CEO stop struggling, start transforming

Posted on 28/10/2013 by admin

Business is changing, more and more computers are replacing humans at work, it is quicker in countries like France where heavier taxes and contributions weigh on salaries. This is a silent move which pushes people to part time jobs or disoccupation. The only spared workers are the high skilled one able to deal with technologies and business organisation¹. Countries where consumption is a growth engine, are suffering as purchasing power is stalling or decreasing. Those turned toward exportation fare much better. But competition is hardening in a deflationary context.

CEO are struggling to maintain or reach an operating income level which is today less and less compatible with investors requiring more and more return on capital. They are also fighting for Revenue as customers are affected themselves by business environment changes. Crisis is a good scapegoat, it explains disoccupation and companies troubles. But now it is over and hangover is still there.

To hope to survive, companies need to transform themselves. Even so, not all will be able to proceed, only those which will get capital to finance the change and only those which will succeed into executing the change. Not much time will be left to start.

All of this would be new, unless consulting and editing companies have not rapped out Transformation for years.

What should be transformational directions ?

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Cooperation for transforming french economy.

Posted on 22/07/2012 by admin

If France does not transform its economy in depth, the financial crisis sounds the start of repeated crises. This transformation will not be the result of technical measures, but a radical change of mindset, behavior, know-how on the part of all stakeholders because the economies of the future will be economies of cooperation.

While we are going through one of the most serious financial crisis in history that contaminates all economic activities, we still have before us the thick walls against which the other day when our blind and unbridled race to growth-happiness will crash: aging poputlation, public health, dependency, pollution. Our elites employ a method that seems borrowed from the fire station of the eighth arrondissement of Paris, which is a stopgap “to save” or rather limit spending to what is necessary, which leads, nevertheless the deficits. Indeed, during the presidential campaign that just ended, have we not had discussions on accounting amounts that in view of the walls that lie ahead can only increase, even if proportions deserve to be controlled?

A light point in the consciousness of some who begin to advocate a re-industrialization of France. However, the potion is still dark, when it is not translated into budget lines or if they promptly doubt its effectiveness. Others recall with great horns that they are the flagships of the French economy and with some additional resources, they will restart the machine. This is for example the Andromède project of the French Cloud funded by the FSI (French Strategic Investment Fund). The project was viable it would have without difficulty, given the actors, secured funding or private, is it, and funding would be cheaper. In any case, the famous mid-sized SMEs that everyone is calling for have not been associated, or will they, as usual, the subcontractors who actually perform the tasks.

Finally, France is an orphan. In the 50s, she had a vision of economic development: engineering, industry, information technology, space weapons. The elite had a vision and hand levers that moved the entire country. In the 80’s a profound change in the global industrial economy occurred. We had the steel crisis. The elite repositioned on niche activities and for the rest on running the country in service activities. Today, she would have a vision, it would not concern levers able of driving all over the country. France is the orphan of a vision, each actor in economic claims it, but it is his own only.

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Successful Solvency II programs have opened the doors to enterprise architecture

Posted on 16/01/2012 by admin

Solvency II regulatory initiative aims to normalize the way Insurance companies will measure risks, will manage their portfolio in accordance and will report on their record to control authority.
Such a big change may lead companies to reorganize their steering processes : some driven by internal momentum willing to get market differentiators, some others driven mainly by regulatory constraint. Whatever the vision, this will end up with major business transformations and, for some companies, with industry recombination due to portfolios optimization.

Hopefully, most of companies have launched transformation programs and, as Deloitte reports in its 2011 survey, more than 52% of UK companies had reached implementation phase by 2011 with 75% among big companies. Moreover the same report shows that budgets are expected to be contained between 1,2m and 12m euros, larger amounts being intended only for biggest organizations.

But, if boards seem to be aware of Solvency II new responsibilities and opportunities, projects and programs still undergo uncertainties and questions :

on capital calculation methods which still have to be tuned and for some of them fullly specified
on data which have to be collected, processed, checked and validated for each calculation method
on organization which have to get responsibilities of subprocesses and define how they intend to performe them
on management which have to prepare people and to request investment for resources

Finally, companies undergo 2 opposing forces : strong dependancies between Solvency II aspects and fragmentation forces coming from solving approach which have been selected to deal with complexities : technical (actuary, computing, business,…) and social (actors, governance, influence,…). Technical fragmentation comes from necessity to adopt partial analytical approach. Social fragmentation comes from business mindset, culture, influence competition.

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That’s why my friends CIOs need the best whishes for 2012.

Posted on 03/01/2012 by admin

CIOs don’t need to read any comprehensive Chaos Manor report to know that project deliveries come always in late and are never or rarely in advance. It is like flights or train travels, things always happen in such way. They undergo asymmetric events. If we try to get measures of it, we could find that when projects portfolio undergo 2 months delay in average on delivery planned time, there is no or few chance any project will be above 10 months delay, but real chance to have 30 above 2 months for hundred projects portfolio.

IT budgets always increase year after year. It is their fate since new projects increase IS functions and, consequently, yearly maintenance. To cope with this situation, CIOs have settled portfolio management process:they assess projects from several points of view -technical, business, risks, strategy…- and make priorities. It results in postponing low prority projects…

After a while, postponed projects pile up like sand and become high priority. So, IT budgets contain also low priority projects which have become high prority for budget year.

Finally, projects portfolio is viewed by Business units as postponing facility on behalf of IT Division. No matter Business units are main projects issuers who make IT budget growing. Moreover they use to complain for additional IT costs though they are not accountable for expected gains which projects business cases have set under their responsibility.

When a project is delayed, costs usually increase in proportion of the time. So current IT capital expenditure budget is also made of slipped projects pieces as current IT operations expenditure budget still contains projects slipped since they have already rolled out platforms.

As current IT budget is flood of slipped past projects, less and less room remains for new ones. Negotiations are hard. Pure IT projects are scrutinized and often postponed if they have not a strong costs saving business case. So are pieces around Business projects that not seem to be required to Business even though IT has stated they are highly desirable.

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European crisis urges companies to reshuffling their change capabilities

Posted on 17/12/2011 by admin

European economic prospects are gloomy. Just have a look to newspapers frontpages if you are not yet convinced. In such context, as I wrote once, best strategy would be to “be prepared to start again“. That means to be aligned with customers expectations and to be competitive when business will start, in short, having a good position, on good place, at good price. Yet every european companies have cut at first their 2012 budget to save cash which threatens to rarefy.

Then, for most of companies, business equation will be : transforming themselves while saving capital spending

Currently, Europe is hit by a severe liquidity crisis which have its roots in questionable solvency of states which spread to banks. Financial european world does not trust each other and borrows liquidities at very high interest rates which darken states and banks solvency more and more. How to get out this revolving door circle is the question which hogs every european summits for months.

What is taking out from all that: the urge to restart cash machine by restoring economic growth based on enterprises competitivity. Several medicines are contemplated : euro depreciation which lower prices but rise fears of capital shrinking and more questions on solvency, frugal states budget and tax cuts which mitigate unit labour costs but rise fears on social model and states solvency. Anyway, all this would take time and is drawing a bleak outlook for next years.

Then, according to their own prospects enterprises would follow 2 strategies :

be prepared : get slimmer and stay prepared for economy recovery
be active : contribute to restore growth and transforming themselves to be more competitive

For these enterprises, the point is how to improve competitivity in such economic context with relatively high unit labour costs ? Just in remembering that competitivity is also productivity, better quality, better time to market, better customer knowing… For that, good technology is obviously a critical success factor, may be the only one since all businesses are by now tightly coupled with technology.

Then how to get transformed while saving capital expenditure ?

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