Big Data, Advanced Analytics and Black Swans

black swanCan advanced analytics be as much a threat as an opportunity? It seems quite plausible: it’s complicated.  The near wipe-out of a leading Wall Street brokerage in just two hours demonstrated how complexity can be financially catastrophic, to take just one example.

McKinsey’s latest advice to organizations investing in advanced analytics highlights the value of simplicity, which enables the business stakeholders to be engaged:

“Two guiding principles can help. First, business users should be involved in the model-building process; they must understand the analytics and ensure that the model yields actionable results. Second, the modeling approach should aim for the least complex model that will deliver the needed insights.”

McKinsey quotes a case where the complexity of a model prevented the business users from spotting its flaws, and so correcting its grossly misleading conclusions. It took the creation of a new simplified model by different authors to realise the mistakes that were being made. I suspect that many of us know of similar instances.

Looking at how companies can turn valid data-driven insights into effective action on the front line, McKinsey notes how user engagement becomes crucial:

“Companies must define new processes in a way that managers and frontline workers can readily understand and adopt.”

I’m not a big data and analytics skeptic.  When data-and-analytics is done well, it has huge potential, especially perhaps for consumer-facing organizations.  But it seems to me that there’s an essential enabling infrastructure that’s required to ensure that fast-paced data-driven agility is managed safely and sustainably.

It’s an infrastructure characterized in three ways:

it’s process-based and leverages the power of visualization and personalization to simplify and engage

it provides 360 degree visibility; joined-up and comprehensive perspectives where roles and responsibilities, linkages and dependencies are always readily apparent

it enables a rich and effective collaboration across silos, within a unified and robust governance framework.

It adds up to an enterprise process management platform.  And it’s an approach that was reinforced, looking at this from a different angle, by a Deloitte webinar this week on the new COSO 2013 Enterprise Risk Management Framework.  Deloitte’s key messages to senior stakeholders included the need to adopt holistic perspectives, to ensure traceable connectivity between policies and everyday practice, and to ensure ongoing engagement with control owners across the enterprise.

Related Posts

02 Apr 2013   A Simplification Bandwagon Begins To Roll

26 Mar 2013   A Litmus Test For Process Craft  

Penguins, Guillemots and Swimlanes

istock_000020691496small - editIn a workshop with a Life Sciences organization looking for a process platform to transform its approach to knowledge management, and the inevitable question comes up:  “We use swimlanes sometimes anyway – so what’s wrong with BPMN?”.

We gave, I think, a convincing response. Next time though I’m going to try drawing an analogy with wings.

Both penguins and guillemots have wings. But only guillemots fly.  According to a recent study, it’s an example of an evolutionary trade-off. A wing can’t be efficient for both flying and swimming.  Optimising wings for diving leads to unsustainably high energy costs for flight.

So penguins evolved wings that leave them waddling across land but can take them to depths of 1,800 feet in search of food; whereas guillemots fly but can dive only to 300 feet. Their wings serve different purposes.

It’s the same of course with the language of process.

Business Process Model and Notation (BPMN) is a process language optimized for automation.  It is high value from an IT perspective. With BPMN swimlanes, pools, complexity and precision, an organization can dive very deep.

Universal Process Notation (UPN) is optimized for operational excellence. It’s a process language designed to enable effective collaboration across the enterprise on innovation, transformation and continuous improvement. It’s UPN’s simplicity – from the user’s perspective – that enables an organization to fly.

The organization running this workshop wants to shift from a document-based to a process-based approach in search of agility and efficiency. They want a new way of working that will better support their front-line people, engage them in continuous improvement, enable stakeholders to automate and outsource where appropriate, and deliver a new customer experience.  That is flying not diving.

Once they have identified automation opportunities, BPMN can come into play – for the IT team at least – in the design and implementation of systems that are scoped to support the end-to-end business processes (that are defined and maintained using UPN).

Related Posts

15 Mar 2013   Future BPM: The Enterprise Platform

11 Dec 2012    Process Management and Google Maps

Risk Intelligence and Smart Compliance

Hat tip to Deloitte, whose new book Enterprise Compliance: The Risk Intelligent Approach acknowledges some truths too often neglected:

“In the real world, ownership of compliance tends to disappear only a few layers deep into the organizational chart, becoming less visible the further you move away from core compliance functions and roles such as the Chief Compliance Officer. As a result, employees may be performing compliance-related activities every day without knowing the potential consequences of not executing them properly.

Just as important, when processes are updated, or workarounds are put in place, critical compliance tasks may be inadvertently eliminated without anyone understanding the impact on compliance risk.

Pushing responsibilities closer to the front lines of the business can make the overall process of compliance more efficient and less painful, but it can also bring new headaches without adequate planning.

One of the leading ways to avoid the unintended consequences that can come from changing responsibilities is to start with a complete picture of how compliance works in an organization. It can be difficult, but the confusion and risks of operating without such an understanding can be even more painful. From there, make sure people know what they are expected to do and why, and provide them with the incentives they need to stay on track.”

In other words, any intelligent approach to risk management has to start with an enterprise-wide perspective. And it has to be real – supporting the front line of the business – not simply an abstract or representation of operational reality created for compliance purposes.

It’s what a good process management platform enables. Get it right and the result can be the cultural shift which Deloitte is calling for – one in which ‘Compliance is not just another box in need of checking but is simply part of how business gets done’.

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29 June 2012   Process And The New World Of Risk Management