Leadership lingo and mindset – the most common faux-pas

A job well begun is half the job done. If the leadership mindset is incorrect or its messaging is unclear, it puts at risk the entire task at hand. Right posturing and positioning, they say, is the all-important first step to a product’s success. Putting together a winning team to work towards organizational success is no different.

I am attempting to call out some of the most obvious leadership mindset and messaging faux-pas that one comes across in routine day-to-day corporate lives. I know there would be countless others, more commonly used and starker in their incorrectness. I am just attempting to kick-off the topic with a small list of five – would really appreciate if readers could contribute their own observations and stuff they have experienced or come across, that are along similar lines.

So here goes…

Employee engagement – I am sure the original semantics of the phrase was centered on the concept of making the entire process of running a business, participative, by involving more and more people that make up the organization from ideation to implementation. However, the latest interpretation of this phrase is akin to co-curricular activities in academics. Employee engagement in most organizations has become the generic buzzword for cultural, social, sporting and similar activities involving a cross-section of employees.

Inclusive growth – This is another classic case of trying to convey the participative culture and that the employee is a key stakeholder in the business and its growth. It is all very well till you start contemplating the corollary - what would non-inclusive growth mean? That your contribution is not seen as worthwhile or that you contribute and I grow!

The 30-60-90 day plan – There are some who would have us believe that if there is no 30-60-90 day plan attached to a piece of work, independent of it being creative or demure and routine, it cannot be meaningful and relevant to the organization. More often than not, if you can put something into such a plan, it is likely to be something that ought to have been done anyway, plan or no plan, because you could think through every bit of what needs to be done!

Empowerment – Another term used in leadership messaging which means everything and nothing all at once! You constantly hear that you must feel empowered to make decisions and conduct your business in your own way. Well the only catch is, you have to keep the leadership ‘informed’, you should ‘operate within the set boundaries’, you should seek ‘approvals for exceptions’, et al. The operating word in actual empowerment is ‘trust’. If trust is at a premium and found lacking, there is no real empowerment. It is like ‘you can decide alright, but you can act only after I have approved’!! Empowerment, in such a scenario, would be the delegation of decision-making and not the delegation of work. Real empowerment would be to provide the flexibility to influence process changes, at times even work around them on ‘exception’ basis without compromising the goals, values and the fabric of the organization.

The Comfort zone – You would often find leaders propagate the mindset and message that when folks get into a comfort zone, their productivity and creativity would suffer. Hence the mantra for organizational efficiency and effectiveness is to prevent anyone getting into a comfort zone – the corollary being everyone should operate in a zone of discomfort. This is the biggest faux pas you would come across. It is a simple law of nature that resonance is constructive and has the characteristic of enhancing the combined output beyond the sum of individual outputs. This is true with humans and teams in resonance as well. Put folks in a comfort zone and you are likely to find greater productivity and enhanced outcomes.

   

Note: The views expressed here and in any of my posts are my personal views and not to be construed as being shared by any organization or group that I am or have been associated with presently or in the past.

Business reviews – how much is not too much?

This is a question that all leaders must have asked themselves at some point in time in the process of conducting business. The entire business cycle - ideation, simulation, conception, planning, execution, delivery, feedback and back to ideation – must be reviewed periodically along multiple themes and viewpoints and across multiple levels of detail – strategic and tactical down to transactional. Reviews could be for financial performance, customer satisfaction, employee productivity, sales forecasts and fulfillment planning, name the thing.

It is important to take a step back and understand the fundamental need for business reviews.

It could be to –

·         track and monitor progress and status against a plan (review of performance), for e.g.

o   business plan for the organization, a function, a process, a charter, a project

o   employee performance

o   customer experience / satisfaction

·         review the output of a business process (review of a deliverable), for e.g.

o   proposal, quotation, contract review

o   design review

·         ensure compliance to procedures, statutes, rules, policies et al, for e.g.

o   process quality reviews

o   legal/statutory audits

Well, the intent was not to put together an exhaustive list but to give insights into what kind of reviews are typically done in any organization and to zero-in on the particular category that we are trying to address here. For the purpose of this discussion, we will confine ourselves to the first sub-bullet of the first category and just call it, business reviews.

At one end of the spectrum, there are people and businesses that just believe in and focus on doing things. They do not have formal review mechanisms and are fairly ad-hoc in their method and periodicity of reviews. Not all of them summarily fail in their businesses but the element of predictability, sustenance and people-independence of such a business’ outcome and results is suspect. At the other end of the spectrum are people and organizations that are, simply put, either ‘control freaks’ or ‘consensus committees’. There is, in such cases, an elaborate process to review with set periodicity, not only the business and its performance, but the review process themselves, the policies, procedures, people, everything! There are preventive reviews and when they fail, corrective ones; proactive and reactive reviews, reviews of the review process where its effectiveness and efficiency is reported, consolidated and reviewed!!

There are many organizations where business metrics like revenue forecasts, sales and opportunity pipeline, hiring performance etc are measured, reported and reviewed on a weekly basis. There are systems being built to have a general ledger view across businesses and geographies on a daily basis. There are monthly account reviews and quarterly business performance reviews with 30-60-90 day action plans which are reviewed, you guessed it right, every 30 days. There are week-long annual business strategy and planning meets, a month of preparation before and another month of communication after, quarterly employee performance feedback, annual performance and compensation reviews. The entire business reporting cycle is on a weekly basis with the preparation, review and action plan spanning a day. Such organizations spend more management time reviewing what was done and the plans of what is to be done, often more than 50% of their time! And they would report their low productivity numbers periodically, review them, have an action plan to improve it and review that diligently all over again!!

So, jokes apart, what is the ideal periodicity of a business review? Is there an absolute answer across businesses, organizations, cultures, and the product-process-people ecosystem? How do you determine what to review, when to review and how to review?

There are no absolute answers but here are some pointers to what may or may not work for you…

1.       Try to find a correlation between action items that emerge from your reviews and their significance to the business. If there is a positive correlation, the review is a value-add.

2.       Recap what was reported in the previous review – if the numbers, issues, line-items, trends haven’t changed much, you should revisit the periodicity of your reviews – it is, perhaps, too often?

3.       Drop into the reviews conducted by your direct reports – if the content (and indeed, the template) of the report is similar to your reviews, ask yourself if there is any value in the same facts being reviewed twice and at what level in your organization are the action items owned. One of the reviews is, obviously, redundant!

4.       Revisit the objectives and process of your reviews – are you using these as mechanisms for you to understand what’s happening in your business? Does everyone just run through the data in standard reports that are brought into the meeting or is there an opinion, perception, value beyond the data? Could you be gathering this information offline? Do you really need a meeting to comprehend data?

5.       In the worst case, if you are unable to figure out if there is a value-add or otherwise, cancel a review but still call for and track the data. This will be most revealing!

6.       The 10-20-30 rule. And finally, as a golden rule – if you are spending more than 10% of effort at any level of the organization in reviews (of any kind), you’ve tipped over. If you are spending more than 20% of that review effort in tracking and monitoring business that has already been conducted (as a corollary, at least 80% of your reviews have to focus on business that is likely to come in the future), you’ve tipped over.  If you are spending more than 30% of that effort in audit-mode or finding-holes-mode of reviews, you’ve tipped over.

Note: The views expressed here and in any of my posts are my personal views and not to be construed as being shared by any organization or group that I am or have been associated with presently or in the past.

The Great Mobility Magic Show – abracadabra!

Some of the predictions and estimates about the size of the mobility market are so grand that the average eye would pop-out at the suggestions. There are claims of the mobile apps market being a $30bn market (again contestable if you take the published numbers from Apple’s AppStore and do the math given Apple and iOS has an approx 20% market share, in which case the market size would be half the number we have assumed) that will grow 250% by 2015. The total mobile user base is likely to equal the world population, approx 7bn by 2017. Total smartphone sales are tipped to touch 1bn in 2015. The number of app downloads that happened in 2011 is upwards of 10bn! The average number of apps in a smartphone is ~65. Well, there are ever so many numbers to this equation that someone would have you believe that this is all that will happen in one’s life 5 years down the line.

I wanted to take a closer look at some of these claims and hence size up the market. The mobility market could be broadly divided into

-          Hardware or device-related spend (note that this would included all bundled software)

-          Ongoing communication services spend

-          Mobility apps spend (these are non-commercial, non-enterprise software apps typically available for downloads)

-          Enterprise mobility apps spend (commercial and enterprise applications tailored to mobile devices)

The average cost of a smartphone is $135 today and to be able to make the claims that the smartphone market will be 70% of the total mobile phone market within 5 years, the price point will need to be significantly lesser than $135. Let us assume that the average smartphone will be priced at ~55% of what it is priced today and hence will be priced at approx $75. The sales figure is supposed to be a billion phones a year in 2015, so the total smartphone market is likely to be $75bn that year (and more beyond!). The Total Cost of Ownership of a smartphone device needs to take into account around $100 per month (actually much more if you go by current averages) of rentals et al that you pay for the voice and data communication services. So this translates to a total of $1,200bn on communication services spend. The mobility paid apps downloaded statistic puts the current size of that market at approximately $15bn. This constitutes around 40% of gaming, entertainment and sports apps and the rest being 60%. This contests the $30bn figure we started with but let us run with a $20bn current market size and with the 250% growth projection, this is another potential $50bn market. The last of the claims is that the enterprise mobile apps market would be in the $165bn ballpark in the same timeframe.

Now, that’s a big market with significant upside potential for everyone to be seriously interested, right? Well, let us take a look at some of these numbers from a different perspective altogether.

From the above calculations, the average cost of ownership of a smartphone device without any apps would be around $1275 a year in 5 years or approximately $3.50 per day. The total world population is just over 7bn and is growing at around 1.4% annually. This would translate to the world population being 7.5bn, 5 years from now. As on date, 5.1bn of this 7bn population (72.8%) earns less than $10 a day. More than 3.1 bn folks among them earn less than $2.50 a day. Assuming these folks would focus on eating, drinking, clothes and shelter, before using a smartphone; this shrinks the potential customer base by around 45%. I am also making a small assumption here that the 500 million folks we would add to the population over the next 5 years would all not be the privileged few but would be in the same ratio as the current distribution of the population. Seemingly the least amount of money you would need on a PPP basis to stay above the hunger (read starvation) line is $1.25 a day. This is the precise point where I would like to hazard a guess on what percentage of the population that earns between $2.50 and $10 a day would spend the $3.50 per day on owning a smartphone. My take is 0 but for the benefit of the hardcore optimists (HOs), let us say 10% of these folks would actually own a smartphone, whatever it takes. That would still shrink the potential base by a further 26%. This leaves us with a solid 29% customer base! There are around a billion folks out of the 7bn who are under 7 years of age. I know the kids are really getting smarter, they would probably be using smartphones during these particular ages, but I am not sure all of them would have a dedicated smartphone with a mobile (voice + data) connection in their individual names! Again, for the sake of the HOs, let us assume 10% of this lot would also contribute to making up the market! That still rules out a further 13% from participating in this relentless mobility march. So we are down to some 16% of the folks that make up this world that is the potential market! So 1.2 billion folks would keep buying 1.2 billion smartphones on a yearly basis 5 years from now to make the numbers we assumed. For the product, that is a 100% market penetration with a 100% annual churn! I hope I could take these kinds of ideas to investors and get some funding for my next whacky dream!

The best 4G connections seem to be giving around 20mbps data rates as we speak. Let us assume everyone has them for this analysis. The average mobile app of the future is likely going to be sized at 50-100 MB and we could assume that the average download times for an app would be in the 1 minute timeframe. Assuming the total number of downloads goes up to around 50bn paid apps (assuming a dollar an app and the size of the market we assumed). Paid apps make up for around 12% of the total apps downloaded, so the total number of downloads would need to translate to 825bn to achieve the magic mobility dream! That is 825 billion minutes to download stuff. Assuming 16 hours of waking time for an average person in this world and take some ablutions out of the way, half a million people would spend their lives downloading stuff!! The average smartphone user spent around 11 hours each month playing games!! This would increase to about 20 hours a month to support the download stats in the end-game scenario for our time range.

Now, let us turn our attention to the claim that the Enterprise mobility apps market is seen to be at $165bn in the same timeframe. The services and software spend within the ICT spend currently adds up to approximately $1200bn. Over $300bn of this spend is in the Infrastructure Management space and another $300bn on system software, internal FTE costs et al. The growth of the software and services spend has gone down dramatically and in the past 5 years averages an annualized 4%. The denominator representing the total market therefore is around the$ 730bn ballpark. To hit the $165bn market size, the mobility spend would need to be a fourth of the total software and services market!

Somewhere, in the midst of all this, I am sure the implication is that people around the world, 5 years from now, would do pretty much everything on the go, no matter where they are headed!  Pretty much every 2^nd person above the poverty line will carry a smartphone. At least 10% of all kids born would take to the smartphone within a couple of years of leaving pre-school. People are likely to be spending a day each year downloading and 20 days each year playing games on their smartphones. And this loss of productive time will have zilch impact on the economy or the affordability of the smartphone itself.

Well, I do not bite this as it appears at face value. There certainly is a market out there for mobility. It is far closer to saturation than one may want to believe. I would tend to look at some business case claims far more closely than the industry currently does. In my view, customer base expansion is likely to be less of a play than re-cannibalization of the existing base itself through more value in the product and services offered.

Till we have greater clarity and the story unfolds to reveal the reality, let’s WATCH THE MAGIC SHOW, ON THE GO! ABRACADABRA…

Note: The views expressed here and in any of my posts are my personal views and not to be construed as being shared by any organization or group that I am or have been associated with presently or in the past.

Innovation directed at business expansion key to IT survival and growth

Current estimates of support spend as a percentage of total applications spend hover around the two-thirds or 67% mark. General opinion is that this is what the entire industry should focus on since that is where the whack is!

Much as everyone would like to spend more and more time and effort on the support space because it offers the comfort of the known paradigm, this is counter-productive in the longer term given that logically this would end up shrinking the total IT spend and consequently the industry.

Here are some interesting points to ponder…

The average application lifecycle in the era of legacy systems, by popular opinion and analyst research was in the 10 year ballpark. Contrast that with the current era of mobility applications being dumped every 3 months (admittedly a rather extreme example), the average web application being retired in the 5 year ballpark and enterprise applications going through a 7 year revamp cycle. Also taking into account the share of each of these category of applications in the overall pie, and we could realistically run with an average application lifecycle of 6 years. The next variable in this equation is the cost of development compared to the cost of maintenance of an application in its lifecycle and there is a plethora of data gathering and analysis that has happened on this with development to support cost ratios ranging from 1:1 to 1:2, the latter being for longer lifecycles and the former for the shorter ones. The current ratio of support and development spend, as reported by multiple analysts having polled more than a representative sample of buyers each, seems to be in the 2:1 range. If this ratio has to be maintained over two and a half average life-cycles (15 years down the line), all the development effort and costs would only be redirected towards rewriting what already exists!

It is a comfortable state of equilibrium, but one that folks in this business must dread. One can contest any of the numbers above (below, and everywhere in between), have their own take on what the numbers should be, but the trend and consequence does not change with the math.

This also lends itself pretty smoothly to the TCO vs CVC discussion from my previous post. The development spend has to be towards expanding the total pie and not just rearranging spends within the pie. This can happen only when most of the IT discretionary or development spend is focused towards top-line growth and not bottom-line optimization for the business. The former has non-linear and structurally far-higher returns compared to the latter and hence the overall risk is proportionately higher. At the risk of digression, I wanted to touch upon the topic of the hyperbolic reactions of stakeholders when cost optimization projects get delayed. Since these projects do not have a take-to-market element, the primary impact is in the cost reduction being delayed by the same amount of time as the project delay. This should not adversely impact the overall return on investment outlook if the returns were pegged appropriately above the hurdle rate. Anyway, this is a topic I will touch upon at a later date, but for now, suffices to understand that this category of development projects focusing on bottom-line improvement through cost optimization are at relatively lower risk levels and lower returns. In the context of the current discussion, these are spends that have fallen or will soon fall directly into the scope of the ‘law of diminishing returns’.

The world has grown at approximately 6.1% and 5.4% in the past 10 and 5 years respectively, while non-communication IT spending has grown at 5.8% and 4.8%. Gartner’s view of categorizing the spend into what is done to ‘Run’, ‘Grow’ and ‘Transform’ the business reiterates the same fact and the percentage spend in each category, 19-20% and constant for ‘Grow’, ~66% and down a couple of percentage points over the past 5 years for ‘Run’, 14-15% and up a couple of percentage points over the past 5 years for ‘Transform’, reflects an awareness, albeit slow in the IT community that the game will soon need to be changed towards innovating in the business expansion space and embarking on aggressive application development initiatives to fuel growth rather than focusing on TCO and a support optimization and consolidation model that is currently in vogue. There is a temporary blip (at least that is the way I would like to see it!) in the 2010 Capex to Opex ratio, which has come down from 3:7 (steady over 4 years) to 1:4, but I would like to see this as exactly what I called it, a temporary blip, given this was the year immediately post the worst year for the economy in recent times.

In conclusion, the IT community, now more than any other time in the past, needs to focus its energy towards finding ways and means through which business expansion happens on the back of information technology innovation and not the other way round. There are avenues to explore, both charted and uncharted. What is required is organizational resolve to invest and do so in a structured way. There is a lot to learn from the other industries which have seen many such cycles in their lifetimes. The organizations that have survived, in fact thrived, are the ones that spent their time, effort and money investing in innovation to define the future rather than fall in line with changes brought about by someone else.

   

Note: The views expressed here and in any of my posts are my personal views and not to be construed as being shared by any organization or group that I am or have been associated with presently or in the past.

Time for burial – the TCO play has run its life – enter CVC

The dominant theme of the past two decades in IT and operations services spend has been to bring down the Total Cost of Ownership. The businesses were riddled by a plethora of operational inefficiencies ranging from sub-optimal business processes and automation to an ineffective and localized human capital supply chain. While the early adopters spotted and fixed this, largely within the last decade of the 20^th century itself, the bulk of the folks got onto the bandwagon between the mid-90s to the middle of the last decade.

While there were a range of new products, services and solutions that came into the market, few focused beyond the TCO and cost optimization themes. Almost every large enterprise had their time, effort and money spent in implementation of ERP products, embarking on collaborative B2B and B2C commerce, et al. And all the while, as an aside, the cost of implementation was also being driven down through optimal sourcing leveraging the benefits of cost and labor arbitrage. Every conceivable component of ‘cost of ownership’ from people to infrastructure to application underlying the business process was optimized to achieve maximum TCO reduction. Make no mistake, this yielded some fantastic business results with actual annual budgets for many of these enterprise cost elements coming down anywhere between 10-30% and the cost of implementation anywhere between 20-50% depending on where each company was on the operational efficiency curve. Even the latest technology or service management trends being adopted like the cloud and shared services et al, merely redistribute the pie within the service providers and optimize the TCO for the buyers. Check the services spend numbers as a percentage of sales for organizations and as a percentage of GDP for the larger economy and you would know where this play is headed.

The TCO play, stark as it sounds, has run its life. It is, in fact, on life-support! The incremental benefits of this play and the effort and costs required to realize them, soon shall make no economic sense.

So what is in store? I deliberately used the preposition ‘few’ instead of ‘none’ when I referred to where, buyers and sellers alike, were focusing in the recent past. There are quite a few areas, for that matter, where technology or process investments have pushed boundaries for the business to be able to expand beyond its current boundaries. The ability to service a global consumer base 24x7 on voice or data is an example. The advent of the web as an alternative channel to take products and service to market is another. The ability to slice and dice enterprise-wide data and carry out data analysis and analytics hitherto not possible, is yet another. These are the areas where technology and operations spend has effectively ‘Contributed to Value Creation (CVC)’ for an enterprise, organization, and at a different magnitude of generalization, the world.

Again, be warned that this is a much tougher route to take. Not just because it is not a much trodden path, but also because the number of experiments and ideas that would actually translate into a viable business proposition would be dramatically lesser than the TCO play that everyone has been used to. Also, measuring CVC is not likely to be straightforward. This would mean, exactly determining the contribution of IT or process driven initiatives, to the business benefits and realized returns-on-investment by broadening the business horizon, will be much tougher than the TCO regime.

Yet, this is inevitable. This is what, in the next decade or more that unfolds, will deliver quantum benefits to the business, revive/sustain/grow business interest and investment mindshare in technology and process services. But most importantly, this will take the CIO and COO agenda of enterprises beyond budget and TCO management to the realm of driving business direction and creating business value, and the outsourcing players back to the heady days of hefty double-digit percentage growth.

Note: The views expressed here and in any of my posts are my personal views and not to be construed as being shared by any organization or group that I am or have been associated with presently or in the past.

Players in the IT industry - Chicken Little or Chicken DoLittle?

The overall pie (World IT spend as a percentage of the World GDP) is, lately, nearly stagnant. If technology (read IT) spend as a percentage of revenues is not growing, the growth rates are going to be a reflection of the overall rate of growth of the economy. Learning from the past, it is only when positive disruptions in the form of technology inventions or innovations have brought in a significant opportunity for business to be done differently (and better), that the overall pie has grown. This was directly reflected in the ‘percentage IT spend’ metric, and in turn, the growth rates of the industry.

Hardcore optimists have been and remain in denial of the above fact despite the data demonstrating it ever so clearly. They would call the folks who see and urge everyone to see this phenomenon as the ‘Chicken Little’ of the world. One alternative is to acknowledge the problem, see it in the eye, and act in pursuit of the next disruption which could ‘expand the pie’. The other is to continue being in denial, play within the boundaries, try and get a ‘bigger share of the pie’, feel good about the incremental growth if you succeed, or put up a price tag around your neck if you don’t. This is the bunch of ‘Chicken DoLittle’ of the world.

The choice is ours to make!