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  

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

Why 48% Of Cost Reduction Initiatives Fail

Almost half of all cost reduction initiatives fail – and that’s despite enterprises scaling back their cost-cutting ambitions – as Deloitte’s 2013 Cost Improvement Survey reports:

“[Despite lower targets…] executive respondents have reported a higher failure rate for their cost initiatives. In 2008, the failure rate was 14%. In 2010, it was 37%. And in 2012, the failure rate climbed to 48%, meaning that nearly half of all cost initiatives now fail to achieve their goals.”

One root cause – possibly the root cause – must be that most organizations don’t have an enterprise process management platform. So they:

  • don’t have a comprehensive and joined-up perspective on their operations
  • don’t have a framework for effective collaboration on the design and implementation of change
  • can’t fully leverage the power of process visualization to simplify
  • can’t easily break down silos and engage their people in continuous improvement
  • are locked into project-thinking, and so down-playing longer-term sustainability.

It’s a diagnosis that’s borne out by the survey respondents:

“The biggest barriers to effective cost reduction cited by respondents are “lack of understanding” about the need for cost reduction (74%), and “erosion of savings” (73%) resulting from cost improvements that are not feasible or sustainable.

Survey respondents indicated that their companies are attempting to overcome the barriers by focusing more attention on change management (52%), clearly defining goals and objectives (41%), and communication (32%).”

Related Posts

02 Apr 2013   A Simplification Bandwagon Begins To Roll

21 Feb 2013   When Process Standardization Backfires

Shared Services: New Frontiers – And Risks

Genpact has a neat graphic (right) on the three generations of a Shared Services Organization (SSO) in a paper for the European SSON Week next month.

Genpact echoes Deloitte on the strategic challenges:

“Businesses around the globe are finding it challenging to take their Shared Services Centers to the next level. Across the board, few SSCs have delivered the full value envisioned by CFOs and finance directors.”

Genpact makes the case for going hybrid, for working with a strategic global partner to deliver the full potential of shared services.

Which may be a great idea. But here’s two reasons why investing in a process management platform should be the #1 priority:

it provides an SSO service management framework – across all three SSO generations. It enables effective collaboration among the stakeholders, both within and outside the enterprise. It orchestrates the design and implementation of change.

it mitigates partnership risk. It allows the SSO to work closely with its strategic partner – and to adopt a multisourcing strategy where appropriate – while ensuring that the SSO always remains in control.  It ensures, for instance, that you never have to buy back your own processes.

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21 Mar 2013   Process Excellence: What’s To Be Done?

26 Feb 2013   Shared Services: Search For Missing Benefits Continues

Shared Services: Search For Missing Benefits Continues

Deloitte 2013 Global Shared Services Survey ResultsDeloitte’s 2013 Global Shared Services Survey report, just published, confirms that things are progressing as expected. There’s growth – in the breadth of services offered, and in the spread of locations – and more complexity and sophistication, with more multifunction SSCs, more hybrid delivery models and more stand-alone GBS organizations.

This year, Deloitte is not publishing the main survey findings, listing only the questions asked of the 270+ respondents.  But one line in the executive summary hints at what is perhaps the most interesting story of all:

“A multifaceted approach to addressing the retained organization is required to realize the intended benefits.”

The word on the street is that few shared services programmes deliver their business case. They may do great things, they may employ very talented people, but often there seems to be a question mark over benefits realization. And although the 2013 Survey report doesn’t comment on this directly, a (separate) Deloitte webinar last week seemed to confirm that there’s no smoke without fire.

Now it’s true that that webinar was focussed on HR Shared Services. But many SSCs are now multi-functional, and Deloitte claims to have worked on 900 shared services projects. So it seems a credible source.

In Global HR Shared Services: Emerging Trends, Brett Walsh and colleagues from Deloitte shed light on Shared Services ‘optimisation’ challenges:

“Much has been said about the role of shared services in the transformation of the Human Resources function. Yet for many companies, the benefits expected from transformation are proving elusive.”

“Long after project go-live, when systems and delivery models are in place, organisations still struggle to release the full potential of their investment in HR Shared Services. In fact, many organisations report either failure or significant underperformance compared to their original business case.”

There’s no single solution. Every organization is different.  But I’m going to stake a claim that one of the root causes for the ‘missing’ benefits – maybe the root cause – is a laid-back approach to process management.  It’s the attitude that defining process is simply an overhead and a non-value-add activity; that it doesn’t matter if process is in duplicated and overlapping fragments, in different tools and formats, unconnected with real work, and ‘governed’ only by email.

Without the rigour and support of a process management platform, effective collaboration among the stakeholders on the design and implementation of change must be in jeopardy.  We see it mostly obviously, and dramatically, in the chasm that can appear between IT and the business, but it undermines effective collaboration between all the other stakeholders too.

Related Posts

21 Feb 2013    When Process Standardization Backfires

15 Nov 2012    Outsourcing’s Secret Sauce

© Text Michael Gammage 2013

Outsourcing’s Secret Sauce

Deloitte - Outsourcing Today and Tomorrow - Nov 2012Deloitte’s report Outsourcing, Today and Tomorrow, just published, attempts to define the secret sauce for outsourcing. The authors are engagingly frank:

“We wish we could wrap up this paper with a pithy summary of the secrets of effective outsourcing, boiled down into a neat list of easy-to-digest bullet points. Unfortunately, if such secrets exist, no one has yet discovered them.”

But they go on to suggest ‘one possible candidate’ for outsourcing’s secret sauce:

“The recognition that outsourcing, like other complex business practices, is a discrete business discipline requiring specialized skills that cannot easily be developed on the fly.”

Which may be true – let’s agree it’s one of the essential spices – but it overlooks an essential ingredient, arguably the foundation for outsourcing’s secret sauce: a platform for effective collaboration, which surely lies at the heart of successful outsourcing.

This platform provides a common language: end-to-end process, expressed in the language of the business, not IT-speak. It is comprehensive, not just IT-oriented. It provides integrated perspectives, not just a repository of process fragments. It is wrapped within a robust governance framework to enable process stakeholders – across the enterprise and including especially IT – to effectively manage change. And, crucially, it enables deployment to process users in a way that is personalised, intuitive and engaging.

The Deloitte report – which polled 100+ sourcing professionals earlier this year – provides ample evidence that this need for a common language, a framework for more effective collaboration, is real and growing:

Outsourcing is big – a $480bn industry this year – and set to expand. So too is offshoring.  But operational roles and responsibilities are often amazingly unclear. [There is far too much focus simply on contractual negotiations]

Cloud will vastly increase its complexity. [as will Social, Mobile and Big Data]

Churn is increasing: half of clients have terminated contracts for convenience, sometimes to insource, most often to re-outsource. [Managing complex dynamic multisourced service delivery environments is becoming the norm]

Innovation and sustainable success in continuous improvement can’t work without it. [Innovation and continuous improvement is the area where organizations report that they are least effective in working with service providers].

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21 Aug 2012    How To Simplify Global Shared Services

20 Jun 2012    Process: The Emerging Global Business Language

© Text Michael Gammage 2012

Global Shared Services: Building The Brand

It’s interesting how rapidly the quality of the customer experience is racing up the strategic agenda for leaders of Shared Services Organizations (SSO) and Global Business Services (GBS) units.

Deloitte’s 2011 Global Survey noted the need for any SSO to promote itself effectively – to overcome resistance, and to secure buy-in, by getting closer to its customers.

On the webinar with HfS yesterday, Ron Walker of KPMG went further, stressing brand development as one of the keys to GBS success:

“How you manage the GBS brand is critical. Any GBS has to sell itself, and to show quick wins.”

The perfect backdrop for my plug for an SSON-hosted webinar next month. Building on experience with a range of clients, I want to show how Nimbus provides a platform for SSO and GBS organizations to deliver continuous excellence – including an outstanding customer experience.

There’s an interesting prelimary discussion, of course, about what we even mean by the ‘customer experience’ in this context.

Deloitte has suggested a useful  distinction between the SSO’s client – meaning the exec team buying the SSO’s services – and the SSO’s customer – meaning the day-to-day users of the SSO’s services.

Clearly ‘an outstanding customer experience’ has to deliver for both the SSO’s clients and its service user customers…

[just fyi – in the typical shared services and outsourcing journey for most organizations, GBS units may be the final stage beyond an SSO, but for all practical purposes, I take SSO and GBS to be interchangeable terms in this context].

Related Posts

21 Aug 2012    How To Simplify Global Shared Services

14 Aug 2012    Enabling The Global-Local Enterprise

© Text Michael Gammage 2012