them using Server Virtualization and Grid Computing
© 2008 Michael Hugos 8PART 2
Becoming an
Agile Enterprise
© 2008 Michael Hugos 9CIO is Different from CTO
• CIO leads in use of IT to drive responsive, agile enterprise
• CTO is master of technology; focused on efficient, reliable
operation of company's IT infrastructure
• CIO is master of applying technology to achieve operational
and competitive advantage; focused on business strategy
• CIO uses IT to wrap company's products and services in
blanket of value added services that respond to changing
customer needs and desires
• Use responsiveness and agility to differentiate your company
or else participate in "grim race to the bottom"
© 2008 Michael Hugos 10Be Strategically Focused, Tactically Agile
• Loop 1 - Monitor and Decide (Observe-Orient-Decide-Act)
- Does existing IT infrastructure support new business strategies?
- What new operating capabilities needed?
- How to best leverage existing systems; what new systems needed?
• Loop 2 - Improve Existing Process (Six Sigma DMAIC)
- Transaction-processing volumes increase or decrease unexpectedly
- System processing or business errors occurring more frequently
• Loop 3 - Create New Process (Define-Design-Build)
- New competitors enter the market
- Company introduces new products and services
- Sales of products increase or decrease faster than expected
© 2008 Michael Hugos 11CIO is Key Business Enabler
• Sales of your company's Product X increasing much faster
than anticipated; customers buying Product X likely to
purchase new Product Y within following 60 days
• How you as CIO respond to unexpected news and speed with
which IT group delivers systems support is big factor in how
much success your company can achieve
• What actions would you take to support your company?
- Existing systems supporting Product X; decide how to scale them up
faster than originally planned (Loop 2 - increases efficiency )
- New IT support to exploit sales of Product Y; deliver needed systems
quickly (Loop 3 - drives responsiveness)
© 2008 Michael Hugos 12CIO Agility Lessons Learned
1. Quickly build new systems that are good, not perfect
2. Automate the routine transactions for efficiency - these are
systems for standardized business process in Loop 2
3. Empower people to handle exceptions for responsiveness
- these are systems you build in Loop 3
4. Continually adjust & enhance systems based on experience
5. Keep IT Super Simple! (easier said than done…)
© 2008 Michael Hugos 13PART 3
Real World Agility:
TM
The 30-Day Blitz-
© 2008 Michael Hugos 14Agile 30-Day Blitz
1. Systems to respond to Loop 3 - build something new
2. Collaborate with business to create "Robust 80% Solution"
3. Avoid temptation to solve big problems all at once; break them into
smaller pieces and deliver working solutions quickly
4. In every situation there are significant improvements that can be made
in 30 days or less; those improvements become a base from which to
continue building as you move towards your goal; 30-Day Blitz™
Think big; start Focused,
Blitz 3
small; deliver Blitz 2 iterative
Blitz 1
quickly! development
© 2008 Michael Hugos 1530-Day Blitz Timeline
DEFINE
Process
Deliverables
DESIGN
Process
• Business Goal & Deliverables
Performance BUILD
Requirements Process
• New Business Process Deliverables
• Conceptual System Flows
Design
• System Data Model
• Cost/Benefit Analysis • Working System that
• Prototype of User Interface
• Initial Plan & Budget Meets Requirements
& Tech Architecture
• Tech Documentation &
• Actual Plan & Budget User Manual
2 Days 4 - 8 Days 6 - 12 Days
(or 2 - 6 Weeks) (or 1 - 3 Months) (or 2 - 6 Months)
© 2008 Michael Hugos 16Seize an Opportunity
• Big customer wanted to reduce excess holiday inventory
• Opportunity to provide value and differentiate ourselves
• Customer, suppliers, and Network Services Co. members all use
different ERP systems
• Needed data from 8 Manufacturer locations, 26 Network members,
5,000 customer stores
• We had 90 days; could not spend lot of money
LOOP 3
Analyze Create New
What would you do? Non-Standard Business
Input !!! Processes
"Robust 80% Solution"
Detect New
Threats &
Opportunities
© 2008 Michael Hugos 17Seize an Opportunity (cont.)
NetNetwworkork
MeMemmbberer
CoCommppanyany
ExExiisstingting
•• WeWeb Pab Pagegess
ProProccess fess foor r
aaddedded to d to
IInnvvooice Fice Filesiles
NeNettwwork work weeb b
sitesite NetLink SyNetLink Systemstem NetNetwworkork
MeMemmbberer
•• SpSpreadreadsshheeeett InventorInventoryy FTFTPP CoCommppanyany
oopenpens ins in DDaatabasetabase ProProccess fess foor r
brbroowwsseerr (Relational (Relational InvInventoentorryy F Filesiles
DB)DB)
•• DDiisspplaylay lo logicgic
NetNetwworkork
dedeffiinenedd in in
MeMemmbberer
spreadspreadsheesheett
CoCommppanyany
E-E-MMaaiill
ProProccess fess foor r
E-E-MMaailil
SpreadSpreadsheesheetsts
SS
System created by combining:System created by combining: SS
SS UU
UU
UU PP
PP
-- SSpreadsheets preadsheets -- SSmall small seervrver per progrrograamms s PP
PP
PP
PP LL
-- EE-Mail -Mail -- RRelational DB elational DB
LL
LL II
II
-- TText fiext files les -- WWeb pages eb pages II EE
EE
EE RR
-- FFTP TP -- WWeb broweb browser ser
RR
RR
© 2008 Michael Hugos 18Trade Journal Reporting
• Big customers of this clearing corporation wanted features
added to legacy trade clearing system
• Trading firms wanted intraday trade journals in a database with
trade prices so they could do reporting, ad hoc queries, data
imports
• We had 30 days and only a small budget
LOOP 3
Analyze Create New
What would you do? Non-Standard Business
Input !!! Processes
Detect New
Threats &
Opportunities
© 2008 Michael Hugos 19Trade Journal Reporting (cont.)
Mainframe Trade Mainframe Trade PCs wPCs wiith th
Clearing SClearing Syystestemm relational DBrelational DB
DowDownload nload
TTrrade ade up to 20,000 up to 20,000
Firm 'A'Firm 'A'
Journal Journal trades each trades each
Database Database cycyccllee
(Rel(Relational ational
DBDB)) 20 standard 20 standard
reports reports
Batch FTP CyBatch FTP Cycle to cle to
move datamove data Firm 'B'Firm 'B' provprovidedided
EasEasyy ad hoc ad hoc
System created by combining:System created by combining: reporting as reporting as
neededneeded
-- LegacyLegacy s syystestemm -- SSmall servmall server prer programs ograms
-- Text files Text files -- PPC relational DBC relational DB
Firm 'C'Firm 'C'
-- FTP FTP -- SSmall PC programs mall PC programs
-- SServerver reler rel DB DB -- PPGP data encrGP data encryyption ption
© 2008 Michael Hugos 20Agile System Development Starts With a Blitz
DEFINE conceptual designs
Rapid iterations Strategic
First Data Whse and Web Reports - 30-Day Blitz
of DEFINE- planning
DESIGN-BUILD exercise
NetLink
delivered
DESIGN-BUILD
systems that Data Whse sequences ran in
transformed our parallel to produce
Website version 1.0 of these
company
business model subsystems
New Data Ctr
DESIGN-BUILD NetLink
DEFINE of version 1.1
enhancements Data Whse
DESIGN
BUILD Data Whse
System DEFINE-DESIGN-
Delivered BUILD version 2.0 NetLink
Website
Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2 Qtr3 Qtr4 Qtr1 Qtr2
© 2008 Michael Hugos YEAR 1 YEAR 2 21Learn More…
This
presentation
excerpted from
two of my
books:
Join the conversation about business and IT in the global economy at my
blog on CIO Magazine's website: Doing Business in Real Time
www.MichaelHugos.com
© 2008 Michael Hugos 22