compounding organizational learning – the key to digital success

www.ovum.com

© Copyright Ovum. All rights reserved. Ovum is part of Informa Group.

Compounding organizational learning – the key to digital success

Wellington 20 June 2014

Dr Steve Hodgkinson, Chief Analyst Global Public Sector

[email protected]

mailto:[email protected]


2© Copyright Ovum. All rights reserved. Ovum is part of Informa Group.

How did I get here?


How did I get here?

‘Smarts’ as a Service

LOL


How did I get here?


New policy options

Digital service innovation

Increased productivity

Government expectations


• Budget constraints• Governance & procurement process• Compliance• Security• Legacy integration• Business continuity

$

ICT realities …


School reports = FAIL


New curriculum: Technology discontinuities

Source: www.mckinsey.com/insights/business_technology/disruptive_technologies

Source: Daniel Smihula, The waves of the technological innovations of the modern age and the present crisis as the end of the wave of the informational technological revolution.

Eco

nom

ic Im

pact

ICT Revolution

TechnicalRevolution

Scientific-TechnicalRevolution

1880 2013

Biomedical-Hydrogen Revolution

1. Mobile internet2. Automation of knowledge work3. The internet of things4. Cloud technology5. Advanced robotics6. Autonomous and near-autonomous

vehicles7. Next generation genomics8. Energy storage9. 3D printing10.Advanced materials11. Advanced oil & gas exploration and

recovery12.Renewable energy

http://www.mckinsey.com/insights/business_technology/disruptive_technologies


“The future is already here – it's just not evenly distributed”

William F. Gibson, quoted in The Economist, December 4, 2003

Eco

nom

ic Im

pact

ICT Revolution

TechnicalRevolution

Scientific-TechnicalRevolution

1880 2013

Biomedical-Hydrogen Revolution

New curriculum: Technology discontinuities

http://en.wikipedia.org/wiki/The_Economist


The rules are being rewritten

• “Leaders pull ahead with superior digital business models, and generate larger profits or surpluses which they then use to consolidate and extend their leads through further investment in elements such as innovation, high-quality staff and better customer service”.

• “In this virtuous cycle, small gains in early years compound to become significant differences”.

Source: IBM/National Institute of Economic and Industry Research


CompoundingOrganisationalLearning… or not

Insert audit/commission of enquiry report of choice

FAIL

The rules are being rewritten


“The future is already here – it's just not evenly distributed”

Ovum case studies – where the future has already arrived Vic DSDBI use of Salesforce

for engagement and grants management

NSW Trade & Investment use of SAP Business By Design for SaaS ERP

Statistics NZ use of Revera IaaS for the Census

Disability SA’s use of Salesforce for MySupportAdviser

DHS’s ExpressPlus mobile apps as a service interface

Compounding organisational learning


As the pace of technology innovation quickens the MOST

important thing is learning how to harness and adapt to changes ….

The speed with which the future arrives in our

organisations is determined by the choices we make and the

skills we learn!




1.Find out more quickly, and at less cost, what works … and do more of it

2.Learn more quickly, and at less cost, what doesn’t work … and stop doing it


Risk management?


Back to school

Big ideas x 3!


1. Can’t make a silk purse out of a sow’s ear

2. Cloudy is as cloudy does3. It Takes Two to Tango


OperationalScale

Local(small)

DedicatedCustomized

SharedStandardized

In-house

Global/National

(big)

Resource Specificity

1. “Can’t make a silk purse out of a sow’s ear”Cloud services are shared services that already work

Cons

olid

atio

n

RationalizationStandardization


Transformexisting

Buy off catalogue

OperationalScale

Local(small)

DedicatedCustomized

SharedStandardized

In-house

PublicCloud

Services

Private Cloud

Services

Global/National

(big)

Resource Specificity

In-houseShared

Services

Out-sourced ServicesPrivate

Cloud Computing

1. “Can’t make a silk purse out of a sow’s ear”Cloud services are shared services that already work


Maturity & sophistication

of ICT capabilities

Lower

Higher

Time

In-house ICT(‘snakes & ladders’)• legacy complexity

• diversity & fragmentation• budget cuts• ageing assets• staff turnover & skill shortages• project failures

2. “Cloudy is as cloudy does”Cloud services are an alternative to playing ‘snakes & ladders’

Enterprise-gradecloud services

• operational scale• focused R&D & skills• multi-tenancy• business continuity• iterative evolution• SOA & open APIs• social & mobile• Internet-age security• user self service• usage-based charging• vendor ecosystems

Cloud innovation edgeIaaS SaaS PaaS


Waterfallproject

methodology

Bespoke software / dedicated ICT infrastructure

Packaged software / shared dedicated ICT

infrastructure

Standardised multi-tenant software / shared

ICT platforms

Waterfallproject

methodology

Agileproject

methodology

Timeframe: years Timeframe: months & years Timeframe: weeks & months

Software and infrastructure built and customised for, and paid for, by an individual agency

Software and infrastructure platforms that are already operating and are shared by, and paid for by, many customers

Specify, buy & build Shop, buy & evolve

“How can I procure a system to exactly match today’s understanding of my functional and technical requirements?”

“What is the best way to access ICT functionality to support achievement of my evolving business outcomes?”

Internal-out requirements External-in requirements

Bespoke/dedicated/on-premise Configured/shared/cloud service

ICT procurementtrend

3. “It takes two to tango”We need to think in more agile ways about requirements


1. Can’t make a silk purse out of a sow’s ear

2. Cloudy is as cloudy does3. It Takes Two to Tango


Platform + agileNew Shared

Cloud Service

Platforms

New Dancing Skills=


--------

Platform + agileNew Shared

Cloud Service

Platforms

New Dancing Skills=

Centralised?


Excellent!


But does a cloud service fit your

needs & circumstances?


?• Latest functionality• Flexibility • Shorter, less risky, projects• Agile/design centric • SOA/API enabled• Decentralized sharing• Platform for consolidation • Scalability• Standardization• Service security and quality • Opex-based costs• Reducing unit costs

Arguments for cloud services

Arguments against cloud

services

• Not trustworthy • Loss of direct control

• Shared with who?• Data sovereignty• Capex vs. opex

• Uncontrollable variable costs • Lack of knowledge and skills

• Integration • Catalyst for rogue adoption

• Islands of information

It is usually debatable … and often hotly debated


Cloud services

enablers

Constraints in the IT

status quo• Latest functionality• Flexibility • Shorter, less risky, projects• Agile/design centric • SOA/API enabled• Decentralized sharing• Platform for consolidation • Scalability• Standardization• Service security and quality • Opex-based costs• Reducing unit costs

Arguments against cloud

services

Arguments for cloud services

• Not trustworthy • Loss of direct control

• Shared with who?• Data sovereignty• Capex vs. opex

• Uncontrollable variable costs • Lack of knowledge and skills

• Integration • Catalyst for rogue adoption

• Islands of information

Business Needs

Pros and cons only make sense when there is context


• Outcomes focus?• Policy support?• Compliance latitude

and clarity?• Proof point visibility?

• Hands-on experience?• Data classification?• Procurement support?• TCO awareness?• Finance support?

Cloud services

enablers

• Budget pressure?• Pace pressure?• Executive frustration?• Infrastructure stress?

• People or skill shortages?

• Security vulnerabilities?

Constraints in the IT

status quo

• Urgency?• Banality?• Demand volatility?• Functional volatility?

• Inflexion point?• Generalizability?• Outsider use?• User mobility?

Business Needs

Constraints make it easier to see the value in cloud services

Enablers create and sustain momentum for cloud services adoption

The Ovum CloudFit framework

Fit to business needs makes the game worth the candle


The Ovum CloudFit FrameworkIs a cloud service a good fit for your needs and organizational circumstances? This framework will help you identify the types of business needs and the IT constraints and enablers that align well with the cloud services model. Rank each of the criteria 1,2 or 3 in the white cells for a particular business need scenario to assess your CloudFit score .

BUSINESS NEEDS Business Needs - scoring guidelines

Urgency? 2

1. Low - this is a relatively low priority business need and/or there are no time pressures that compel immediate action (and hence there is time to undertake a conventional IT procurement process and project lifecycle ).2. Medium - delivery timeframes are 'normal' - to be balanced against other drivers in the portfolio of IT projects. 3. High - this is a high priority business need which must be met in an unusually short timeframe (and hence the solution will likely need to be substantially pre-existing and implemented quickly ).

Banality? 2

1. Low - the business need has specific sensitivities regarding the character and location of the entities, people, processes, systems and data involved - if things go wrong it will be 'front page' news (and hence non-functional requirements will likely be material and the cloud services model may be viewed as introducing undesirable complications and risks ).2. Medium - the business need is 'normal' in terms of its complexities or entanglements.3. High - the business need is banal - straightforward, free of particular constraints arising from political or operational sensitivities arising from the character and location of entities, people, processes, systems and data involved (and hence the decision can be pragmatically based on the business outcomes and the functional, technical and commercial merits of the solution ).

Demand volatility? 3

1. Low - demand is well known and/or able to be forecasted accurately (and hence the operations can be relatively easily optimized to the workload ).2. Medium - demand has some volatility but this can be easily accommodated.3. High - demand is hard to manage because the number of users and/or the workload demands are unknown, unpredictable or known to be volatile depending on external factors ( and hence the solution will need to be able to scale up or down seamlessly depending on demand within defined service quality and cost parameters ).

Functional Volatility? 3

1. Low - business requirements are very well understood, stable over time and well documented (and hence the focus will likely be on a dedicated solution finely-tuned for optimum performance ).2. Medium - business requirements are pretty well known and stable.3. High - business requirements are inherently difficult to specify or are evolving rapidly in response to external demands or internal circumstances ( and hence the solution will need to be flexible and designed to evolve iteratively over time ).

Inflexion point? 3

1. Low - the circumstances are ‘business as usual’ (and hence there are no particular pressures for innovation or flexibility in the solution ).2. Medium - the usual changes are happening in the organization but there are no specific inflexion points or change catalysts.3. High - the organization is at an inflexion point and this is creating a catalyst or opportunity for change e.g. a leadership change, restructure, the termination of an existing contract or a major crisis or project failure (and hence circumstances may be ripe for some fresh thinking and a ‘greenfield’ approach - never let a good crisis go to waste! ).

Generalizability? 2

1. Low - the business requirements are unavoidably organizationally specific due to business process, location or regulatory drivers ( and hence a dedicated and customized solution is likely to be required ). 2. Moderate - the requirements are a mix of generic and specific needs - some customization is likely.3. High - the core elements of the business requirements are similar to those of many other organizations (and hence could - and possibly should - be substantially met by configuration of generalizable pre-existing software as opposed to dedicated customized software ).

Outsider use? 3

1. Low - the solution will be used only by internal employees of the organization (and hence use can be managed via terms of employment and corporate IT controls )2. Medium - there may be some external users, but most users will be internal staff 3. High - a substantial proportion of the users will not be organizational employees (and hence the solution will need to be designed to efficiently and securely support a large number of users accessing via a web browser and the internet ).

User mobility? 3

1. Low - the system is only accessed from within the organization's offices (and hence will likely be accessed via SOE compliant desktops and laptops over the corporate network only ).2. Medium - the system is mainly internal but has some mobile users.3. High - a substantial proportion of the users will access the solution from outside the office using mobile devices (and hence the solution will need to be designed for mobile devices and for efficient and secure support of rapidly evolving mobile device ecosystems ).

What are the characteristics of the business problem that needs to be

solved?

The CloudFit framework tool

IT CONSTRAINTS Constraints - scoring guidelines

Budget pressure? 31. Low - there is fully adequate funding for development and ongoing operation of the application (and hence to fund a dedicated and customized solution if this is the preferred path ).2. Medium - budget pressures are normal for this type of project.3. High - the available budget for the project imposes financial constraints on development and/or ongoing operation (and hence lowest cost is an important factor in the procurement approach ).

Pace pressure? 2

1. Low - the current approach to IT development is in tune with the pace required by the business (and hence does not comprise a constraint on the ability of the organization to innovate ).2. Medium - the current approach to IT development is broadly delivering to the pace required.3. High - the current approach to IT development to demonstrably too slow and is regarded as constraining the ability of the business to innovate ( and hence there is demand for a faster way of developing some new applications ).

Executive frustration? 3

1. Low - executives are highly satisfied with their organization's ability to cost-effectively deliver and operate business applications ( and hence there is little demand or necessity to consider an alternative approach ).2. Medium - the current approach to IT projects is broadly delivering to executive expectations.3. High - executives are frustrated by the organization's inability to cost-effectively deliver IT-enabled business innovation projects and have perhaps experienced repeated IT project failure and/or excessive wait/delivery timeframes and (and hence there is an appetite for a fresh approach which produces more direct outcomes and reduces project implementation timeframes, costs and risks ).

Infrastructure stress? 2

1. Low - existing infrastructure and operational arrangements are well invested, of high quality and able to accommodate business demands ( and hence are regarded as a strength of the organization to be leveraged ).2. Medium - the existing infrastructure and operational environment is broadly adequate.3. High - the existing infrastructure and operational environment is under-invested, failing to deliver the required service levels and/or unable to accommodate business demands ( and hence there is an appetite to consider a solution which can complement, or operate independently from, existing infrastructure and operations ).

People or skill shortage? 2

1. Low - the organization has full access to the people and skills necessary to implement the project and operate the proposed solution ( and hence there is a high degree of confidence in the adequacy and sustainability of the existing IT delivery model ).2. Medium - people and skill availability is generally adequate.3. High - people and skill capabilities (in number or quality) are a material constraint on the approach to the project (and hence there is benefit in seeking a solution which minimizes the internal implementation and operation work effort required ).

Security vulnerabilities? 3

1. Low - existing information security arrangements are worked well and perceived to be effective and sustainable ( and hence there is a high degree of confidence in the adequacy and sustainability of the existing information security approach ).2. Medium - information security is adequate.3. High - audit reports and security incidents have exposed weaknesses over a prolonged period (and hence the status quo is not perceived as necessarily 'safe' and there is an appetite to consider alternative approaches to information security ). 6-9: Low - The current approach to IT has few constraints - there are no obvious or compelling reasons to change the approach to sourcing ICT capabilities.10-13: Medium - The current approach to IT has some constraints - cloud services should be considered to gain experience in obvious areas of good fit to business needs.14-18: High - There are many constraints in the current approach to IT - there is a strong case for considering cloud services as a fresh approach to sourcing ICT capabilities.

What are the key constraints

affecting the current

approach to IT?

Constraints CloudFit Score 15

Enablers - scoring guidelines

Outcomes focus? 3

1. Low - executive focus and organizational culture are primarily aimed at operational stability, performance optimization, and risk reduction (and hence the behavioural bias favours industrialized process discipline, predictability and risk avoidance ). 2. Medium - there is a moderate degree of outcome focus - which needs to be balanced with appropriate process and risk management behaviours.3. High - executive focus and organizational culture are primarily aimed at growth and innovation via achievement of business results or outcomes ( and hence the behavioural bias favours action, agile pragmatic approaches, more direct ways to achieve outcomes and the creation of cycles of compounding organizational learning ).

Policy support 3

1. Low - policies and standards are silent on the benefits of cloud services but prescriptive and detailed regarding risks and are mandated across the organization to drive standardization of approach, methodology, architecture and risk management practices (and hence the practical effect is to tightly constrain project choices in order to drive standardization and reduce risks ).2. Medium - policies and standards are regarded as best practice guidelines but there is discretion about compliance.3. High - policy is 'cloud first' or otherwise policies and standards have an innovation bias and have flexibility because their primary goal is to enable innovation by propagating good practice and pragmatic approaches to risk management (and hence the practical effect is to give outcome-focused policy direction and pragmatic guidance).

Compliance latitude & clarity? 2

1. Low - regulation is prescriptive and constraining and/or guidelines provide simplistic or ambiguous guidance on key compliance requirements such as information security, privacy, record keeping and data sovereignty (and hence uncertainty leads to risk averse behaviours and conservative approaches ).2. Medium - regulation is moderately prescriptive and compliance clarity is not really an issue or guidelines are broadly adequate.3. High - regulation is not unreasonably constraining and/or guidelines provide practical and well informed guidance on key compliance requirements such as information security, privacy, record keeping and data sovereignty (and hence provide confidence for a practical assessment of risks and the tradeoffs involved in different approaches ).

Proof point visibility? 2

1. Low - there is little or no visibility or showcasing of cloud services projects in the organization, either from without or within ( and hence cloud services projects appear to be uncommon, unproven and risky ).2. Medium - some proof-points are visible, but they are not well documented or widely communicated.3. High - proof-points and case studies of cloud services adoption are well documented and showcased in the organization as exemplars of innovation ( and hence it is easier for executives to see the 'art of the possible' and to understand the reality of the cloud services model )

Hands-on experience? 3

1. Low - staff involved in a project have no hands-on experience of cloud services procurement or implementation (and hence cloud services is a largely theoretical discussion and risk perceptions are not moderated by actual experience ).2. Medium - there is some hands-on experience but only in small projects.3. High - staff have hands-on experience of substantial cloud services projects or pilots (and hence have a pragmatic, rather than a theoretical, appreciation of the benefit/cost/risk trade-offs ).

Procurement support? 2

1. Low - procurement processes have not considered the implications of buying as-a-service offerings, there are no guidelines or reusable contracts or guidance is impractical ( and hence each project needs to 'reinvent the wheel' to overcome procurement obstacles ).2. Medium - there is some sharing of procurement lessons learned regarding cloud services across business units and projects.3. High - the procurement function is proactive in solving procurement policy issues, providing pragmatic guidance and sharing information about cloud services procurement activities ( and hence the organization is proactively removing known procurement barriers to cloud services adoption and creating catalysts for the reuse and leverage of procurements across business units) .

What enablers of cloud services

adoption exist in the

organization?

CLOUD SERVICE ENABLERS


CloudFit scores

8-13: Low - Business needs do not fit well to the cloud services model - cloud sourcing is unlikely to be appropriate unless IT constraints and enablers are both high.14-19: Medium - Business needs have a moderate fit to the cloud services model - cloud sourcing may be an appropriate approach if IT constraints and enablers are high/medium.20-24: High - Business needs fit very well to the cloud services model - cloud sourcing is likely to be the best approach even if IT constraints and enablers are low.

21Business Needs CloudFit Score

6-9: Low - The current approach to IT has few constraints - there are no obvious or compelling reasons to change the approach to sourcing ICT capabilities.10-13: Medium - The current approach to IT has some constraints - cloud services should be considered to gain experience in obvious areas of good fit to business needs.14-18: High - There are many constraints in the current approach to IT - there is a strong case for considering cloud services as a fresh approach to sourcing ICT capabilities.

Constraints CloudFit Score 15

8-13: Low - few enablers of cloud services adoption exist - meaning that there will be many hurdles to overcome to buy and implement a cloud service.14-19: Medium - some enablers of cloud services adoption exist, but the organization still lacks familiarity and confidence with the cloud services model.20-24: High - many enablers of cloud services adoption exist so the organization is well positioned to deepen its adoption of cloud services.

Enablers CloudFit Score 19

22-37: Low - Business needs are not well aligned to cloud services, the IT status quo is adequate and there are few enablers of cloud services adoption present - a cloud service is not a good fit to current circumstances.

38-53: Medium - Business needs create no particular drivers in favour of cloud services but there are constraints in the IT status quo and some enablers are present - cloud services should be considered as a possible ICT sourcing option.

54-66: High - Business needs are well aligned to the benefits of cloud services, the IT status quo is inadequate and strong enablers of cloud service adoption are present - a cloud service is highly likely to be a good fit and should be considered as a preferred sourcing approach.

Overall CloudFit Score 55


In closing …

The quickening of technology change requires a compounding organisational learning approach

Find things that work and do more of them Learn what doesn’t work and stop doing it!

Ovum’s case studies show that cloud services can provide better, faster, less costly and less risky ICT for government

3 big ideas shed light on the value of cloud services for agencies “Can’t make a silk purse out of a sow’s ear” “Cloudy is as cloudy does” “It takes two to tango”

It’s not a universal panacea … cloud services need to fit an agency’s needs and circumstances

A good CloudFit is when: Business needs align well to the cloud services delivery model Constraints in the IT status quo are high Enablers for cloud services adoption are in place.


Cloud services+

Agile Thinking =

Innovationand thus

ProductivityQ.E.D


Homework:

What if every $ We spent on an IT solution

contributed incrementally to the growth of a Service that could be shared and

reused by other agencies? Discuss.

www.ovum.com

© Copyright Ovum. All rights reserved. Ovum is part of Informa Group.

Compounding organizational learning – the key to digital success

Wellington 20 June 2014

Dr Steve Hodgkinson, Chief Analyst Global Public Sector

[email protected]



compounding organizational learning – the key to digital success

Documents

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technological innovations

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