Monthly Archives: November 2013

What are the business benefits (and value) of Strategic Design?

Strategic Design can be used to redesign organizations to improve how they are experienced by people. A primary focus is on customers, of course. The point of doing that is to increase the benefits customers perceive they are receiving from the organization. The point of doing that is to increase customer loyalty.

So a primary business benefit of strategic design is increased customer loyalty.

The business value of strategic design is therefore increased lifetime customer value and profits.

As I noted in another blog post, lifetime customer value is calculated as the present value of future revenues from a customer and depends on customer loyalty. In banking, a 5% increase in customer loyalty lifts lifetime profits from that customer by 85%. This is because of high customer acquisition costs such as advertising, on-boarding, and financial inducement (a lower price or special promotional deal) required to get customers to switch banks or choose one bank over another for a particular product.

That said, there are other benefits of Strategic Design, such as higher quality leads (referrals), improved brand equity, and increased sales conversions of new customers.

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What are business benefits and value?

This entry is part 10 of 31 in the series Defining words

Ironically, the most common request I get from business people nowadays is to explain the business benefits and/or value of some course of action that we are proposing.

In the past, business leaders wanted to accomplish some goal for good reason and we were asked to propose a way to do it. They knew the benefits already and had a sense for the expected value.

Now, business leaders are asking technology experts for ideas on how best to compete. The line between business capabilities and technology enablers is blurring. I am not just referring to products such as Blogsy, where the technology is the product. In financial services, from the customer’s perspective, the mobile app is becoming indistinguishable from the bank. Instead of solving a well-defined problem we are trying to figure out how to make customers more loyal or something like that and the technology is the primary knob to tweak.

When an IT or transformation team sells business stakeholders on solutions, projects, and initiatives they are selling products and services to meet business needs and wants that are derived from the ultimate consumers’ needs and wants. This is true even for corporate banking, just more indirectly.

The value to the business stakeholders is a function of the expected benefits to the business (derived from benefits to the ultimate consumer) and are calculated based upon the present value of the resulting future cash flows.

For example, lifetime customer value is calculated as the present value of future revenues from a customer and depends on customer loyalty. In banking, a 5% increase in customer loyalty lifts lifetime profits from that customer by 85%. This is because of high customer acquisition costs such as advertising, on-boarding, and financial inducement (a lower price or special promotional deal) required to get customers to switch banks or choose one bank over another for a particular product.

So the business benefit expected is the 5% increase in customer loyalty. The business value is the present value of the changes to future revenues and costs.

How to make customers more loyal is another matter.

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What is Strategic Design?

This entry is part 9 of 31 in the series Defining words

I work with a lot of people who have a strong aversion to the word “strategic” so I really enjoy terms like “strategic design”. When I say such things, the first dear friend to roll their eyes gets the most credit for calling me on another ridiculous tangent into obscure techno babble.

Then I tell them to “Google it” and look down my nose at them like they haven’t read an important book in decades.

Google offers up Wikipedia, where you will learn that “Strategic design is the application of future-oriented design principles in order to increase an organization’s innovative and competitive qualities.“

Intersection says “The challenges enterprises face in a hyperconnected, highly dynamic, and technology-pervaded world require them to think holistically about their relationships to people. The design competency can help enterprises to consciously shape the way they are experienced over time, to provide afacevisible and approachable to everyone interacting with them. To tackle problems on this level, the practice of design needs to become more strategic and relevant to problem settings typical to the enterprise.“

My hope is that each person goes off and learns that everything we have been doing has been a futile and myopic attempt to optimize a single variable in a complex system. We have been like a group of oblivious surgeons furiously operating away without even realizing they were all trying to save the same patient.

So how do you broaden your perspective and work across disciplines in a well-orchestrated team to make an enterprise work better for everyone involved? That is the subject of INTERSECTION, How enterprise design bridges the gap between business, technology and people.

There is a useful article about the book by Gerd Waloszek on the SAP Design Guild, complete with summary tables that helped me get my mind around the book.

There are other books on strategic design. What drew me to this particular book was the extensive definitions of words, lists of things to think about and do, and a process for putting it into practice.

I encourage you to read the book and then go around saying “strategic design” and see how people react.

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Alan’s Reading List Summary

I have peppered my blog posts with great books, articles, videos and Podcasts for architects to reference. If you are not keen to wade through all of my long-winded ramblings and rants then you can find them all listed on the “Reading list”, below.

As a bonus, I list them in the order I would read them if my brain was wiped and I had to read them all again.

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Chinese noodle soup for the discouraged soul

I was thinking it was worth 10 minutes to make a donation to the Philippines. There were a dozen bank account numbers all over the internet. Just transfer to the account. How easy! Everyone must be doing it!

So I fired up Xoom. I like the site because I can transfer money to Brazil for only a $4 fee. Oops. They need the organization’s street address and I can only guess which address they want. Not so simple. Visions of spending hours tracking down my money (like the first time I tried to transfer money to Brazil) flashed through my mind.

So I jumped over to my Bank of America Web banking. $35 in fees was sounding better all the time. But still, the freaking street address was required. Who has a street address these days? It’s like a pencil. Christ. Let go of the past, world.

No worries! There on the same Web site was the logo for the mini-mart where my father bought me tamales as a boy in Las Vegas, proudly stating I can donate there. And what are the chances, there is a location one block away from my condo in Kuala Lumpur! It seems God always gives me the red carpet! One problem…my requests brought only looks of confusion. No tamales. Even bricks and mortar are failing me.

I was hungry and I could smell the Chinese noodle soup kitchen across the hall. I guess I will eat my soup thinking of people who have none.

Later, with some blood sugar reaching my brain, Google was able to lead me to http://www.americares.org, who took my donation via credit card. Thanks Americares!

Do you ever get the feeling, even in the best weather, things are just too damn hard in this world? I think a few people save a few minutes or a few dollars by not taking the time to imagine how things will work in the real world and the rest of us stumble over it until we figure it out. But we are thousands of people duplicating the stumbling thousands of times. Can we just pay one guy to think it through before putting it out there? Remember the ultimate user might be just some hungry guy on his way to get some soup.

I think the Chinese noodle soup for the discouraged soul (or blood sugar for the starving brain) lies in something called strategic design. More on that later…

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Note to self about Trust, likability and digital channels…

I was considering a passage in a book I am reading:

“Trust is gained through a combination of factors. Likability is one of them. People more easily trust those they like. Likability ties in directly with similarity. We trust those who are similar to us. To influence others with likability, you have to express genuine interest in them. You have to speak their language by using words they use and frames of reference they understand. Making people feel comfortable by subtly mirroring their nonverbal communication contributes to the feeling of similarity.”

And it occurred to me that the passage, as applicable as it is to interpersonal matters, is just as applicable to getting people to like and therefore trust a company. It is applicable to digital channels and suggests tailoring a digital experience based on details about a person that can be learned from any number of sources.

So which book?

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Why a wad of Ringgits is good for your brain

This entry is part 3 of 3 in the series The Executive and the Elephant

In my last post I committed to myself that I would try some techniques from The Executive and the Elephant and report back on the results. This is the first status update.

The most effective technique was keeping a wad of RM10 bills in my pocket to remind me not to interrupt anyone. The idea was, should I interrupt anyone, I would fork over RM10.

It really makes me feel like an amateur when I interrupt someone. Like my wife, galloping along on her horse, and getting thrown when the horse dips unexpectedly to grab a mouthful of weeds; my “executive” falls off my “elephant” sometimes.

There is something magical about a physical object in your pocket (such as a wad of RM10 bills) to help you keep the presence of mind to build new habits such as listening attentively.

So the result: It worked like a charm. I did not interrupt anyone, I didn’t have to give anyone any Ringgets, and I feel great about being a better listener.

In fact, the wad of bills also reminded me to use some of the other techniques. I remembered to let people “empty their tea-cup” and I looked them in the eye when they spoke. In retrospect, I looked them in their right eye (my left). In theory it is better to look them in the other eye. I’ll try that next time. But even the right eye was better than looking at my ~~blackberry~~ iPhone.

If you want to improve your listening skills then I recommend that you combine these three techniques. Remembering to do it is the hard part and that is where it helps to have a cumbersome wad of RM10 bills in your pocket.

What I am trying to do with my brain

This entry is part 2 of 3 in the series The Executive and the Elephant

I thought that it would be interesting to point out the parts of The Executive and the Elephant that sounded most promising, commit to trying them out, and document my results.

First, I’ve tried to-do lists already and they have been how I overcome procrastination for more than 20 years. The trick is to break down tasks small enough to not be intimidating or vague. They need to be something that you can imagine doing. Hand-written lists work best for me and I was surprised to read that this is true of many others as well. Write it down (by hand) and you stand a good chance of actually doing it.

Visualization is another good idea that I am already familiar with and use frequently. I rehearse any situation that stresses me out in every scenario that I can think of. It is another staple of my daily routine that makes me paranoid and strangely quiet for long periods of time at home–not one of my wife’s favorites.

A new and promising idea that I had not heard before is to imagine that, at the beginning of a conversation, a person has a full glass of tea in their hand. You need to let them empty it before you try to pour in some more. Otherwise, your tea will just end up overflowing onto their lap and shoes. Let them speak and do not interrupt them. I am going to us this imagery to become a more thoughtful listener.

I am also going to tell several colleagues that I am going to give them RM10 every time I interrupt them. I’d better remember to get a wad of RM10 bills!

Another great idea is to focus on someone’s left eye and make sure you know what color it is. Supposedly this is a proven technique used by actors to stay focused when rehearsing lines over and over. I am intrigued and will give it a try. If it makes me a better listener then hey, whatever works!

There are some meditation techniques to sharpen concentration. They should help me work faster under pressure and remember little details like reading what I just wrote before distributing it.

The book is far more interesting and convincing than the above few notes. If you read it then my notes will sound more reasonable. At any rate, I will post again sometime soon with some results.

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What is Enterprise Information Architecture?

This entry is part 8 of 31 in the series Defining words

I remember the first time I heard a Nirvana song on the radio. The sound caught me off guard and I thought it was too good to be true!

That is how I felt when I read The Art of Enterprise Information Architecture.

The book does a good job of explaining Information Architecture and contrasting it to Enterprise Information Architecture.

The only thing I do better than the authors is forgetting about what I said yesterday and not worrying about trying to make it consistent with what I am saying today. There is some stuff about historical IBM messaging that I would be smarter if I didn’t know.

Nonetheless, if you are interested in either Information Architecture or Enterprise Architecture, this is the place to start. Stop what you are doing and read this book.

I give a quick definition of EIA in “What is Architecture?”.

The following primary areas of EIA are shown in the diagram below from the book:

Data Management
Metadata Management
Information Governance
Enterprise Content Management
Information Integration
Master Data Management
Analytics Applications.

I’ve listed them in the sequence I would consider tackling them in an organization.

All systems have operational data inside them. Beyond accessing the data by an application, Data Management would involve creating data services or some other means to access the data programmatically from outside the application. For example, from a business process or information integration.

Metadata Management puts in place a standard way to document what data exists, where it is stored, how it flows, and where it is consumed.

Once you have started documenting your information landscape you can start Information Governance.

Enterprise Content Management puts some business process around the provisioning of content to be displayed and separates it from applications, similar to how WordPress (used to create this blog) stores content in a database so that you can display it using different themes. This would also be a place to store digitized documents so that they can be shared across the organization.

Information Integration is typically implemented as part of Master Data Management or Analytics. This is where the organization begins to slog through the process of standardizing data and realizes the importance of defining words.

Master Data Management happens as organizations try to synchronize operational data about the most important business entities (customers, products, relationships and locations) across systems.

Analytics involves data warehousing; decision support such as business intelligence (BI); decision management such as business rules management, predictive analytics, decision models, and cognitive computing; and “big data”.

What is Architecture?

This entry is part 7 of 31 in the series Defining words

I am happy to say that is was NOT ME that complicated “Architecture”.

One thing that makes it complicated and confusing is that we describe the various dimensions of architecture with some ambiguous words. Architecture is made up of different viewpoints that require different skill sets to tackle properly.

The least confusing dimension focuses on different aspects of systems such as applications (requirements about what you want the system to do), information (requirements about what you want the system to process or store), integration, business, etc. So we have Application Architects, Information Architects, Integration Architects, Business Architects, etc.

Architects within one of the above specialties then focus on different levels of abstraction. Think of it as levels of knowing what you are talking about. If you have very little idea of what you are talking about then you use vague words like “gather customer behavior” to create a Conceptual Architecture. Then, once you have kind of narrowed it down, but not quite, you use more specific words such as “Web Analytics” to create a Logical Architecture. Then, once you know exactly what you mean you use concrete words such as “Core Metrics” or “Tea Leaf” to say exactly what you mean.

Finally, we have different levels of detail. Application Architects understand the components that make up an application or system. Solution Architects understand the building blocks that solve a problem, usually involving a small cluster of applications that are integrated together. Enterprise Architects understand all of the major systems that solve the biggest problems for an organization (business unit, corporation, etc.).

Now, if I say the Information Architecture of a teller application is part of the Architecture of the teller application, part of the Solution Architecture of the branch solution, and part of the Enterprise Information Architecture (and therefore part of the Enterprise Architecture) then you will know exactly what I mean. Right?

Of course, software makes up a layer in yet another dimension including software, platforms, and infrastructure (hardware, networks, OS, DBMS, etc.)

Lying orthogonally across the above categories there are specialties such as CRM, marketing, security, channels, etc.