What to Expect
Interestingly enough, many managers plan ingenious strategies in response to competition and marketspace innovations. Yet few firms excel at translating strategy into action. If you ask these same managers how well their organizations have executed past projects and to assess their ability to reach strategic goals, you'll hear a litany of frustration and little hope for success. This problem is getting worse as companies race to integrate physical assets and online capabilities.
The problem has often been a lack of tools for managers to align both their long-term and short- term e-business strategy and the processes and application frameworks that will help them imple- ment it. The e-business blueprint provides the tools to support management in implementing a solid long-term foundation. The e-blueprint creation process covers both infrastructure and application projects and provides a roadmap to help companies translate their e-strategies into actions.
An enterprise blueprint is a plan for the long term. A well-planned blueprint of interconnected ap- plications is a pre requisite for e-business. This chapter explains how to span the gap between e- business strategic planning and execution using e-blueprints. The chapter also
• Details the steps involved in building an e-business blueprint
• Presents the business case for making e-business investments
• Discusses the management issues and challenges you must confront when developing an e- blueprint business case
• Provides a business case checklist and the top ways companies fail at turning strategy into action Why is it that converting e-strategy into action, high on management's priority list, is not well un- derstood? Could it be that most managers underestimate the real challenge: getting their ambitious Internet plans off the drawing board and onto the implementation road? Is top management slow to realize that whereas designing a high-level e-business design—identifying the journey—might take a few months, building a comprehensive e-business architecture—getting to the destination—is a long, bumpy road?
It has been our experience that e-strategy discussions ignore the link- application infrastructure between strategy formulation and execution because executives fail to see it as part of the big picture. Unfortunately, most people don't find application infrastructure to be a very exciting subject.
As a result, many companies miss the opportunity to make an educated choice between a "real"
strategy that they can execute well and an "ideal" strategy that may demand capabilities they simply do not possess. So it should come as no surprise that many "ideal" strategies have trouble getting executed in the real world. How do you fix this alignment problem? How does a firm arrive at a "real"
strategy?
A good analogy to the "ideal" versus "real" dilemma can be found in everyday life—fitness. Fitness isn't an option in today's sedentary e-lifestyle. It's a necessary part of our daily routine. To become fit or to maintain fitness, many individuals set goals, often at the beginning of the year, to stick to a disciplined regimen. Yet few follow them. The strategy is great, but the execution is poor. To execute better, experts have been advocating a whole new way of thinking about exercise—one that goes beyond regarding fitness as a fad or the province of marathon runners and instead considers it as a necessary part of our daily routine. Again, good concept. But to get there requires not only major shifts in personal behavior but also an effort to systematically change structural and process im- pediments to leading more healthy lives.
Everybody knows they should exercise. So why do so few people actually do it? This fitness dilemma is very similar to e-business execution dilemma. Many firms fail to establish connection between their strategy-planning processes and the processes they use to identify, select, implement, and deploy individual projects (see Figure 13.1). Companies often fall prey to the "business fad of the day" syndrome and often throw away discipline and bet the company on the silver bullet. This lack of discipline at the enterprise level creates deep-rooted structural and coordination problems in a world in which the time between planning and tactical execution is increasingly compressed.
Figure 13.1. Linking Value to e-Blueprint Planning
Based on our experience of observing what works and what doesn't in large companies, we have come to the conclusion that lack of a disciplined approach to execution is often the cause of failure.
To overcome this problem, we have created the concept of e-business blueprints as a missing link between strategy and tactics. An e-business blueprint is defined as the whole fabric of applications, processes, and services that shape and sustain customer value. The traditional model of different silos with different applications has restricted the development of holistic strategies for building more integrated and efficient e-businesses.
So what lies ahead? In the previous chapter, we detailed the questions that managers need to ask before they can create an e-business design. The purpose of this chapter is to add to the e-business roadmap detail that can help bridge the chasm between high-level e-business strategy and effective execution. Read on and learn what others are doing about the challenge and, most important, what your company can do!
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Setting the Stage for e-Blueprint Planning
Clarifying the e-Blueprint Problem
In medieval times, cathedrals were usually built without any blueprints. The master builder had a vague idea of a plan and began to build. As he proceeded, the builder or his patron—a bishop, a king, or a rich nobleman—might alter the plan. Rather than start anew, the builder incorporated the changes and continued until something resembling a cathedral was complete. Usually, the finished product looked nothing like the initial design.
Today's corporate e-business efforts resemble the construction of a medieval cathedral. A "vague idea" substitutes for cohesive management and a well-developed plan. Intuition rather than reason directs development of new applications. The e-business strategy's success hinges on the creative ability of the artists—management—rather than on the inherent solidity of the design.
Today's typical corporate infrastructure comprises a diverse mixture of application packages, legacy systems, and custom apps. The problem is not so much the diversity but the absence of a cohesive approach to creating sustainable business designs. The CIO of Chase.com stated it well: "We're not trying to be a winner on the Internet. We're trying to be one of the best-positioned companies to take advantage of opportunities in the new economy. It is a much bigger battle we're trying to win, and a massive opportunity to change the way business is done."[1]
e-Blueprint planning links your e-business strategy with the technology, resources, and company capabilities required to make the strategy happen. As technology spending accelerates, e-blueprint planning becomes more important and difficult, for the following reasons.
• Without an e-business blueprint, technology investments are not often linked to a definable e- strategy. The business risk increases, as poor investment decisions can be costly and detri- mental to an organization's competitive position.
• The strategic use of technology, the widening scope and complexity of decision making, and the speed of innovation make it difficult for organizations to make technology-related decisions ef- fectively.
• The successful analysis and implementation of technology projects that meet stated objectives is rare. Failure, on the other hand, can be devastating.
• Greater technical complexity and the proliferation of vendors offering a variety of solutions have made understanding emerging technology, and anticipating its impact, more challenging.
Technological complexity and the associated fiscal risks mean that more companies are searching for better ways to manage the task of aligning their business models with their decisions about technology spending. Such alignment takes skill and depends largely on which type of strategy—
process improvement, strategic improvement, or business transformation—is being pursued. The skills required to execute each of these strategies, although not mutually exclusive, are rarely present in a single company.
Strategic alignment is further complicated by the widespread corporate habit of managing a group of poorly integrated individual projects rather than a portfolio of projects carried out in support of a specific strategy. This project portfolio detailing a master plan for implementing multiple concurrent projects is the e-blueprint.
The e-blueprint lays out a plan for execution. This may require companies to overhaul project man- agement. For instance, in an SAP R/3 financial application project, McKesson chopped an unwieldy 40-member business steering committee down to 4 executives: CIO, CFO, the controller, and the vice president of shared financial services. At the same time, McKesson transferred the week-to- week project management from a single business executive to a four-person "project office" that had business knowledge, SAP knowledge, and a deep understanding of the complex legacy sys- tems. No one person had all this knowledge. There wasn't even a person who knew two aspects.[2]
Focusing on e-Blueprints, Not Single Projects
In most companies, e-business projects are treated the same as any other initiative. Each e-effort is undertaken one project at a time in isolation from other projects, with little forethought given to achieving economies of scale and scope or shared resources. Without a shared strategic vision in place, each initiative goes in its own self-defined direction. This problem is compounded by mergers and acquisitions. As a result, many companies have serious application infrastructure problems, and these problems have worsened in recent years.
The end results of the single project focus are
• Resource competition, resulting in political fights
• A failure to embrace commonality of purpose and technology across the organization
• Uncoordinated system designs, with lack of compatibility and standardization among initiatives
• Inconsistent customer experiences when one common experience would suffice
• Expensive in-house-developed technology serving a single project
• Business processes with essentially the same specifications but subtle differences so they are not reusable
An e-business blueprint can easily become chaotic and dysfunctional when it is developed and managed one project at a time (see Figure 13.2). In most companies, the political will simply is not there. Without such political courage, the institutional obstacles to well-thought out, comprehensive, and integrated e-blueprints will remain. Like good politicians, top managers rhetorically support common initiatives every chance they get—but then do next to nothing to make it happen for fear of the consequences.
Figure 13.2. Approaches to e-Blueprint Planning
Departmental resistance is often the reason individual projects take precedence over enterprise- wide need. Departmental incentive structures are often driven by parochialism, group loyalty, and a stubbornly rooted culture based on the concepts of profit center and individual P&Ls. As a result, the business lines are loath to implement common projects. This attitude is tremendously harmful when you are creating solutions for a common customer.
Translating e-Business Strategy into Action: e-Blueprint Formulation 299
The experience of Microsoft provides an alternative to the single-project mentality. Most readers probably own a PC powered by Microsoft Windows running Microsoft Office. There is a good reason for this. Microsoft drove most of its competitors, such as WordPerfect and Lotus, out of the word processing and spreadsheet business by developing consistent and common product platforms for its major product families. Microsoft did the same to Novell in the networking business by making local area networking part of its operating system. Microsoft overtook Borland in the development tools business by emphasizing consistency and broader integration. Microsoft overtook Netscape also by using its platform to provide integration, consistency, and ease of use. In area after area, Microsoft's relentless pursuit of improvement excellence, coupled with its focus on providing better integration for the customer, has proved to be unstoppable.
Beginning the e-Blueprint Journey
Imagine taking a caravan of thousands of people on a journey with no map, no plan, no one in charge, no logistical support, no way to keep everyone informed, no scouting reports to assess and update progress, and no navigational instruments. Sheer madness, yet that's how most companies handle the transition to e-business. The purpose of the e-blueprint is to map a course for creating an integrated design and to avoid the dead ends that are typical when you don't plan where you're headed.
The e-blueprint translates strategy into action (see Figure 13.3). Integration of the following drivers into a comprehensive application framework is the essence of blueprint planning:
Figure 13.3. Translating Strategy into Action
• Organizational, such as consolidation, the need for operational efficiencies
• Business, such as mergers and acquisitions, new business initiatives
• Customer, such as changing customer priorities
• Technology, such as the availability of new technology, legacy applications
GE, Wal-Mart, Microsoft, and Intel seem to excel at this. For instance, during the 1980s and 1990s, Wal-Mart turned the discount-retailing business into a pure game of tactical execution by excelling in information technology, logistics infrastructure, and front-line execution. Market leaders know that however excellent a strategy may be, it will not succeed without disciplined execution.
Blueprints also must support the "value" goals: customer focus, highest quality, lowest cost, and shortest lead time. For instance, e-blueprints must support the necessary application integration required to deliver value to customers. How? By determining the strategic elements of its application infrastructure and translating these to an enterprise-wide, unified foundation that is both efficient and flexible, allowing the company to adapt, change, grow, and innovate.
In your company, who lies awake at night thinking of the integration of technology and applications across all the business units?
The relationship between value creation, innovation, and integration forms the core of e-business blueprint planning. Are your blueprint planning efforts able to
• Balance the opportunities for improving application infrastructure by prioritizing technology ap- propriately in accordance with the corporate strategy
• Achieve the right project mix to support the company's strategic direction while allocating re- sources appropriately
In addition a company can take two possible approaches when justifying its blueprint. Which of the following is your company doing?
• A short-term approach whereby a company patches together an e-blueprint plan incorporating the company's existing applications
• A longer-term approach whereby a company starts over with an entirely new group of applica- tions as the core piece of its e-blueprint plan
Companies with groups of complex information systems must adhere to a structured and disciplined approach when managing the risks associated with enterprise framework planning and investment.
Corporate managers can learn from builders. Any builder will tell you that designing a house from the ground up is often a breeze compared with adding on to an existing structure. When starting from scratch, you can pick and choose the features you want. But adding on can be a headache because you have to mesh new and old structural elements, and often the old structure dictates the materials, design, and extent of the addition.
To Patch or Not to Patch?
What is the optimal blueprint for traditional brick-and-mortar organizations? Whether a company chooses to patch together its existing applications framework to support its e-business strategy or to start with an entirely new framework, neither choice reduces the workload or the difficulty. There are no shortcuts when creating seamless integration across enterprise applications. For this reason, many established firms are vulnerable to competition from start-ups.
For example, Citibank is a pioneer of online banking. When formulating its e-business blueprint, Citibank decided to abandon many expensive, proprietary computer systems it had built in the past decade and to create a new Internet banking and investment service. Citibank aims to replace the core back-office computer systems on which it keeps customer accounts—systems that it had built and maintained at a cost of hundreds of millions of dollars. The bank is taking such a radical action to catch up with a new generation of competitors, such as E*TRADE and more nimble, established companies, such as Charles Schwab, that have seized the initiative on Internet financial services.
[3] Citibank had to address the question of whether to create a fresh new infrastructure or to patch the existing infrastructure. Based on your experience, is discarding legacy systems the best way for larger companies to compete with newer firms?
Large firms face three challenges when deciding to patch or not patch their existing infrastructure:
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• Integration of their legacy infrastructure
• Building a seamless infrastructure on a fragmented application base
• Knowing when to walk away and start over
Many companies must deal with the first of these challenges. For large, established companies, updating and integrating their existing infrastructure is often their only choice. According to the CIO of Delta Airlines, "A Web site is like an iceberg. What you see looks small and simple, but below it you have infra structure integration issues with maybe 40 or 50 databases. So building a Web infrastructure can be a pretty serious risk for older companies."[4] In the case of large firms, the e- blueprint provides a logically consistent plan for implementing coordinated projects to take a com- pany's application infrastructure from its current state to the desired future state.
The second challenge requires large companies to make sure that the front-end experience for customers is a seamless, well-integrated service-delivery platform. Such platforms mark a funda- mental change in the way a business runs. Integration is not simply an IT issue but means creating the right structural foundation to facilitate e-business.
The third challenge is knowing when to walk away and start over. If the company has chosen to patch its existing infrastructure, senior management has the responsibility to monitor whether such change is sufficient to meet the goals of the company's e-business strategy. When incremental change is insufficient, the company must be prepared to make the fundamental changes required to reshape the application foundation on which the company operates. The e-blueprint assists com- panies in overcoming the inertia and cultural resistance that often come with the decision to under- take radical technological change.
As companies become customer focused, an effective blueprint differentiates successful companies from other firms because it enhances their ability to deliver value. Blueprints help launch new inte- gration efforts, not just implementing patches to existing initiatives. Information, process, and data integration across applications is where the battles will be fought and won in the next 5 years.
Evaluating Your Company's e-Business Blueprint Process
It is important to regularly assess how your firm is managing its e-business blueprint formulation.
Following are several red flags indicating that the process is in trouble:
• Platform projects take too long. When asked why, managers point out how everyone is working as hard as possible, but people are stretched across too many projects. Too many "strategic"
projects in the pipeline results in project gridlock.
• Many substandard projects have been in the pipeline for years, have lost their value, and are siphoning off resources from more worthwhile efforts.
• Nearly all the projects you are implementing are long-term, multimillion- dollar, big-bang efforts.
Many of the projects are high reward but also high risk, implying that there's a high probability of technical or commercial failure.
• Almost all projects you are implementing appear to reinvent the wheel, resulting in wasted effort and overlap, and no one takes advantage of previous work or already established key elements.
• Too much procrastination when making decisions. The complexity of today's technology—pro- liferating layers of servers, operating systems, application languages, network protocols, data- bases, middleware, hardware, and software—makes it more and more difficult to ascertain the long-term impact of any technological choice.
• Project interdependence is difficult to manage. Increased integration among business units and functions means that changes in one system often affect dozens of others, some in other or- ganizations.
• Lack of communication and business-side buy-in. IT often deploys technology without user management's buy-in, and users resist it. Adoption is slow or just nonexistent.
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