Wednesday, February 27, 2008

Curing the Cancer of Business

There was a time, when the “C” word was cancer, and it was whispered in conversations. Our attitudes have changed, as we learn more about cancer. The same is true in business. Cancer eats away at the very heart and soul of a business.

Perhaps the deadliest form of business cancer is cost cancer. That is the focus on measuring and managing cost at the expense of measuring and managing value.

Allow me to offer up the optimization cycle as an example. Many US business entities follow what is know as a Chase Cycle. They staff up when demand is high, they staff down when demand is low and it seems logical on the surface.

Each time they shed talent, they remove key balancing elements of the foundation from the business. There is a loss of perspective, knowledge, skill and wisdom. There are also those elements of the foundation that remain; which include loyalty and structure. When an upsurge in demand occurs, the foundation that remains, tries to clone itself. They seek people who are loyal, structured and detail oriented; and this comes at the expense of competence.

Down turns put talent onto the street. Some retire, some are absorbed by small firms and others are transformed to another profession. No one is waiting around on holiday. Then like a tsunami, surges from pent up demand are so great, that business entities cannot find the talent needed to do it right. The market place is unprepared to provide the talent needed. The result is a change in cultural rules of competency. Education, training and experience are viewed as development alternatives to each other. Instead of seeking people qualified to do the job, we look for people who aspire to develop competency under fire.

The lessons learned on the job lack the balance of traditional development. Whatever understanding is gained is limited to the experiential perspective. Knowledge of theory and concepts gained through formal education is rationalized as unnecessary. Skills developed by professional training are rationalized as trendy. Because more downturns are expected in the future, on-the-job experience becomes the preferred method of cost effective development.

In time, the once complimentary balance between education, training and experience are viewed as conflicting. The balance of perspectives is lost and a myopic cancer spreads with each and every wave of the Chase Cycle.

In time, the organization dies of natural causes, or the organization is dismantled and rebuilt. The best-known example of the second is GE, a process that took twenty years to complete.

Organizations like Toyota avoid this cancer all together. They do this by not following a chase strategy. Instead, they follow a level strategy. They forecast demand over long periods and set the capacity, capability and competency based on the mean.

They not only keep the foundation of knowledge, skill, wisdom, loyalty and structure together, they build discipline on top of it. Something US firms are not able to achieve. Discipline is a very valuable proactive element, but it also comes with a high cost. US business entities tend to have more of a reactive perspective, and that is why the Chase strategy makes sense to them. Developing discipline is not important, because their perspective does not allow them to see the value, only the cost.

As the Japanese ways continue to transform the rest of the world, in time, the old world methods of the US will die off. Survival for American business will either be accomplished by a Jack Welch type of transformation, or through foreign ownership. Either way, what business entities do in the US, will probably die in the US. The only question is at what economic cost to the US.

Saturday, February 23, 2008

A Wrong Turn at the Industrial Revolution

I for one cannot wait to read Susan Jacoby’s new book The Age of American Unreason. I learned about it from an article in the New York Times on Valentine’s Day. The article written by Patricia Cohen, was titled Dumb and Dumber: Are Americans Hostile to Knowledge?

Just from my experiences of the last 30 years, I feel it is true. When we look at the United States of America, we see a people that are collectively fulfilling the famed Peter Principle. As a nation and a culture, we are rising to a level of incompetence.

It was commonly known in the ancient world that competence varied widely between artisans. Since they would never need to work together, it was not important. Legend has it that the building of King Solomon’s Temple required artisans from all over the Europe and Asia. The variation in competence was solved by developing a system to assess and thus a blueprint to develop competence in order to complete the construction of the temple.

It believed that the master builder of the temple was recognized that different people defined competence differently. One third of the artisans defined it as the knowledge gained through education to understand why we do something. Another third defined it as the skills gained through training to understand how we do something. The last third defined it as the wisdom gained through experience to understand when we do something.

Recognizing that all three views complemented each other, legend claims that the master builder developed the maturity model structure. It can be assumed the structure is very similar to our modern capability maturity models; and that there were five levels of educational maturity, five levels of skill maturity and five levels of experiential maturity.

Due to the complimentary nature, in order for an apprentice to complete the first level of development they needed to demonstrate level one competence in all three areas. This continued as the apprentice moved up the developmental model until they reached level five at the top. They were then designated as journeymen, which indicated they had a level of competence that allowed them to travel to do work without supervision.

Though this three dimensional perspective of competence continued to evolve through guilds, colleges and early universities, for many reasons, it began to break down with the introduction of factories. In time, the simultaneous model gave way to a linear separation of education, then training and finally experience. This separation led to inconsistencies between the three and tended to feed the natural preference of individuals who prefer one method to the other for developing understanding.

The bottom line, without the standards of character and the structure of discipline, individuals left to their own compass will be driven by the natural tendencies of the own temperament. They have no reason to expand their capabilities and no motivation to see the world through other perspectives. Without a rationalization to drive their development, they will believe, feel and think based on the limited wiring given to them at birth.

Thursday, February 21, 2008

Upside-down Service Management (UDSM)

There is a very interesting trend in the professional writings of the IT industry. The trend is use of terms that have traditionally existed as verbs to be used as nouns, or traditionally nouns and used as verbs. In other words, there is confusion between the action and the result.

In many ways, the computing industry is almost like a parallel universe, where the logic of everything is the opposite from the logic of our traditional universe. The nature of the industry might be causing the confusion. After all, it is the first industry where the output of the “techno” (Latin for value added by the machine) action is primary and the “techne” (Latin for value added by the human) action is secondary.

Perhaps the confused writings are the result of the type of personality drawn to such an industry; and for some reason, either they are un-able to separate the process from the product, or they tend to reverse the roles, using terms traditionally defined to represent “products”, to represent “processes”, or visa versa.

While this was very common for the last two decades when the term “project” as in “project management” was used to represent a type of product, after more than one hundred years of use to represent a type of process.

Today, in many writings regarding service management, either Information Technology Service Management (ITSM) or Business Service Management (BSM), the term “service” is used to describe either a process or a system, even though it has been used traditionally for more than on e hundred years to represent the product of a process or system.

Products are always the result of a process. There are two types of product (goods or services) and four types of process (artisan, project, operation or automated). Any of the four processes can be used to create either of the two products.

Type One processes are temporary and ad-hoc, for unique or customized efforts of inventing something. Products (goods or services) delivered via this process are one of a kind. For example, type one processes are used to capture the likeness of an individual in a painted portrait.

Type Two processes are temporary, plan-able and control-able efforts. Products delivered with this type of processes are customized derivatives of an original created by the type one process. For example, type two processes are used in Restaurant Service situations, where customers control requirements and providers control delivery.

Type Three processes are on-going, plan-able, control-able and repeat-able efforts. Products delivered with this type of process are commoditized (not customized) replicas of an original. For example, type three processes are used in the original telephone service, when individual operators where used to make the person-to-person connections.

Type Four processes are the same as Type Three processes, with one exception – no people. For example, type four processes are used in “Self-Service” situations, where customers control the delivery of service benefit.

A service is not a type of process or system; it is the result of a process or system. Service is the benefit consumed by the individual. For example, the ability to communicate a written message is the benefit of post office or e-mail. When used in the title of a person or organization, it is used to communicate expectations. Postal Service does not mean the post office is the service, it means they provide the service.

Service Managers are a type of Product Manager. They are responsible to ensure that the service delivered to the consumer meets the expectations of the consumer. It does not mean they manage the processes, systems or operations that deliver the service.

Saving ITSM

Since 1900, most business gurus were able to find a direct correlation between the failures of programs and businesses with the competence of management. To understand the connection, it helps to understand that as an entity, management is comprised of a collection of managers. Management (the entity) has an “agency” relationship to the legal entity known as the corporation; it also has a “stewardship” relationship to the stakeholders, such as investors and employees.

As an entity, management receives its power and authority from two places, the shareholders who own the equity, and the state, which recognizes the corporation and management as legal entities. The delegation of authority and liability forms agency relationships. The Board of Directors is the highest level of management and executive managers are their agents. Mid-level managers are agents to executive managers. Front line managers are agents of middle managers.

One common thread found between all failed program attempts is what can be called the agency disconnect – an intentional severance from the chain of command in the mistaken belief that higher levels of management can remove themselves from the liability created by the actions of lower level sub-agents. Even though the Board level and Executive level management are legally liable outside of the business for the actions of all managers, the behavior is still supported internally, by the ignorance of and arrogance in the corporate self-governance mechanisms.

In terms of arrogance, thousands of fiduciary violations such as manipulations, omissions and misstatements occur every day under the flag of “real life”. Since they are not exposed to public scrutiny, what happens in management stays in management. However, by the time these behaviors see the light of day outside the corporation, the issues have reached Enron-like proportions.

In terms of ignorance, the average manager has no idea that management is a professional practice based on a science. The illustrate, lets look at Alfred Chandler, who is famous for researching the connections of successful strategies. Essentially the Chandler principle states –structure always follows strategy, and systems always follow structure. Disconnects comes, when executive develop a strategy and hand it off to middle management to implement. If we follow Chandler, we will change the organization structure accordingly and pass it down to the front-line management. They will change the systems to align to the structure that aligns to the strategy.

If the middle managers are not formally educated, trained and familiar with Chandler, or they have no specific instructions, they will tend to protect and defend the organization against change. Since the new strategy will not work with the existing structure, the middle managers will re-interpret the strategy to fit the current structure. In other words, instead of adopting the strategy and adapting the structure, they adopt the structure and adapt the strategy.

An examination of most, if not all “silver bullet” fads that have swept the nation in the last forty years we find an unimpressive record of success. Most importantly, of these fad-like programs intended to change the business organization, there are few successes, which indicates the theory behind the idea is actually valid.

Service Management (SM) theory has been active in Europe for more than thirty years. The theory of IT Service Management (ITSM) has been active for more than twenty years. The success record in the US and Canada has not been great. In fact, the success of SM and ITSM has been far greater in Europe than in North America.

For those who succeed in changing the organization from a System Management culture to a Service Management culture, the Chandler principle was applied. The CIO was not only active in the development of the Service Management strategy; they were active in the implementation, evaluation and control. Therefore, the IT Directors changed the structure to align to a Service Management strategy, and IT Managers changed the management systems to align to a Service Management structure.

The bottom line is that Service Management is a practice of management, just like risk management, quality management and financial management. The successful organizations approached IT Service Management like a member of the management profession, not a management program. They identified all the traditional principles, practices, processes and professional responsibilities of management and applied them to a service environment. What could be easier?

Can We Get There From Here?

Before there was Continual Service Improvement (CSI) – there was LEAN Sigma; before that, Six Sigma; and Total Quality Management (TQM) before that. When I started learning about process improvement in 1982 it was called Quality Circles.

With each of the countless new names, there was hope that some day, quality will become an accepted part of our work culture. What does this tell us about our culture, as we struggle for a quarter of a century to match the quality of Japanese products?

Before there was Business Service Management (BSM), there was IT Service Management (ITSM). Before there was Information Technology (IT), there was Information Systems; and Information Services (IS) before that. In 1982 it was called Management Information Services (MIS).

With each new name, there is hope that some day, the value provided by IT would begin to exceed the ever growing cost of IT. What does this tell us about our culture, as we struggle for a quarter of a century to realize the financial benefits of technology on the bottom-line?

Starting in 1979, business entities from around the world began turning around their failing ventures with the principles and practices of Service Management. Can these lesson learned be successfully applied to IT? Or is it just a culture problem in the United States? What clues can we discover from the shifting history of modern day IT that will help us find success?

Whirled Class IT

The business advancements of the last three decades have demonstrated the amazing power of technology – in the hands of the right managers. That’s because good managers understand that good technology is nothing without good people. Due to the nature of the industry, globally, Information Technology (IT) departments are knowledge intensive organizations that require a continual flow of education and training. The more they know, the more they can benefit the organization. There are even times when we believe it.

Historically, IT cultures in the United States have struggled with a rapidly swinging pendulum, swinging from one extreme to the other. One day they need to be leading edge innovators, opportunistic and ad-hoc, often resulting in a Laissez-faire culture that tends to believe that their work need not be planned or governed. Then, overnight the pendulum swings to a dictatorial culture, a centralized cost controlling bureaucracy, reducing the organization to manageable silos and papered with thousands of policies and procedures.

Yes, things change and some have the ability anticipate the change, be ahead of the curve and capitalize it. Others just follow the pendulum. The more detailed and myopic the culture (the less big picture visionary), the closer to the pendulum. Today, business cultures such as those found in the United States tend to view IT as a cost burden, not a service benefit. Their strategic direction is to manage IT by allocating resources through fixed budget targets. To better control costs, managers attempt to direct the behavior of the organization by isolating it into asset related silos.

The shortsighted efforts to reduce budgets tend to increase turnover. Those replacements that fit the budget tend to be less qualified then their predecessor, thus requiring a greater number to accomplish the same amount of work. An increase in headcount tends to result in greater need for management attention. More managers we have, the more cost and the spiral continues. Failing to recognize that IT, like HR and Accounting, is an extension of management and their fiduciary duties, managers blindly reduce their own capacity and capabilities to be good managers, agents and stewards.

While the pendulum moves faster and faster in the United States, IT departments in Europe and Asia have introduced the human touch – fusing professional discipline and service management. Around the world, IT Service Management (ITSM) is an attempt to reframe IT from an asset oriented cost burden back to a service benefit. Like any new strategy, Service Management requires a new structure and system to be successful. In the United States, thousands of failed implementations of ITSM standards known as ITIL and ISO can be tied to asset centered cultures attempting a new strategy without changing the structure, the systems or the culture.

In 2007, the worldwide IT consulting market reportedly generated $300 billion in revenue, up from $280 billion in 2006. Global growth rates are forecasted at 5 to 10 per cent annually through 2010. In Asia, firms like Tata Consultancy Services (TCS), a large software consultancy organization from India are bucking the system and taking a leadership role in the IT industry. For 2006-07 TCS provided services to clients in 55 countries across the globe and employs 110,000 professionals, reporting global revenues of $4.3 billion.

Unlike US competitors, TCS seems to have accurately anticipated the global expansion and planned accordingly. TCS hires graduates from different disciplines and transforms them into software engineers through its own training model. The training model has evolved over the last three decades and has kept pace with technology trends. The strategy is deployed across TCS to drive its global Learning & Development initiatives and the effectiveness tracked through appropriate metrics. The use of multiple System models in addressing the problem has resulted in the sustained growth levels of TCS even during adverse market conditions.

Globally, trends in the IT industry are actually far more transforming. In Europe and Asia, the trend is for non-IT companies to outsource their IT services, lock, stock and barrel. The hardware, the software and the employees all move over. A practice long avoided by US firms, because the difference between US and Non-US cultures. In the United States, the employees are tied to the company. Their healthcare, vacation and benefits are all different. In Europe and Asia, it’s not the case. IT employees can move from ABC manufacturing to XYZ Computing Services, and not even skip a heartbeat. ABC gets state of the art service oriented results, and XYZ increases the economies of scope and scale.

Why is it Easier to Outsource than to Change

A great solution provider will take the time to get to know the client and the clients’ needs. That means a great IT service provider will take the time to understand the principles and practices of business to understand the environment to which the client is operating. Large successful vendors understand this, and many of their Account Executives have earned MBA’s.

The result is that client organizations view great solution providers as being Value Centers that should be optimized. One would think that an internal IT department could take a couple a pages from the vendors’ playbook and become great solution providers as well. While this is an obviously powerful theory, it is a neglected practice.

Internal IT departments are viewed as Cost Centers, something to be minimized. Client management views their internal departments as consuming the critical resources and cash the business needs.

Since there is no use of Value-Based metrics, the IT management attempts to live up to the Cost-Based metrics that are used. This promotes a very one-sided practice of cutting headcount, reducing wages, cutting corners, etc, until the behavior creates a crisis. The effective value provided to the business unit is so minimal, that the perspective of a Cost Center is reinforced. At the point that the purpose of the IT department is no longer being fulfilled, or the cost far exceeds the benefit, the result is to outsources to a Value Center.

Why is it Easier to Outsource than to Change

A great solution provider will take the time to get to know the client and the clients’ needs. That means a great IT service provider will take the time to understand the principles and practices of business to understand the environment to which the client is operating. Large successful vendors understand this, and many of their Account Executives have earned MBA’s.

The result is that client organizations view great solution providers as being Value Centers that should be optimized. One would think that an internal IT department could take a couple a pages from the vendors’ playbook and become great solution providers as well. While this is an obviously powerful theory, it is a neglected practice.

Internal IT departments are viewed as Cost Centers, something to be minimized. Client management views their internal departments as consuming the critical resources and cash the business needs.

Since there is no use of Value-Based metrics, the IT management attempts to live up to the Cost-Based metrics that are used. This promotes a very one-sided practice of cutting headcount, reducing wages, cutting corners, etc, until the behavior creates a crisis. The effective value provided to the business unit is so minimal, that the perspective of a Cost Center is reinforced. At the point that the purpose of the IT department is no longer being fulfilled, or the cost far exceeds the benefit, the result is to outsources to a Value Center.

The Problem with Defining IT Services

IT, as a service, is the little brother of services. It is still immature in its development and still trying to grasp the concept of service. Many IT departments do not get it. They think that service is synonymous with system.

My favorite example of a service is the transportation industry. For example, it we look at an airline that provides the service of transportation, we can compare the IT industry to a more mature service industry. They understand that service is the benefit the customer seeks to consume, without owning the system that provides the benefit. They know the service provides a benefit of moving from point A to point B.

If the customer is a wealthy member of the community, they might use a “full” service provider that handles everything; including collecting them at their front door of point A and delivering them to the front door of point B.

In this up scale transportation service, we find a number of benefits called service components. We find a ground-transportation component, a terminal component, a baggage-handling component, a ticket-processing component, the air-transportation component, a meal and beverage component, and seating component that allow the customer to board and depart the aircraft before other customers.

Over the last 100 years, transportation companies have sought to increase profits by reducing costs, as opposed to increasing value. As a result, some airlines have eliminated service components or charged for them separately. As profit drives the behavior of the firm, profit shifts from being a metric to being a mission, and we begin to manage by numbers, not satisfaction. This results in a dysfunctional airline. In order to gain control over the numbers, management feels they must isolate service components to reduce and fragment them into individual functions. This practice of fragmenting of service components is also known as reductionism.

Computing Services or IT, in its infancy, was started as a “full” service offering. Before the internet, desktops and networking, computing services were specialized and therefore de-centralized. Each service providing system was owned and operated at the department level. Manufacturing, Engineering, Accounting and even HR had its own staff of computing experts. The experts provided data entry service from point A to information reporting at point B. They even transferred data between systems on tape or disk. IT was a full service offering, with every service component included.

As desktops increased access and networking began to connect the individual systems, we could package information together in comprehensive reports. Unfortunately, the lack of vision and standards meant computing systems struggled to talk to each other. The inability of the various isolated departments to reach a consensus on standards and the pressure to drive down IT costs led to the formation of a centralized IT department. For a very brief moment in time, centralized IT departments offered full service information processing.

In the 1980’s the move to re-engineer processes led to the application of capability maturity models began to drive reductionism in IT. Processes were defined according to organizational silo. In the 1990’s the need to be Y2K compliant pushed isolation even further. Breakthroughs in the Internet offered another dimension to computing, however instead of bringing the fragmented pieces together, it drove them further apart.

For the first half of the first decade of the 21st century, IT departs have struggled with different configurations of functional structures and service components. Constantly reorganizing and shifting, hopeful to find the best structure to deliver the benefit of IT.

The science of modern business management is nearly 100 years old. While the principles are as solid as ever, the adaptability of management practices and the lack of willingness to embrace the advances of computing technology formed an estranged relationship. IT departments began to see themselves as having the power to create an automated alternative to outdated management practices.

While the answer was there all the time, many IT departments still cannot see it. In the early 1980’s a move to keep a true service focus on IT emerged in the United Kingdom. Over the years, it was introduced and reintroduced in the United States. Unfortunately, by then, most IT departments were so close to the computing trees, they had no idea there was a computing forest.

Many IT consulting firms define their challenge as moving the technicians away from the tree by providing education and training in ITSM. However, it should not be up to a consulting firm to lead the front line technicians to the Promised Land. That is the job of the head of IT, whether it is a manager, a director or a CIO. The ITSM consultant needs to begin with the leader, and help them re-define what a computing service looks like from the eyes of a business unit.

Which Perspective, Purpose or Parts

ITIL as a reference model for service management has been around for twenty years. In that time, many firms in Asia and Europe have mastered the concept and even advanced the knowledge and practices. In that same time frame, the culture of innovation that we find in the IT departments in the United States has struggled with the concept of IT as a Service. Is it possible that the personalities identified as natural innovators see the world differently than the personalities identified as natural service providers see the world?

A similar phenomenon has also been identified in an academic survey of the profession of IT project management. When asked to describe what is “managed” by the project manager, some of the teams described the “project” in terms of the product produced; some of the teams described the “project” in terms of the producing process; and a small portion described the “project” in terms of the team and organizational relationships.

Imagine you are in a room filled with one-hundred people. You ask them to describe an object such as an automobile. About twenty-five will tend to describe it in terms of its purpose, what it does and the benefit it provides; a “synthesis” of cause and effect relationships. Because they see things in terms of intangibles, we will call this group the intuitors. About seventy-five will tend to describe it in terms of its parts, what it is made of and resources it consumes; an “analysis” of its components. Because they see things in terms of tangibles, we will call this group the sensors.

For all of these people, the ability to manage and “control” the object comes from their understanding of the object. The twenty-five intuitors are able to “understand” the object in terms of what is “possible”. They perceive the object in terms of the environment it exists in and the potential relationships that can be created. The seventy-five sensors are able to “understand” the object in terms of what is “proven”. They perceive the object in terms of the environment it creates, which is based on its components.

The general population has a blend of both intuitors and sensors. Since business success tends to need balance between both perspectives, the organization that tend to select members based on skill, will find a 25/75 balance. Unfortunately, cultures of a business organization do not evolve that way naturally. They tend to recruit and employ people who think as we do first and skill second.

An organization with a large concentration of sensors will develop a culture of highly literal people with the detailed concrete perspectives This will produce a culture of analysis paralysis; which is always breaking things down to better understand. Eventually this results in the formation of isolated silos and the need to form bureaucracies to regulate the interfaces between the isolated components.

An organization with a large concentration of intuitors will develop a culture of highly imaginative people with the conceptual theoretical perspective. This will produce a culture of experimental synthesis; which is always discovering how organizational structures behave. This results in the formation of an organization of hybrid configurations and dotted line reporting relationships.

Today, some of us identify ITIL from a strategic perspective, associating responsibility for success or failure with the CIO to effectively command and control the IT organization. Others identify ITIL from a tactical perspective, associating responsibility for success or failure with middle management to build an effective organizational structure without silos. Yet others identify ITIL from an operational perspective, associating responsibility for success or failure with the front-line managers responsible for the detailed execution.

The reality of success is that all three perspectives are true and correct. Management science is all about the alignment between the strategic, the tactical and the operational responsibilities. This is the crux of the problem. Not every one studies management sciences, so they do not understand that it should align. Individually, we see things differently and we struggle to rationalize our perspectives. Since we do not know they should align, we fight for what we think, feel, believe and know is right in our mind.

We could use education and training, but the cost perspective blinds us from seeing the value perspective. Therefore, we send a manager to master the subject and return to train the team. We do not consider the fact that the managers’ training will be naturally filtered by a biased perspective. Because we do not understand that individual perspectives represent pieces of a bigger and more accurate picture, we are condemned to spend our career rolling our bolder of biases uphill.

On a Clear Day You Can See The IT Infrastructure

Strategic Thinking or the Strategic Perspective has been around for millions of years. The strategic perspective has been defined as the ability to see the big picture. Big Picture and Vision have always been synonymous; both have been reduced to jargon for seeing the relationships between four things:

The Field of Play; the breadth and depth of the environment of behavior.
The Players; the mass of the team, an organization or a nation taking action.
The Possible Action; the process, path or course of action that may occur.
The Outcome Desired; the objective of a series of cause and effect connections between objects.

The formal science behind Strategic Thinking is known as Game Theory. In fact, most games are considered Strategic exercises. For example, to be successful in the game of Monopoly, players must use planning to acquire certain properties. Combined with a little luck from the dice, the results will provide a winning strategic advantage. Just like real life, it is rare that a player without a plan will win, entirely with the benefit provided by extraordinary luck.

In terms of breadth of perspective, Strategic Thinking is very similar to the structural perspective of Tactical Thinking; and modular perspective of Systems Thinking. In fact, Alfred Chandler is famous for identifying the critical relationship between Strategy, Structure and Systems. He is famous for coining the rule that Structure must always follow Strategy; and Systems must always follow Structure. This is the high-level formula for responsive organizations.

Unfortunately, undisciplined management philosophies have emerged that attempt to save time and money by combining Tactical and Execution into and Operational perspective. Tactical Thinking deals with developing a state of readiness or a state of being prepared to execute. Developing and testing capabilities and capacity. This is a practice made famous by theaters, guilds, craft unions, military organizations and professional sports; developing the capabilities of the organization through repetition and practice. In each and every one of these environments, it is not acceptable to learn your profession while performing it.

The profession of IT Service Management is no different from any other management science. Successful ITSM is comprised of a strategic perspective for direction, and tactical perspective for readiness and a systems perspective for delivery.

The big picture strategic perspective logically belongs to the head of the entire IT organization. IT service management is a strategic direction that is very different from the direction of systems management. Because the strategies are different, the organizational structures that enable the strategy will be different and organizational systems that enable the structure will be different. These are the basic principles of Alfred Chandler’s amazing work.

However, what happens when the culture has placed the systems or the structure in concrete and they are not flexible enough to adapt to different strategies. Upper management will announce bold new strategies design to transform the business organization. Wall Street analysts will see promise and anticipate improvement. Middle managers will receive the bold new strategies and attempt to fit them into a inflexible structure and unchangeable systems. In their mind, the only way to make it work together is to interpret the strategy so that it fits the existing organization and the existing systems.

In essence, middle management is choosing to adopt the old culture and adapt the strategy, instead of choosing to adopt the strategy and adapt the culture. The result is the consumption of resources and spending lots of money and producing no change.

The Death Spiral: Recognizing the Symptoms of a Dying Organization

It is an observable fact, that as organizations grow in size, they become more efficient in the generation of output; for a limited period. Unfortunately, as they grow in complexity, they become less effective in the generation of throughput.

As time continues, increases in size and complexity begin to drive down both effectiveness and efficiency. This often leads to adding layers of management; which strain the bonds of discipline and begins to form centralized bureaucracies.

To understand why this happens, it is important to understand that an organization is a confederation of stakeholders with different interests. In the beginning, organizations are formed to concentrate assets, resources and different forms of human energy in order to satisfy mutual interests – investors seek returns; workers seek employment; vendors seek customers; customers seek suppliers.

Every partnership known to humankind requires a system of administration (decision-making) that is tied to accountability of mutual interests. In the eyes of our laws, management is central to all stakeholders. They are the legal “custodians” of the collective relationship between stakeholders, they are the legal “agent” who acts on behalf of the collective organization; as well as “stewards” to the individual interests of the stakeholders.

In the beginning, successful organizations must have raison d’ĂȘtre (reason to exist), commonly known as a purpose. In other words, it must provide a benefit. The failure of an organization to fulfill the beneficial purpose eventually results in demise of the organization.

Organizations are a collection of individuals. In addition to purpose, they must have a philosophy of behavior that provides the order of logic; and they must have discipline of behavior that provides the order of governance. Without the structure of discipline and philosophy, organizational agendas decay to the personal agendas of those with power and influence and chaos provides the rules of behavior.

In times of economic expansion, a rising tide lifts all boats, including those of the stakeholders. In times of economic recession or stagnation, the interests of the stakeholders begin to conflict. The pressures such as price inflation begins to drive a wedge between the stakeholders; investors to seek higher returns; workers seek higher wages; vendors to seek higher prices; customers seek lower prices.

Anyone can lead an organization of diverse interests when dealing with the pressure of an expanding economy. Only great leaders can lead an organization with conflicting interests in time of economic trouble.

How can stakeholders tell their organizational ship is doomed in an economic down turn? The key is to examine the culture promoted by management. They set the tone for how well the stakeholders function together.

Imbalance:
The world is filled with a variety of personalities and cultures, at the macro-level they are perfect compliments, but at the micro-level, they are in conflict. Great leaders work through the storming turbulence of forming a diverse culture in order to realize the synergistic benefits and innovation later. If every one looks the same or thinks the same, trouble looms.

Arrogance:
Minds closed to the things they do not agree with. It is difficult for stakeholders to agree with the demands of each other when they competing for shares of the same profit. If management picks sides, the cancer of arrogance eating up the organization.

Groupthink:
A rationalization of the way people should behave or the way things should be. This is normally tied to the phrase, “because we are different”. The problem here, the rationalizations make it almost impossible to accept mistakes and cut losses. The power of groupthink forms black holes that suck the critical resources out of an organization. As great ideas perish for lack of funding, stakeholders begin to seek other relationships.

Reductionism:
The use of fragmentation and isolation to analyze, understand and control. When followed with the understanding cause and effect (systems thinking) of Determinism and the fusion and synthesis (strategic thinking) of Holism, the results are amazingly powerful. When reductionism is the only tool of management, the organization is continuously dissected into a non-functioning state that must be placed on life-support. Resulting in departments spend years working on projects, consuming resources, yet produce nothing of value.

Closed Systems:
Organizational cultures isolated in an attempt to preserve the status quo. They develop internal standards and avoid comparing themselves to others. As an organization closes it self off to the views and opinions of others, it also closes itself off to the ideas of others. Creativity and innovation is a product of open and diverse environments. Organic growth of the organization stops and future growth must come from acquisitions. Acquisitions coupled with divestitures are the sign of a hopeful transfusion. Acquisitions without divestitures are a sign of life-support.

Ignorance:
Minds closed to the things they do not understand. Defending what they believe, feel and think is true; individuals and entire cultures will question and avoid any new knowledge. An organization defending the ignorance of its culture tends to prefer “real life experience” over “academic theory”. This creates an imbalance that eventually leads to collective organizational incompetence.

Incompetence:
Behavior or performance that is not in compliance with established professional standards. The production function of an organization transfers the value of knowledge, skill and experience from the worker to the product. While defects and failures cause by incompetence will always reduce throughput to the customer; output may continue with the belief that inventory assets are being added to the balance sheet. An organization building more than their customers are buying is a sign of trouble.

Exclusion:
The elimination of individuals that question or oppose the organizations cultural practices. Large organizations are not designed to be dysfunctional. The dysfunction evolves as if an infection. Practices become dated and inefficient. In time, they become obsolete and ineffective; able to produce output, but not throughput. The people who made the investments of developing the practices and publicly supporting them are now bound to defend them at any cost. Ridding themselves of threats is a sign the disease has reached a terminal state.