An F1 car or the old school bus?

Andrew Rowsell-Jones

Andrew Rowsell-Jones, Vice-president and Research Director for Gartner’s CIO Executive Programmes, says that CEOs may think their organisations are as agile as F1 racing cars— but in reality not all of them are.

Formula 1 racing is the pinnacle of motor sports. The racecourses are the most demanding in the world and F1 cars are fast and manoeuvrable.

CEOs often claim that their enterprise is like an F1 car, but in reality many have built a car for only the main straight. Try to change direction too fast and you’re in trouble. Worse still, they may think a bit like the emperor, that they are driving an F1 car when in reality they’re really driving an old school bus.

In either scenario, the enterprise will crash and burn at the first corner. So the question is, what are the real characteristics of enterprise agility and what is the best way for the CIO to contribute to them?

WHAT IS AGILITY?

Agility is a complex and often misunderstood management concept. To an enthusiast it means quick, light and nimble in movement, and quick, clever and acute in devising and understanding. These characteristics distinguish the agile from the rigid.

For agile enterprises, their people, factories and capital must be fleet of foot and ready at a moment’s notice to be redeployed in pursuit of a new opportunity. Their management, the restless and relentless thinkers, must stand ready, at the drop of a hat, to discard their old business orthodoxies and embrace the new.

In the real world, it’s hard for enterprises of any size, and their management, to be this flexible. In the real world, this level of ceaseless change would shake an enterprise to pieces. In the real world, agility is a careful balance between institutionalised control and carefully choreographed redeployment.

Technologists see agility being achieved through technologies such as Web services. Others see agility in terms of buying capabilities through mergers or acquisitions. These views each have a grain of truth, but none captures the entirety of agility.

Enterprise agility is something you earn and build through your enterprise decisions and investments. It is not something you can buy ‘out-of-the-box’ despite what technology vendors and consultants might say.

Why? Because agility is a characteristic that defines the quality of your enterprise—or in other words, how ready your organisation is to launch and support a new product. Agility is therefore increased or decreased by management actions and attitudes. For example, investing in skills and knowledge enables the workforce to become more flexible.

WHY IS AGILITY IMPORTANT?

Enterprise agility is defined as the ability to change when needed with managed cost and risk.

Agility’s strategic value comes from its ability to support competitive advantage. Agile enterprises that can readily change without incurring unnecessary cost can preserve their sources of competitive advantage. For example, this can be a supply chain capability in the face of evolving technology and market needs. Since agility cannot be bought or sold, advantage attained through agility is sustainable over time.

In many enterprises, there is tension between agility and IT, because new initiatives clash with the realities of application development and efficient IT operations. Unsurprisingly, this leads some to view IT as rigid, unresponsive and therefore at odds with enterprise agility. This is more a myth supported by IT’s current role in enterprise processes than a reality of IT potential.

Astute CIOs recognise that IT is often the first point when strategies and plans developed out-of-the-box face the reality of implementation. Yet CEOs and strategists are surprised when new plans that they thought could be implemented in weeks require months of application changes. CEOs increase enterprise agility when they involve the CIO in the decision-making process from the beginning.

AGILITY AND CORPORATE DNA

Jim Collins, author of the book Good To Great, says that good-to-great companies pay scant attention to managing change, motivating people or creating alignment. This suggests that agility has little to do with large change management projects, and more to do with limiting the negative impact of change. Incrementalism, guided by culture and a long-term view, win out over quick win strategies.

Our research agrees—with some surprising evidence. For example, popular opinion has it that to be agile a CIO has to spend more on infrastructure then his non-agile peers. This is not the case. A question in the Gartner 2005 EXP CIO Survey asked CIOs about the need for rapid change in their enterprise. Those who rated agility as ‘very high importance’ spend an average of only 32 percent of their budget on infrastructure whereas their non-agility-focussed peers spend 44 percent.

So what do agility-focussed CIOs spend their money on? They spend 18 percent of their IT budget on strategic initiatives compared to 10 percent spent by non-agility-focussed peers. These initiatives often enhance enterprise agility.

Rigidity, complexity and lack of visibility prevent an enterprise from being agile. The CIO can reduce each of these agility ‘evils.’

The first thing the agility-seeking CIO needs to do is to distinguish between processes, capabilities and assets that are sources of competitive advantage, and those that are not. The competitive advantage ones are key.

He or she must then ‘free and enable’ these processes from restrictions that may prevent opportunities from being exploited. In other words, focus the agility efforts where there’s the biggest pay-off.

This demands a strengthening of the IS staff’s technical and leadership skills, and ensuring that IS processes are up to the job. After all, agility must be built into design and test processes in a repeatable and ideally optimising way. It is part of the DNA.

THE NEXT TO-DO

The next agility ‘to-do’ is to build an architecture that allows best-of-breed components in areas such as ERP and CRM without compromising architectural integrity. Smart decision making about the type and level of integration between systems makes the difference between IT being seen as a contributor rather than as an obstacle to change.

For business and IT assets, capabilities and processes that are not sources of competitive advantage, agility comes from getting the dead money out of them so that it can be spent somewhere else.

The key to doing this is to standardise, consolidate, share and build in scalability where it is needed. Common commodities in enterprises are administrative processes such as finance, accounting, facilities management, and IT infrastructure.

More generally, the enterprise toolkit for commoditisation includes process improvement initiatives, creating process centres of excellence, and business process outsourcing. It must also include movement toward real-time infrastructure, IT service management initiatives, IT Infrastructure Library (ITIL) and strategic sourcing of IT services.

GIVE VISIBILITY

Finally, there’s the need for management to be quick, clever and acute in devising and understanding. The CIO can help here too. While adaptability and simplicity contribute to the ‘agile body’ of the enterprise, visibility contributes to the ‘agile mind.’ Visibility means unlocking the value of information by putting it in the hands of those who can get value from it, in a usable format.

Three types of visibility help with agility: operational, knowledge sharing, and business decision making.

Operational visibility is about rapidly identifying trends and issues in day-to-day operational processes. Business Activity Monitoring (BAM) technology helps with this, whether stand-alone or embedded in brokers, rules engines or other enterprise software. For commodity business processes, BAM alerts based on efficiency trends can help manage costs and spot expensive process exceptions as the enterprise changes. For processes that are sources of advantage, BAM should help spot opportunities to further that advantage.

Knowledge sharing through knowledge management initiatives and collaboration tools helps institutionalise best practices and enhance business value. Knowledge management has become a major competitive differentiator and the core of organisations’ business strategies.

Business decision-making visibility is achieved by providing externally and internally sourced market insight information to senior executives. But visibility is not only about technology. It also involves establishing a culture that values information and communication. This is called ‘information orientation.’ As CIO you may not be able to turn your enterprise into a Formula 1 race car. You may not be able to live up to the enthusiast’s belief that anything less than the whole enterprise being quick, light and nimble in movement, and quick, clever and acute in devising and understanding, is just rigidity. Indeed, you may fall far short of that ideal. The good news is that you may want to. In the real world, it is far better to strike that careful balance between institutionalised control and careful change.

Agility is not free. Even if agility initiatives release cash in the medium to long-term, they require investment upfront. To succeed, the CIO must pursue agility selectively. The selection can only be achieved by engaging the business better at all levels to build a detailed picture of agility needs, and to communicate the IS contribution.