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Archive for the ‘Business’ Category

Developing general KPIs for Enterprise Architecture

05 Sep

Enterprise Architecture is one of those topics today’s CIOs of both large and successful enterprises have to deal with. In times of a steadily growing range of applications, EA can be very helpful to keep everything under control. However – considering that there hasn’t been any single approach of EA-Management so far, it is also a quite expensive process of change. So unfortunately, it is not enough that you (and maybe your team) understand the benefit of EA – you will have to convince the decision makers.

For those of you who are new to EA, here’s a brief and helpful introduction. However, it is in German.

Now both of those required factors for EAM – cost and change – are not easy to communicate towards an enterprises’ management. Once you say ‘cost’, they will say ‘how much’. Furthermore, they might (actually they should) ask you for a plan of amotization. An easy one for you as well-prepared associate might be: “What’s the actual benefit of Enterprise Architecture?” And the worst case scenario might be the question of measurable KPIs for EA.

One – and from a management standpoint probably the most important – KPI is cost. However, it’s hard to determine the overall cost of EA implementation. But what is quantifiable would be the cost that can be saved through the successful implementation of EA. Within an IT environment of approx. 2000 different applications, EA is the key to regain control and a certain ‘tidiness’. You might discover that the same application is used in different places (for the same use case) – and might be able to consolidate those applications. Thus, you are able to save cost (no matter if it’s license fees, server space or what so ever – it’s quantifiable).

Another important – and again measurable – KPI that can be identified is time – time that can be saved with successfully established EA processes. For instance, reporting will be much faster and as a result, decision cycles become much shorter. The enterprise will be able to respond to technological trends much faster than it could ever before. After all, EA makes the difference between an organizations ability to react or to predict.

Several weeks before this article was published, I initiated discussions on several forums for EA. With the results of these discussions, I was able to identify at least two more generic and measurable KPIs for EA: Business-IT-Alignment and the compliance with rules & regulations that came with EA.

The KPI Business-IT-Alignment describes the degree of complexity / collaboration between business (management) and IT when it comes to an organizations overall strategy. You can measure this KPI by simply counting the amount of both parties’ representatives taking part in general strategy meetings. Informational exchange as well as close collaboration between business and IT are inevitable for successful EA.

The KPI compliance with EA rules & regulations describes, how IT projects match with the standards that have been set through EA implementation. It is measurable by the number of rules / regulations that had to be overridden to realize and approve an IT project. This KPI, of course, should be as low as possible.

 

 

The Cultural Matchmaker Index (CMI) – A new index for intercultural business?

01 Aug

Imagine that you and your management team take an acquisition (or merger or other international alliance) into consideration. When analyzing the target enterprise, you might not only look at their KPIs, strategy and value it will add to your own enterprise. You also might want to have a closer look on other facts – let’s say cultural characteristics. In the past, plenty of managers have underestimated the cultural aspect which even lead to a fail of the whole merger in some cases.

Of course, you are aware of the significance, cultural differences have when it comes to international mergers. That is why you might want to find out if there is a match between two cultures a and b and how well the correlation is…But how?

Since the dutch anthropoligist Geert Hofstede already spent a huge effort on developing measurable cultural dimensions, we are now able to compare culture from different countries with each other. Hofstede developed five different cultural dimensions:

  • Power Distance Index (PDI)
  • Individualism vs. Collectivism (IDV)
  • Masculinity Index (MAS)
  • Uncertainty Avoidance Index (UAI)
  • Long Term Orientation Index (LTO)

 

The Formula

The index range goes from 0 (less pronounced) to 120 (strong pronounced) for each of these cultural dimensions and the values are available for most countries in the world* on Hofstede’s research page on the internet. Now that we have the values, we can put them together in a useful formula to calculate our Cultural Matchmaker Index (CMI):

Formula for calculation of the CM-Index

Interpretation

Ultimately, we need an interpretation for the results. Since each of the cultural dimensions is equally important, we do not need to weight them individually. So we get an index that reflects the intensity of difference between two given cultures. Thus, the index should not be too high – in fact, oneself has to determine how much significance he or she is willing to assign to the factor of cultural differences. A merger with a CM-Index of 10 will surely work out much better than a merger with a CM-Index of 15 – at least from a cultural standpoint. The indicator also reflects the amount of effort, management will have to spend on cultural aspects. Of course, you can push through a merger with a CM-Index of 20. But in the end, you and your management team will have to spend much more effort on everything culture-related within your post-merger integration program.

The CMI range starts from 0 (perfect match) and ends at 60 (very hard to match). Here are some exemplatory values for international relationships:

  • Argentina & Brazil: 11.25
  • United States & Japan: 37.8
  • Germany & Switzerland: 3.25
  • Norway & Sweden: 7.8
  • Turkey & Brazil: 4.25
  • United States & Germany: 10.8
  • Germany & Japan: 29
  • Denmark & Slovakia: 57.5

 

Obviously, cultures which are close to each other from a geographical angle are also very easy to match. But this is not always true (see Turkey and Brazil). Big challenges however, for the management team can be expected at alliances between high CMI combinations (eg. Denmark and Slovakia or Sweden and Brazil).

 

*LTO – the cultural dimension for longterm/shortterm orientation has been added as a last resort by Hofstede. That is why there is not a value for each and every country for this particular dimension. However, you can still measure the CM-Index with four dimensions by setting the denominator of each term to 4 (or the actual number of dimensions you want to take into consideration). If you change the denominator, do not forget about the impacts on the result of the final index. This is one of the reasons why there is no general approach for interpretation.
 

Meet The Future CEO

06 Jun

I recently spent some time on future economic development and how key people are going to adapt to it. Here is the result:

The future CEO is not driven by numbers and forecasts. Although they could simplify his daily business, a very important element would get lost – humanity. That is why the future CEO prefers product quality, humanity and customer service over quantitative management. He learned how to increase his employees’ motivation and therefore cares a lot about their wellbeing. Investments flow into consolidation of friends and work place, health and family integration. The attractiveness of a work place can be increased when employees do not connect negative thoughts with it. Along comes a distinctive environmental awareness. Being a realist, he detected and followed up with the changes of business frameworks already during his studies. Globalization led to a more and more diverse mix of culture within corporations, mobility has become a significant standard in daily business and there are first theories about getting informational overflow under control. Besides that, the science of communication experienced a paradigm shift that brought many alterations. Changes not only affected in-house communication due to the lack of subtextual elements of communication and others.

Successful corporations enjoy a societal strong image worldwide. But image is not that related to turnover or presence in the media anymore. Instead, it is defined by employees’ satisfaction, a certain amount of transparency and positive feedback from the customer (testimonials). Thanks to the internet – a media channel that is hard to influence – both positive and negative experience with products and services spread around the world much faster. Corporations have realized that professional customer retention grows from candor, honesty and sincerity. Moreover, the following can be said for innovative success: People being able to offer anything – that is needed by others – will be successful. Even though in some cases, the necessity first has to be learned by the consumer. For instance, we experienced this learning process throughout the introduction of cellphones or Facebook. Certainly, a successful corporation is still economic and profit-oriented. But profit is no longer focus of attention. Instead, corporate pseudo guiding principles from former times have become more and more important.

Neither very big nor very old corporations are subject trust by themselves. No matter if their product range is notably diverse or the corporation claims to have many years of experience. Customer loyalty is a privilege one has to work very hard for.

 

Chinese Facebook enters the US stock exchange

05 May

BörsenstartRenren (Chinese for Everybody) is the name of the most popular social network in China – aka the Chinese version of Facebook. However, its 31 Million do not make Renren a serious competitor to the world leading network Facebook (which currently has more than 600 Million active users). The first day in stock (May 4th) was quite successful though – a strong plus of 29% to $18.01).

Some experts see the IPO (Initial Public Offering) of Renren as a foretaste of the Facebook IPO which has been announced for 2012. Investors are excited about arising opportunities of social networks on the stock market.

With LinkedIn, Groupon and Skype there are three more promising US corporations to come this year:

Upcoming IPOs

Corporate Values in $bn

 

Since several governments (Syria, China, Iran and Vietnam) have blocked the Facebook network due to its “open nature”, there is some space left for more competition within these countries. Clearly, the Facebook censorship is a defensive signal. The Chinese government is afraid to lose its power over the people. The conservation of cultural values and beliefs is – according to experts – a lame excuse. For Chinese people it is even worse – they feel kind of isolated from worldwide progress and blame the government.

Now that the first Chinese social network has entered the US stock exchange, we could question ourselves why the relatively small Chinese network has been granted access to the rest of the world – and even being shared by the rest of the world – while the “Rest of the World” in the shape of Facebook is continuously blocked?

 

The Age of Yield Management

22 Apr

Yield Management (or Revenue Management) is what happens when we are about to book a flight or a hotel room.

Yield Management

Nearly all of larger airlines or hotel chains use such a (computer based) system for their price policy and the main rule is easy: Demand determines price. Once an airplane takes off, a lot of costs have to be paid by the airline (airport fees, gas, crew etc.). The overhead is huge. That is why it needs an intelligent price policy to sell as many seats as possible. After all, cost for the airline are the same regardless of the number of empty seats. However, a yield management system has a huge impact on the success of an airline (or a hotel chain). And here is how it works:

 

An airline has an airplane with 350 seats that goes from New York to Frankfurt in twelve months from now (April). As a huge fan of my favourite band, Joe just read an article of the world tour next year and the concert in April 2012 in Frankfurt – as a huge fan, he HAS to be there and will immediately book his flight. From the view of the airline, Joe is probable among the first passengers in that airplane. In addition to that, there are no ‘seasonal price impact’ predictions for New York or Frankfurt in April 2012. Ergo: Joe is happy because he spent a ridiculously low price on his ticket.

In November, it occurs that Dominiks responsibilities in his company increase – and so does his salary. He surprises his family with an announcement of vacations in Germany during April 2012 and immediately starts searching for flights and accomodiation. The flight tickets are still at a good price but nowhere near as cheap as Joe’s ticket. The yield management system has realized that seats are more and more filling up and increased the ticket price.

In February, Marcus celebrates the entry of his favorite soccer club ‘Eintracht Frankfurt’ into the European soccer competition ‘UEFA Champions League’ (granted, but a little far-fetched). As he is a huge fan and always wanted to travel to Frankfurt, he is immetiately checking airfares from New York to Frankfurt. Since the amount of available seats has decreased significantly since Dominik’s booking back in November, Marcus is confronted with very expensive prices. After some hours of price comparison on the internet and some ‘inner negotiation’, he finally books his flight to Frankfurt.

March 2012 – almost all seats are taken and prices increased to ridiculously hights. ‘Nobody would book a flight at this price’, Chris says to his girlfriend. Both study at the University of New York and want to travel to Germany – but if the fares stay that expensive, they could not afford the price.

In April – two weeks prior to takeoff – US business man Kevin gets to know this new company producing interesting stuff in Frankfurt, Germany. After some research, he found out that his former classmate Juergen works for this company. Juergen invites Kevin to take a facility tour and afterwards they want to talk business. Since this is a huge opportunity for Kevin and his company, he accepts the invitation and his secretary starts looking for flights. She books a flight for Kevin at the ridiculously high price that Chris commented with the words: ‘Nobody would book a flight at that price’. Apparently, there is…

Finally, two days prior to takeoff, the yield management system realizes that there are two separate seats left in economy class and lowers the price. Since Chris did not want to give up on the trip to Germany with his girlfriend, he kept checking prices every day – and every night – and now, two days prior to takeoff, he got the tickets at a barely affordable price. ‘I’m a lucky man’, he thinks.

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