Put up or shut up: The corporate guarantee

By Gene Tanski, CEO, Demand Foresight

Things were getting heated at the sales meeting. The cause of my anger was an old theme: Industry-wide, client expectations for business software were so low that stories about the failure of big enterprise projects had practically become wallpaper.

Where were the repercussions for the business performance that never materialized? The big systems failed to deliver what they were supposed to over 70 percent of the time and the big checks just kept getting cut with no accountability. The whole dynamic needed to be nuked.

In the heat of our discussion about the institutionalized negligence of our gigantic competitors and how we could exploit it, a 25-year-old, Xbox-playing member of our team, said: “Dude, if we’re that bitchin’, why don’t we guarantee it?”

“What?” I asked him.  “Are you nuts?  Do you have any idea how software works?”

“No, not really. But I hear you guys constantly complaining about how everyone else over-promises and under-delivers. Why not do something about it?”

That simple dare became our biggest differentiator – and, more surprisingly, revolutionized the way we run our company.

During the dot-com boom, new businesses were founded on completely new thinking by young professionals, unencumbered by any notion of what was or wasn’t possible. Most of that potential was never realized, though – at least not in the first wave, since the young visionaries had no grounding in the disciplines that would sustain their visions over time.

However, we wondered, could our team fuse the experience of the old hands with the “anything is possible” optimism of our young teammate?

Once we got our minds around the concept, the experienced guys on the team were able to adjust some long-held assumptions and work through how to handle the risk, build the pricing and generally operationalize the concept.

It was a little bit like learning how to fly, as characterized by Douglas Adams in his “Hitchhiker’s Guide to the Galaxy” books: the key to flying was to throw yourself at the ground really hard, and miss.

It was exhilarating. I felt like we had just missed the ground by a huge margin, and instead were flying straight to a business model that embodied the exact opposite of everything we hated about the IT and consulting world.

The guarantee was an explicit one – with no wiggle room. Clients would measurably improve their business performance — in our instance, a 25 percent minimum reduction in absolute forecast error — or we wouldn’t get paid. Not a dime.

It could have been a disaster, but taking this leap of faith actually did incredible things for our organizational focus – and ultimately helped cement our culture and internally align all divisions of the company.

The developers know that the software has to work and be relevant to specific job responsibilities or they don’t get paid. Implementation and technical support? They better get it right or they don’t get paid. Sales people? They had better understand the client problem and know exactly how to solve it, or … well, you know…

Another benefit of this ‘put up or shut up’ philosophy was the elimination of the need to micromanage. Once everybody understood that the promise would not bend, I found I could trust everyone to solve problems the way they thought best.

Vacation policy? Didn’t need it. Our team was entrusted to take the time off that they knew they could afford to take. Office? Wherever they could open a laptop and do their best work. This culture tells us a lot about the kind of people we should hire — can they stay motivated and productive in our unique environment?

So an energetic, passionate clash of skilled professionals turned out to be lightning in a bottle. It let us fuse the brashness of youth with organizational know-how.

We still argue in meetings, of course. But these days I enjoy it. You never know what sorts of benefits it can produce.

This post first appeared on Venture Beat: Entrepreneur Corner on October 26, 2010

Why IT projects fail: changing client expectations for technology vendors

Client expectations for their software and technology providers have got to change.

Major technology implementations are significant investments: money, people taken away from their day jobs, and opportunity costs. With all that at stake, why is there such an extreme lack of accountability for specific business results?  It is utterly baffling to me. How often do clients get demonstrable business value — features and functionality that actually make their business better in terms of customer relationships, revenue and profit? Not very often. There is not much good about the current recession, but here’s one potential silver lining: it is forcing more companies to think of IT decisions as business decisions that need to demonstrate an auditable link to driving growth and revenue for mission-critical operations.
Photo by hans.gerwitz
The rate at which business technology implementations are considered failures is north of 70%, according to multiple studies from McKinsey, AMR and Forrester. What would you do with a stamping press, paint line or vendor that failed 70% of the time?

Vendors simply have to stop BSing. And clients have to quit letting them get away with it. Technology, and software in particular, has to work as advertised, or clients should get their money back so they have a chance to work with something better. We can’t afford the old way anymore.

Two pitfalls that doom business technology projects: requirements gathering and the old “over-promise, under-deliver”
When clients change their expectations and clearly define the business outcomes by which the project must be judged, we clear the way to improve formative stages that are a two-step to frequent failure: requirements gathering and promised results.

Requirements gathering
Here’s something that happens at way too many companies: the vendor puts their client’s team in front of a whiteboard and encourages them to dream up software in a vacuum. They really don’t know what they want or the capabilities of the software in context of their actual business processes. They don’t know the capabilities of what’s out there, nor are they, during this critical process, asked to see their company in terms of the software. Their understanding is limited to what they know from their day-to-day experience and whatever chock-full-of-functionality marketing brochure they’ve seen last. In other words, they are limited to what they know, and that limited knowledge drives the outputs from the requirements gathering sessions. But what about what they don’t know? What about the possibilities? If there is a  software tool functionality that would eliminate three steps from a process, wouldn’t you want to explore that impact?

Requirements planning should be done within the context of the technology platform chosen — in this case, the software. Wouldn’t it be more powerful if you could react to the software by visualizing your company within it?  What if you could react to what works and what doesn’t in context of your actual job and responsibilities? Wouldn’t that be more meaningful than a whiteboard?  Wouldn’t you feel more ownership of the end product if you got to provide informed, constructive feedback and really help your team decide which features work and which are a waste of time?

Once we’ve made our choice and undergone implementation, the technology should then do what we all agreed it was going to do. When it doesn’t, this is when the “partnership” to which both sides professed early on starts to fall apart. Rather than focusing on addressing the problems or the misunderstanding, usually there is an investigation, fingers are pointed, and then the negotiations begin as to the solution. Not surprisingly, the new solution requires yet more money, and somehow, despite the best corporate negotiators, the customer ends up footing the bill. Only the software industry (and maybe the finance industry over the last couple of years) can look people in the eye, tell outright lies as to what is really going to happen, and then make the customers pay for the result.

Until the people who actually write the checks start refusing to perpetuate this dynamic — you demand more, you demand measurable results, you demand outcomes and refuse to pay if your investment does not deliver — then the majority of these projects will continue to be failures. Ultimately, the customers will lose an opportunity to become more competitive, both domestically and internationally. And that is a large and painful cost that rarely is identified and discussed. Changing our expectations and avoiding these pitfalls sets the stage for IT to truly improve your business.

The first step is simple: decide that you deserve better and act to make it happen.

An open letter to the C suite about your integrated IT shop (Pt. 2)

Dear C Suite:

Hi, it’s Gene Tanski again. In my last missive I talked to you about how IT is really about driving better business performance, creating cash flow, and giving your teams the tools they need to compete — and how going across the board with an integrated IT suite means at least some of these teams are going to be stuck with sub-par functionality. And that is going to cost you.

The Oracles and SAPs of the world buy other companies because they know their current offerings are not competitive. And in the process of acquisition and all the resultant difficulties, the purchased technology gets watered down and ultimately the functionality loses its relevance because it is no longer the one and only focus of the company that made it. It has to compete for resources and time; it no longer represents the business value for which it was originally purchased.

In the integrated ERP strategy, the sales and operations planning groups usually get stuck with the sub-par functionality. This is in part due to the nature of salespeople: anything they can do to stay focused on selling and not having to do any “administrative” work will be supported. So if they get stuck with something that doesn’t work all that well, isn’t easy to use and doesn’t add measurable value, then they can say it doesn’t work and it’s wasting their time.

But there’s a bigger problem here: a vital group of professionals are not actively participating in the S&OP process and focusing on forecast accuracy — potentially costing the company huge amounts in reduced revenue growth and increased production costs.  If there is any area where your professionals need the best tools and support, it’s in sales and operations planning. Their activity drives the forecast, and forecast error negatively impacts the operations side, the customer service side and the finance side (how many times have you seen a stock get hammered because of a missed forecast?).  It is a bit like flying: even being a degree or two off (your forecast) leads to a big miss in your final destination (customer service levels, inventory amounts, etc).

Again, this is usually countered with the “line item cost” response.  However, even this doesn’t hold up when you consider the total cost of ownership (TCO).  Maybe purchasing officers are able to claim huge value add because the ERP vendor bundles together the functionality, and because Oracle threw in the Demantra licenses for free. Free? Really?

What happens when it is time to upgrade?  See all those attractive, bright kids wandering around with the consulting logos on their shirts? Are they free?  While the initial license might have been thrown in, do you really think they are not included in the maintenance cost? When something is not working and you need support and fixes, are those free? If your business changes and you need to rearrange some of the process flow within the software and change the configuration? Free?  Do you really believe that?  Didn’t think so, but these issues are tragically not brought up often enough when your ERP rep is dangling free shirts and big “value adds.”

And where are the professionals who question why the licenses were thrown in free in the first place?  Could it be that these companies know the stuff is sub-par, doesn’t add value, and basically has to be given away?

Lastly — and this is the cruel irony of the thing — in the fevered pursuit of a single vendor and the associated wardrobe enhancement opportunities, IT shops are setting up their own demise. By using a single ERP vendor, companies are forced to simplify and homogenize their processes, becoming more and more similar to competitors who use the same system.  The work within the department is also homogenized — there is very little difference between one Oracle support person and another. This is not a knock on the people themselves, but rather an acknowledgment that the skill sets required are standard and easily replicable. And since the whole justification of the single-ERP strategy is cost savings, the IT department has allowed their value to be defined solely in terms of cost rather than the ability to help their team compete better.  Do you really think Q branch would have been tolerated had it continued to equip 007 with the same equipment that enemy spies were using?

Don’t think for a second that the aforementioned consultants don’t know this. They are vested partners in pushing this strategy. Why? Outsourcing. The more homogenized that IT departments become, and the more they define themselves on cost, the easier it is to make the case for outsourcing.  “Hey, it’s just an Oracle/SAP/Infor/JDA environment, just like all these other guys. We can take it over, consolidate support and deliver to defined service levels for a lot less than your in-house department.”  Ironic, don’t you think?

When focused on the correct areas of the business, best-in-performance environments are easy to support and maintain, result in a lower total cost of ownership, and allow IT and business to work together and create competitive advantage and profits.

I know it was a long letter. But I felt like you had to hear it.

Yours in creating your future profits,
Gene Tanski, CEO
Demand Foresight
Golden, CO