Of Technology, Loyalty, And Fries

Tracking customer loyalty is becoming more common as organizations recognize that unlike loyalty, high satisfaction is poorly correlated to increased profitability. However, this trend has not yet influenced the return on investment (ROI) analysis associated with software projects. I hope this changes as research has shown that an increase in customer loyalty can have a tremendous impact on profitability (a 5% increase in retention translates to a 25-100% increase in profits).

In this environment of inadequate data, we must resort to inference to understand how software can impact loyalty. In certain instances this may appear to be a fool's errand (e.g., word processing's influence on customer loyalty), but many applications make sense. Let's review for example, Business Process Management Suites (BPMS), defined by Gartner as [a set of tools that] "enables the direct control and management of operational processes in near-real time by business managers and process owners to better meet today’s business cycle time needs and enable more-agile." In my last post , I discussed how loyalty is most directly impacted by the quality [and subsequent delivery] of an organization's products and services. The challenge is as delivery scales, the importance of making each customer interaction positive remains stable, while the difficulty grows exponentially. This is where a properly implemented BPMS shines.

Think of it this way, why was McDonalds so successful from the start? Consistency. The same quality and service no matter where you go. Imagine if those famous french fries were different from location to location. Their customers' loyalty comes from this consistency, a McDonald's fry is the same the world over. Similarly, a BPMS allows for this consistency of quality service and responsiveness, even in the face of a changing business climate, fluctuations in workload, new rules and regulations, employee movements, new products, major disasters, etc. Not only is this level of consistency possible, but the degree of oversight and monitoring is unparalleled. It is the equivalent of Jim Skinner, McDonald's Corp. CEO, tasting the fries from the 30,000+ restaurants in 100 countries every moment of every day.

Through the comprehensive use of a BPMS, if a customer's interaction with an organization is consistently positive (e.g., requests are responded to promptly, orders are fulfilled without error, applications are processed quickly, payment is ontime, etc.) their likelihood to stick like a barnacle and pass-along a recommendation promoting the vendor's products/service is much greater. With the ability to monitor these interactions, benefit from real-time, automated, process improvements, and simulate adjustments, it is reasonable that a BPMS can help drive customer loyalty and the bottom-line.

Using Technology To Drive Loyalty

You are probably familiar with the term "loyalty program," however you may not know these programs do little to influence true loyalty.

So-called loyalty programs typically assign points to your continued usage of the vendors' product... the more you use it, the greater the reward. Think frequent flyer miles (FF miles), which began in 1981 at American Airlines to keep business travelers flying with them. While many argue that without FF miles, only a couple of airlines would remain today, from a loyalty standpoint they failed. That is because money, rewards, gifts, etc. do not impact what is most important - quality of products and services. If an airline existed that was almost 100% on-time, comfortable, went everywhere you needed to go, reasonably priced, safe, etc., but did not give you a "gift," how would this lack of a "gift" or "reward" impact your loyalty? Probably not at all. The gift only matters when you first meet the basic requirements for loyalty.

This issue of quality applies to every company and industry. Dell was once the poster child for exceptional customer service, a major competitive advantage, but is now fraught with customer service woes after letting customer service slip as Kevin Rollins, CEO, admits. So how can software help?

In and of themselves, nothing from CRM to ERP to ECM to BPM to BI to CEM to BRM or any other 3-letter software-related acronym will generate loyal customers. As much as a brochure may say, it simply will not happen. However as I discussed in May, enterprise software implementations with an agile plan, solid project management, executive sponsorship, collaboration between IT and "the business," realistic expectations, strong user adoption, and appropriate metrics with a feedback loop for improvements, can put your organization on the track for driving loyalty and profitability.

Capitalizing On Loyalty

In Frederick Reichheld's Loyalty Rules he describes the concept of butterflies and barnacles when evaluating potential customers. A "butterfly" is very attractive, but easily moves from place to place, while a "barnacle" may not appear quite as attractive, but sticks around. "Loyalty Leaders," those companies that have the most loyal (and profitable) customers and employees, seek to attract customers who exhibit barnacle-like behaviors. The reason? As Reichheld describes, attracting new customers is costly and only generates big returns in the later years when the cost of serving a loyal customer falls (they become more self-sufficient) and the volume of purchases rises.

Another significant benefit of a barnacle is in frequent referrals. Since a butterfly does not stick around long enough to experience how much value you provide, they will rarely generate referrals. Conversely, a barnacle has a significant depth of experience and knowledge with a particular vendor, leading to highly credible peer recommendations. This value is three-fold.

1. The referred customers typically turn out to be barnacles
2. Since referred customers cost so little to acquire, they begin to generate profits much earlier in their life cycles
3. Referred customers cost less to support, since they tend to use the people who referred them for advice and guidance

Furthermore, barnacles, unlike butterflies, are not easily lured away by flashy, attractive, offerings. This means that they'll stick with you through thick and thin, even in the face of a seductive media campaign. To understand this, think about a company or brand that you have used for years. Then consider how many alternatives you have encountered, but ignored. Many industries have done a poor job at luring barnacles... think cell phones and airlines.

How does all of this (including the last couple of posts) relate to enterprise software - the topic of this blog? You can easily leverage your information technology investments to drive customer loyalty. I will explore this in my next post.

In the meantime, for further insight and discussion into the impact of customer loyalty, and Reichheld's venerable "One Number You Need To Grow: Net Promoter Score" (% of promoters - % of detractors) check-out these related blogs and resources:

http://netpromoter.typepad.com/paul_marsden/2006/03/title_here.html

http://netpromoter.typepad.com/fred_reichheld/

http://www.cfo.com/printable/article.cfm/7108840?f=options

Measuring Loyalty

Since loyalty (customer, employee, partner, member, etc.,) is so important to the profitability and longevity of your organization, it must be measured. The good news is that measuring loyalty is relatively easy, but the question is how to use the results to your advantage. Check out Reicheld's standard loyalty acid test which asks key questions especially useful to help to pinpoint problem areas. It is important, however, that upon surveying you thoroughly analyze the results, report, and then communicate what was learned and what actions must be taken to improve and drive loyalty. The most progressive organizations will incorporate the results as a key metric to be correlated and measured within their Business Intelligence and CRM systems. In this way, they can identify those who are loyal and the specific qualities that make them loyal. With this information, it is possible to develop specific programs and initiatives to encourage loyalty across the ideal customer base.

There are a few key components to capturing loyal customers and it all starts with the integrity of senior management. In fact, research shows that companies with loyal customers have employees who feel their leadership deserves their loyalty. So like most aspects of corporate culture, loyalty seeking flows from the top down. Prime examples of what Reicheld calls "Loyalty Leaders" include: Southwest Airlines, Vanguard, Dell, Harley-Davidson, and Intuit.

Here are the "Six Principles of Loyalty" he also describes:

• Play to win/win: Profiting at the expense of partners is a short cut to a dead end.
• Be picky: Membership is a privilege.
• Keep it simple: Complexity is the enemy of speed and responsiveness.
• Reward the right results: Worthy partners deserve worthy goals.
• Listen hard, talk straight: Long-term relationships require honest, two-way communication and learning.
• Preach what you practice: Actions often speak louder than words, but together they are unbeatable.

Of these elements, the concept of "being picky" is most fascinating because it means that you choose who is worthy of being your customer. While this may sound a bit controversial, it makes a great deal of sense when you consider the economics. Next, I'll explore how seeking out only those customers who demonstrate loyal tendencies pays off considerably over time.

Loyalty - What's It Worth To You?

Back when I started this blog I committed to talking about customer loyalty. I figure since I have recently focused on technology that I will take these next few posts to discuss this most important business issue.

Loyalty is something that I personally take very seriously because much of the bread on my table is directly tied to the loyalty of my customers. What's interesting is that if you are working for any company, even a non-profit, the loyalty of your "customer" effects you as well. It does not matter if you are a business analyst, systems administrator, HR Manager, Director, VP, or CEO, loyalty should be top of mind. Not only is loyalty a nice-to-have, but loyalty and its primary leading indicator - retention - can be directly linked to profitability. According to Frederick Reichheld, founder of Bain & Company’s Loyalty Practice and author of the international best seller, Loyalty Rules, How Today's Leaders Build Lasting Relationships, a 5% increase in retention translates to a 25-100% increase in profitability.

But what about satisfaction? Most companies, yours is probably included, measure customer satisfaction. In fact, companies often boast about their CSI (customer satisfaction index). Geico is famous for their 97% customer satisfaction tagline. While that sounds impressive, satisfaction is an essentially useless measure to determine the health of a business. Here are some facts:

• A recent automotive study showed that of the 90% of customers who said they were satisfied, only 40% became repeat buyers
• 25% of customers who experience a problem with your company don't tell anyone at the company
• Only 1-5% of customers with a problem tells management

Satisfaction is an indicator of what has happened, but in no way predicts what will happen. Measuring satisfaction is like driving while looking in the rear-view mirror. In my mind, loyalty comes down to this...if something better comes along (as perceived by you the customer), would you leave, or stick around? Switching costs have decereased in so many markets, making loyalty even more important. Next, I'll review measuring loyalty and using it to your competitive advantage.

Success in Business Rules

Every business has rules, from the notification process for vacations, which I am sure many of you recently exercised or soon will, to qualifying an applicant for a home loan. What I have oftened wondered is why business rules engines have been a luke warm market segment, eclipsed by more exciting technologies like Business Intelligence. It sounds like a great idea, identify your rules, reduce them to a series of variables and just plug those into some software that automates them. Done... nothing to worry about. Right?

Unfortunately like a whole lot of enterprise software, often the marketing hype and situational reality are a bit disconnected. But it is not all the fault of the marketers, some of the blame falls on us humans. We tend not to like rules, or better stated, follow rules. They are constantly changing and everyone has a different interpretation of what the rule is, or means. Just look at our legal system. Vendors strive to make business rules engines easy to use and some have been quite successful, Global 360 just partnered with Corticon, a leader in Gartner's Business Rules Engine (BRE) magic quadrant. They have an excel-style user interface that is quite slick and powerful, yet easy for us non-techies. I do not believe that a bulk of the problem resides with the ability/inability to use a particular system, as a few pundits have theorized, but it is the fact that mapping out rules is difficult and there are implications to changes...and we love to make changes.

The information for specific rules is dispersed throughout an organization and many are quite complex, rarely independent, and a change to one component can invoke the law of unintended consequences. That is why, especially with BREs it is critical to start with something small and easily manageable, map it out completely, and then use the software to automate the rule. Doing so will make it easier to make changes when necessary and will set expectations appropriately from the start. The BPMInstitute had a webinar on 6/9 that explored some of these issues. You can check it out here.

The Soft Launch

Today I am "soft launching" this blog to customers and colleagues. For my new visitors, I hope you enjoy perusing the posts while providing comments that benefit others. And be sure to pass the link along ( enterprisekarma.blogspot.com ) so we can build a diverse community of opinion.

It has been and continues to be my goal to make each post valuable to you by incorporating extensive research, experience, and a commitment to making sense out of the complexity that plagues Enterprise Software.

• To start from the first post back in April, click here
• To add this blog to your RSS Feed provider (e.g., Google Reader) , making it more convenient to access my latest posts, select one of the "rss feeds" under the heading in the right column
• To review archived posts, check out the "archives" heading on the right column

As the blog continues to evolve, please let me know what you think and be sure to return. Thanks for visiting.

Try Before You Buy

Essential to optimizing your business processes is the ability to simulate changes. A pilot who spends hours in a controlled environment before actually taking off can simulate hundreds of scenarios that include both ideal and adverse conditions. In this way a pilot can remain safe, while learning how to overcome potentially hazardous pitfalls. By simulating environmental changes, significant risks can be mitigated, while critical expertise is developed.

Unfortunately, business leaders have never had this critical capability necessary to confidently implement process changes. That is, until now. Leading Business Process Managment Systems can provide organizations with simulation capability. While the extent of this capability varies considerably amongst vendors, even the most basic simulation can be helpful before major process changes are undertaken. Even when the simulation capability is manual, a business analyst can test numerous scenarios to determine optimal processes for a variety of given situations. Like a pilot simulating landing in high winds, on ice, with failed landing gear, an organization can use simulation to develop business processes for a dynamic business climate, driving efficiencies, improving customer service, and gaining a competitive advantage.

Optimization Should Never Stop

By definition, optimization of your business processes should never stop. I could give all of the clichéd reasons like: "in this day-and-age, business never stops changing...neither should your processes" or "your competition never stops innovating... neither should your business," but you already know all of this. The problem for medium to large organizations is that it is difficult to make changes to business processes. This is especially true for ad-hoc changes, while being confident that the modifications will have a positive effect on service and the bottom-line. Change for change sake not only does not make sense, but can have a detrimental effect on your business. Most of us already know this, which makes organizations reluctant to effect change. But this extreme reaction can also have an adverse effect.

The key is to start by focusing on a specific set of business processes. Trying to tackle the super-set will, at best, result in minor improvement, at worst, have a detrimental effect across the organization. This is especially true since most processes are inter-related. By mapping out a process subset, incorporating all of the components and variables associated with the processes, and identifying goals and key performance indicators (KPIs), implementing changes will be less risky, provide measurable results, and act as an excellent learning experience. An excellent path to process optimization is through simulation.

Why The Hiatus?

I have not posted for 2 weeks for good reason. I recently had a new addition in my family, which as many of you must know, is an all-consuming experience. As understanding as she may be, my wife would have been less than thrilled had I been blogging while she was in labor. Since that is now over and everyone is healthy, I will be resuming regular posts, picking up where I left off. Thanks for your patience.

Combining BPM And SOA... What's All The Fuss About?

There has been a great deal of discussion around the combination of Business Process Management (BPM) and Service Oriented Architecures (SOA). Just run a search on these terms and you will see hundreds of articles and blog discussions on the joint topic. Many pundits believe that BPM is the real-world manifestation of SOA, which tends towards the theoretical. Check out this ITBusinessEdge article for a discussion. What is clear is that while one does not rely on the other, their individual value is greatly enhanced when joined. Review my post on May 3rd for a discussion on BPM.

While many BPM systems are focused on human-human flow of work, advanced suites can leverage SOA and Web Services to invoke systems as part of a comprehensive business process. By combining the two, a holistic process can be achieved.

For example, in the Financial Services scenario from yesterday, a new loan application is faxed into the organization. This fax invokes the BPM system and the specific business process associated with new loans. A SQL task in the process is kicked off and executes a database query to see if the applicant is already a customer, to ensure no duplicate accounts. Once it is determined that the applicant is not a duplicate, another step in the process connects with the mainframe and returns an application number to the business process. From this point, a business rules engine is called through a SOAP Web Service to evaluate the details of the loan application and depending on the outcome, approval may be automated and the BPM system notified. The next step automatically seeks the loan officer's review and final approval. Once recieved, another step automatically sends mail notification to the applicant, informing him/her of their approval.

This is a greatly simplified instance of the BPM system managing just one business process, making "calls" out to other systems and seeking human input along the way. With a Service Oriented Architecture, the details to making this process work are simplified. Now imagine hundreds of processes much more complex than this - traditionally static processes in an ever-changing business environment. Many of these processes are created by different departments with limited resources and different individuals with varying technical ability. While SOA, with its central "repository" of services, and traditional BPM controlling the process, makes great strides in managing the flow of work, ensuring efficiency and consistency. The dynamic business environment means that ongoing process optimization and adaptability is incredibly important, particularly to ensure a competitive edge.

More on this soon.

SOA In Practice

Now that we've got the theory, jargon, and general technical aspects of SOA out of the way, let's explore an example of usage. My hope is that this may spark some ideas for you in your organization.

Scenario Background: A regional Financial Services company was seeking to expand the average number of products purchased by existing customers. They knew the more business each customer conducts with them, the greater the impact to the bottom line, and the greater the retention rate. They launched a broad-spectrum marketing campaign, including print, radio, and television advertising. They even included Internet-based marketing in the form of Web advertising and e-mail campaigns. As a result, there was an influx of inquiry from both new and existing customers seeking to setup a variety of accounts. Applications came in from all channels (Web, paper, phone, even e-mail).

Challenge: The challenge for this company was in quickly processing these applications and creating the new accounts to meet high customer service expectations. As part of this, it was important to ensure that there were no duplicate accounts - these wreak havoc on their systems, especially invoicing and billing. Furthermore, since many of these were loan applications, they required credit scores which had to be obtained from a 3rd-party.

Before SOA: Prior to implementing SOA across the enterprise, each system and division had its own unique forms for new accounts, which were inconsistent. Often little differences would cause glitches (e.g., Male/Female vs. M/F, date formats, etc.). In addition, the 3rd-party providers for Credit Scores were different, depending on the department (e.g., Mortgages vs. Auto Loans). A constant challenge was in checking for duplicates, because the systems setup for this task often failed due to communication protocol errors. Checking for duplicates slowed the amount of time to process a new application.

Using SOA: With the newly implemented and fully tested SOA-based setup and associated Web Services, this company met their performance targets. Here were a few key benefits:

• Forms - rather than have disparate forms, with inconsistencies, they created a central repository of forms and "snippets" of forms. They used Web Services to call these forms when creating a new application. If anything changes on these forms, rather than having to make the change in 50 different places, it is updated only once, and then pulled when needed.
• Credit Scores - for consistency and speed, the firm made a decision to consolidate 3rd-party credit-score providers to a single company. They made sure the selected provider offered a secure, Web Services interface, with high availability, to which they could connect their loan application system and automatically capture the credit score. This reduced errors and increased efficiency.
• Checking for Duplicates - they used Web Services to connect to their mainframe, which houses all customer Account Numbers. Rather than taking a great deal of time and resources writing code, figuring the format, establishing communication protocols, etc., they easily called a Service to identify duplicates. If no duplicates were identified, the system called another Service to setup the account number. By calling a central service, consistency and accuracy were preserved.

There are an infinite number of possibilities for leveraging a Service Oriented Architecture. However, Business Process Management and SOA, are particularly well-suited to one another. I'll explore this powerful combination tomorrow.

Working with SOA

On Friday I discussed what SOA is and why your organization should be looking into it. Today, I will explore the real-world of SOA. Referring back to the "electrical outlet" example outlined in Friday's post, even 102 years since the 1904 invention of the "electrical plug and socket" by Harvey Hubbell, while standards exist, there are still 14 plug and socket types used across the globe. Anyone who has traveled to Europe with an electric razor, sans adapters, has learned this the hard way. Likewise, having a Services Oriented Architecture across line-of-business (LOB)applications does not mean perfect interoperability, but it is a significant improvement over the alternative - writing C-code, developing communication protocols, designing error handling etc.,

While SOA can be implemented using any service-oriented technology, Web Services is the most common. Example Web Services include SOAP and REST (to delve deeper into these services and related SOA technologies, select the hyperlinks in this post). Web services allow communication between software, based on a set of standards (e.g., XML, WSDL, UDDI, etc.). It is also important to note that with Web Services, software applications do not need to be based on the same platform (e.g., Windows vs. Linux) or same programming language in order to communicate. These issues have long been the achilles heel for enterprise systems.

Organizations that have adopted SOA are primarily focused on communications between systems within the company. However, Web Services ushers in a whole new set of capabilities by allowing for smooth interoperability with applications outside the enterprise. While potentially revolutionary, this is less common as significant security, accessibility, and performance issues remain.

Tomorrow I'll review a business scenario that leverages SOA to drive value to the bottom-line.

SOA And Why You Should Care

A Service Oriented Architecture (SOA) is "a collection of services that communicate with each other. The services are self-contained and do not depend on the context or state of the other service. They work within a distributed systems architecture." Think of a "Service" as application code that performs a specific task or set of tasks (e.g., determine a credit score for a loan applicant). These discreet services can interact in a standard way so it is easier to link one service to another.

Imagine if each appliance in your house were connected to your outlets using a different plug, and the outlets were different as well. Just getting your toaster to work would be incredibly frustrating, requiring numerous adapters and connectors that would be prone to failure, loss of function, etc.. This is the environment that IT professionals must deal with in their enterprise software infrastructure. The advent of key technologies (those that compose SOA) and development of industry standards have essentially made interaction between systems and applications easier and more straightforward.

Here's the upshot:

• Significantly reduce application development costs
• Increase business agility because useful pieces of code in one part of an organization no longer need to be constantly re-written... they can now be easily re-used
• Design completely new applications with minimal effort by leveraging code from a 3rd-party and combining it with existing code
• Create competitive advantages where no one is looking through a creativity and a just a few lines of code
• Reduce the time-consuming and risky task of changing firewall filtering settings by utilizing HTTP with Web Services

Next time I'll explore how it works, followed by a post with examples.

What Does SOA Mean For Your Business?

For the past two years the popularity of Service-Oriented Architectures (SOA) has been steadily increasing. Just check-out this Google Trends report. This begs the questions:

1. What exactly is SOA?
2. Why should one care?
3. Is SOA just marketing hype?
4. Is SOA just for technical-types? What does a business person need to know about SOA?
5. How does SOA benefit one's business?
6. How should one get started implementing a service-oriented architecture across an organization? What are the pitfalls?
7. Who benefits most from SOA?
8. How will SOA impact my existing infrastructure and business processes?

Over the next few posts, I hope to address these and related questions, providing greater clarity into a complicated issue with this new architecture.

What's The Deal With Buyouts?

On April 3, 2006 Global 360 was purchased by TA Associates in a $200 million management buyout (MBO), as announced in this press-release. Why am I talking about this when it happened over a month ago? Two reasons:

1. I continue to get asked about the nature of this transaction and the differences between the types of private equity buyouts.
2. Buyouts have been extremely popular and continue to grow

First, what are the different types of buyouts? A buyout is executed when either the controlling stake or the complete company is sold. There are two basic flavors: Management Buyout (MBO) and Leveraged Buyout (LBO). An MBO, often referred to as "going private," exists when a company has its outstanding shares purchased by an individual or small group of investors in order to obtain complete ownership. In the case of Global 360, when Sonny Oates, the primary owner, decided to retire, he executed an MBO with TA Associates, Technology Crossover Ventures and JMI Equity. More on this in a moment.

An LBO is a takeover that occurs primarily through borrowed money (typically greater than 70% of the total purchase price) often using the company's own assets as collateral. An LBO is often viewed as a desperate transaction, used to prevent hostile take-overs, or ensure a company's survival in rough times. LBOs were made famous during the 1980's.

A February 2006 article in the Washington Post captured the trends in "private equity dealmaking." Here are a few key facts (from the article):

• Private equity firms struck deals worth $396 billion in 2005, a third straight record year and a 51 percent increase over 2004, according to Thomson Financial _ outstripping a 39 percent rise in overall mergers and acquisitions business.
• In 2005 buyout houses raised $261 billion in new investment...an all-time high
• Overall, take-private deals rose by more than 150 percent worldwide to $97.4 billion, beating the previous record of $85 billion in 1988
• The growth of buyouts is widely blamed on the burden of Sarbanes-Oxley legislation and increased shareholder litigation risk

So what is the impact of the MBO on Global 360 and its customers? Very positive. This is for many reasons, not the least of which is the instant improvement to the Global 360 balance sheet, giving us access to the capital for growth and acquisitions. In addition, the management team and vision remain in place, only with greater resources for execution. This is because TA, TCV, and JMI have no interest in managing the company, as evidenced by their 28-year investment history and portfolio. In a market ripe for consolidation (as described by Gartner), this buyout ensures Global 360's independence and leadership position.

For more information on buyouts, checkout the always interesting "Buyout Blog."

Implementation Approaches, What's The Difference?

While I have talked in the past about the attributes for successful projects, I did not discuss the tactical approaches. Before joining Global 360, I had not heard much talk about tactical methods. However, it is obviously quite important. In my research, I have deduced the approaches down to the three most common: Agile vs. Iterative vs. Waterfall. What follows is a short discussion.

Agile Methodology
Back in 2001, a group of software developers who followed the "lightweight method [of development]" gathered in Utah to discuss various development methods. Out of this meeting, they crafted the "Manifesto for Agile Software Development." Essentially, it boils down to this (from the Agile Alliance Organization):

While all of the following are important, the Agile Method values:

• Individuals and interactions more than processes and tools
• Working software over comprehensive documentation
• Customer collaboration over contract negotiation
• Responding to change over following a plan

The ultimate end-goal is a successful implementation of working software. The most common criticism of Agile methodology is typically that it sacrifices detailed documentation for face-to-face communication and efficiency. The best way to think of the Agile Method is as an adaptive approach. In other words, as a project's needs change, so will the team - in order to deliver what is ultimately desired. This is not to say that the Agile Method is unplanned, rather it accounts for the reality where software implementations are often a moving target. Critical to this method, more so than any other, is the experience and resumes of the people involved.

Waterfall Methodology
Proposed in 1970 by W.W. Royce, famed software engineering researcher, this approach views development as a flowing process of: requirements analysis, design, implementation, testing, integration, and maintenance. Only when one step is completed and perfect, should the next one begin - there is no jumping back-and-forth, or skipping around. Interestingly, in the same paper which introduced the concept, Royce argued against it saying, "[it] is risky and invites failure."

While on paper Waterfall Methodology makes a lot of sense and in certain cases is ideal, most organizations are unable to invest the resources (i.e., money, people, time) required for a successful implementation of the method. In fact, many organizations do not know exactly what they want until they have a mock-up or prototype. They then use this as a way to learn more and incorporate the positives and eliminate the negatives in their design.

This is summarized quite nicely in a Wikipedia article on the subject. It states:

"The idea behind the waterfall model may be "measure twice; cut once", and those opposed to the waterfall model argue that this idea tends to fall apart when the problem being measured is constantly changing due to requirement modifications and new realizations about the problem itself. The idea behind those who object to the waterfall model may be "time spent in reconnaissance is seldom wasted."

Iterative Methodology
On the scale of "adaptive" to "predictive," this method falls somewhere in the middle between Agile and Waterfall approaches respectively. Essentially this approach allows for incremental development where a developer learns from previous versions of a system, using this information to constantly improve each new release. While quite practical for software development, for project implementations, it is not quite as applicable.

The Iterative Method boils down to the: Initialization step (creating a base version), the Iteration step (redesign and implementation of Project Control List tasks), and the Project Control List (record of all tasks that must be performed, including new features).

The initialization step forms the foundation for the project, offering the core features to solve the problem. It is usually easy to implement and simple to understand. The idea is to then use this as a way to elicit feedback from others. This feedback influences the Project Control List, which is used to form the next iteration.

The Value for Symetra

In yesterday's post, I described Symetra's phased approach to implementing their Business Process Management system. No matter how smooth the implementation, the bottom-line benefits must be there. So what are their results to date?

• Increased application processing capacity by 30%
• Reduced application processing time by over 3 days
• Decreased the need for temporary staff
• Faster and more effective customer service
• Shortened the time to train employees
• Improved employee satisfaction by making them more efficient in their activities
• Increased the ability to respond to process changes related to business strategy

In addition, they are no longer in constant reactive mode, "putting out fires." Now, goals are driving the process through the automatic work assignment. To learn more about Business Process Management and how your organization may benefit from a BPM solution, check out BPMInstitute.org, an independent resource for BPM information.

You've Got Goals, But Are You Meeting Them?

Last Thursday, Symetra Financial's (formerly Safeco) Margaret Harder spoke at GCC. What was particularly interesting was her in-depth description of how their Global 360 BPM Suite has enabled them to process more work, in less time, with fewer human resources.

Based in Bellevue Washington, Symetra has over 2 million customers and 200 employees, managing $20 billion in assets. They saw 14% growth from 2003-04. Incidentally, their initial Global 360 installation was back in 2003 and was designed to move them away from paper. Then in 2005, they expanded the system within the organization and in terms of capabilities. The Customer Service department implemented the process components to achieve true Business Process Management (BPM).

In just 5 months from start to finish the system and associated processes were fully implemented. As part of the implementation, they established measurable goals for 58 different transaction types. They incorporated these goals within the system such that the established parameters and thresholds would be automatically managed. This would mean that as tasks flowed into a queue, based on these parameters, it would be proactively assigned to the optimal resource. Those with permissions can run real-time Goal Management reports to determine efficiency and effectiveness in meeting the established goals. Their next step will be to incorporate Business Optimization into the setup.

Since Margaret's team recognized the importance of this system to the organization, they wanted to ensure a smooth roll-out. This meant smoothing the shock that is often associated with change, especially when tenured employees are affected. So they introduced these changes first with a pilot group of just 8 Customer Service Representatives. After just a couple of days of working through the kinks, they began to see significant benefits. Excitement started to spread within the group, but they were careful to manage the enthusiasm. They continued to roll out the system in ever larger groups, while:

• Sending "benefits" e-mails to the broader organization
• Placing creative posters around the building that described individual benefits
• Collecting and posting testimonials of pilot users
• Establishing a "mentor" program between existing and new users

All this was completed to ensure a positive transition. After a total of 4 stages, they completed the roll-out and instead of "shock and awe," by that time the introduction was barely noticeable... exactly how they wanted it. So how are they doing, and what are the hard and soft benefits? Check back tomorrow for details.

Managing The Distributed Workforce

Every organization must plan for a variety of risks. As I mentioned in my post on 4/26/2006, it is often the act of planning that matters much more so than the plans themselves. Continuing from yesterday, I am particularly interested in AIG's distributed workforce and thought you might be as well.

A distributed workforce is like the internet versus a mainframe. In fact, the development of the Internet began as part of wartime communications. The defense department was looking into the ability to re-route digital traffic around failed nodes – an Achilles heel for the then current phone network. With such a network, if a portion failed, another node would pick up the slack.
In the event of a disaster, a distributed network is an ideal way to handle the situation. The human brain acts in a similar way. In many cases, as one sense fails (e.g., sight), another compensates (e.g., hearing), becoming more acute. While certainly not perfect, it provides the strongest chance for survival.

With the progression of telecommuting and its enabling technologies, a distributed workforce is more practical than ever. While certainly not every organization can support such an organization, those that can may want to seriously consider it as part of disaster planning. So how do you sustain such an environment?

I asked Mr. Popolano, AIG’s CIO this question. He suggested that monitoring is key. A remote employee’s progress and efficiency should be transparent – both you and they should be able to monitor it in real-time. Goals should be established and actual results compared. If an employee is consistently falling short of defined goals, action must be taken. An employee who is just incapable of success as a remote contributor must be dealt with. He/she must be prevented from becoming a “virus,” negatively influencing fellow remote co-workers. Done well, a distributed work environment can improve employee satisfaction and productivity, while being an important component to handling all types of disasters.