Monthly Archives: January 2008

Now That Your Marketing Budget Has Been Approved

It would be a very good time to send the doctor an e-mail to reserve your slot as a sponsor of Sourcing Innovation. As one of the few resources for sourcing, procurement, purchasing, supply and spend management professionals interested in improving themselves, their processes, and the overall performance of their organizations, and possibly the only blog in the space whose primary goal is reader education, Sourcing Innovation is uniquely positioned to give you the brand boost and visibility you need with the audience that counts. (After all, who is more likely to influence important technology and service buying decisions at their companies – the lazy gossip seekers or, as Brain would put it, the “chaff”, or the driven knowledge-seeking professionals anxious to advance their skills and careers who, as Brain would also put it, are the “wheat” of their organization?)

More information about Sourcing Innovation can be found in the About post, always accessible from the right-hand sidebar. More information about where your market is going, the SI Open Pricing Model, and why you’re going to sponsor Sourcing Innovation is available in the sponsorship section.

If you have questions, or you would like more information, please feel free to e-mail the doctor <at> sourcinginnovation <dot> com at your convenience.

Screwing up the Screw-Ups in BI

Today I’d like to welcome back Eric Strovink of BIQ [acquired by Opera Solutions, rebranded ElectrifAI].

Baseline recently put a slide show on their site illustrating “5 Ways Companies Screw Up Business Intelligence — And How To Avoid The Same Mistakes,” with data drawn from CIO Insight. The slides are an excellent example of how mainstream IT thinking misses the essential problems of business data analysis.

Let’s take the “screw-ups” one at a time:

  1. Spreadsheet proliferation (97% of IT leaders say spreadsheets are still their most widely used BI tool.)Spreadsheets are one of the most valuable business modeling tools available, and IT might as well understand that they’re not going away. The problem is when spreadsheets (and offline tools like Access) are used inappropriately, to manipulate transactional data rather than drawing it in the right format from a flexible store. The solution provided by Baseline is to “cleanse and validate your data, then migrate the information to a central server/database that can be the backbone of any BI strategy.” Bzzt! Sorry, a central database won’t solve the analysis problem, and at the end of the day you’ll have just as many spreadsheets as before. That’s because a fixed schema data warehouse is a lousy analysis tool, and might as well be on planet Neptune as far as usability for the business analyst is concerned. There’s nothing wrong with a reference dataset, but business analysts need to be able to manipulate its structure as easily as a spreadsheet, or they will simply extract the raw data from it and manipulate the data offline, with the same slow, expensive, and uncertain results as today.
  2. Systems can’t talk to each other (64% of IT leaders say integration and interoperability of BI software with other key systems such as CRM and ERP pose a problem for their companies.) Right! Except that the Holy Grail of trying to extend a “centralized” database umbrella over completely disparate systems is both incredibly expensive and nearly impossible. Baseline suggests “[partnering] with a reputable systems integrator.” Good for them — at least they dodge this bullet rather than getting the answer completely wrong. The right answer is that business analysts should be able to construct BI datasets on their own, as needed, from whatever data sources are useful/appropriate, and it shouldn’t be difficult for them to do so. Concentrating all of the information under one umbrella isn’t necessary; many umbrellas can do the job, and if they’re easy to deploy, they’re both inexpensive and provide a better and more flexible answer.
  3. No centralized BI program (61% say they don’t have a center of excellence of the equivalent of BI.)And they’d be well advised to tread carefully, because BI systems have a track record of poor performance and poor customer satisfaction. Why? Because the analyses you can do with a fixed data warehouse are limited to the views set up a priori by IT or by the vendor, and those views are largely immutable. Baseline dodges this one, too, suggesting the “[creation of] a data governance and data stewardship program.” Can’t argue with that in principle, but a governance and stewardship program doesn’t actually put any meat on the table. How about putting tools into analysts’ hands that they can actually use? Right now?
  4. Data lacks integrity (57% say poor data quality significantly diminishes the value of their BI initiatives.) Hmmm, I wonder why the data are of such poor quality. Could it be that the BI system doesn’t really provide much insight? Could it be that the fixed schemas set up by IT or by the vendor don’t have any applicability to day-to-day questions? Could it be that the inability of the BI system to re-organize and map data on the fly causes errors to persist over time? Baseline recommends spending more money on data cleansing, which might make a cleansing vendor quite wealthy, but won’t help much. It typically isn’t cleansing that’s the problem, it’s (1) the fixed organization of the data, which is guaranteed to be inappropriate for any analysis that hasn’t been anticipated a priori, (2) the ad hoc reporting on it, which has to be easy to accomplish, as opposed to requiring IT resources (see below), and (3) the fact that cleansing can’t be accomplished on-the-fly (as it should be) by the business analysts themselves.
  5. Managers don’t know what to do with results (58% say most users misunderstand or ignore data produced by BI tools because they don’t know how to analyze it.)Even when BI is in place, nobody knows what to do with it. Baseline recommends that “IT staffers… should work closely and regularly with business managers to ensure that measurement, reporting, and analysis tools are supporting business goals.” But this is precisely the problem. For business analysts, BI systems are difficult to use and set up, it is difficult to create ad hoc reports, and it is impossible to change the dataset organization. It is also politically impossible to change the dataset organization if it is being shared by hundreds or thousands of users. How are you going to get them into the same room to agree on the changes?

    So, Baseline is proposing (in essence) that IT resources sit cheek-by-jowl with business users, to ensure that they can get value out of a system that they otherwise could not use. This is certainly a “solution” of sorts, but it’s not practical. Either business analysts can use the system on their own, or the system will be of marginal value to them. It’s that simple.

The Brain Gives Pinky a Marketing Lesson

Pinky and the Brain
They’re Pinky and the Brain
Yes, Pinky and the Brain
One is a genius, the other is insane
They’re advertising guys
Their mind is on the prize
They’re dinky
They’re Pinky and the Brain, Brain, Brain, Brain,
Brain, Brain, Brain, Brain, Brain

Before each night is done
Their plan will be unfurled
By the dawning of the sun
Take over the sourcing world

They’re Pinky and the Brain
Yes, Pinky and the Brain
Their twilight campaign
Is easy to explain
To prove their sourcing grace
They’ll overthrow the space
They’re dinky
They’re Pinky and the Brain, Brain, Brain, Brain,
Brain, Brain, Brain, Brain, NARF!

Pinky Gee Brain, what are we going to do tonight?
Brain Same thing we do every night Pinky – try to take over the Sourcing World!
Pinky How are we going to do that, Brain? Narf?
Brain We’re going to do something different, we’re going to market our strategy to take over the sourcing world!
Pinky And what is our strategy this time, Brain?
Brain I just told you, we’re going to market our strategy to take over the sourcing world.
Pinky I don’t understand Brain. Nog!
Brain Obviously not, Pinky. So let me explain.
Pinky Okay, Brain.
Brain Marketing is a process that enterprises use to try and convince consumers that they want the products or services that they have to offer.
Pinky And how do they do that?
Brain They use advertising to create a positive brand image through mediums that the people they want to buy their products watch or listen to.
Pinky Like when Mr. Cheddam of Australian Cheddam comes on the radio and tells us about how great its golden yellow, rindless block of cheese that combines cheddar and edam is?
Brain Something like that, Pinky.
Pinky And when Mr. Wensleydale describes his lightly pressed and smooth textured offering with a subtle milky flavor that is both clean and refreshing.
Brain Yes, Pinky.
Pinky And when …
Brain YES PINKY! Now let me continue.
Pinky Sorry, Brain. It’s just that I love cheese. So much tastier than these food pellets.
Brain I know Pinky, now pay attention.
Pinky Okay, Brain.
Brain So the goal of marketing is to create brand recognition through advertising on selected mediums. Good marketers do this by trying to create the message that the product or service is what the user wants, at the price point they want it, at a placement that is good for them, using a promotion that appeals to the masses.
Pinky So how are we going to do that, Brain? Narf?
Brain We’re going to post useful content on blogs, sponsor research in our specialty areas using reputable market research companies, and do our best to stimulate discussion amongst people who really know what they’re talking about!
Pinky But didn’t you tell me that the masses were morons and that if our plans didn’t appeal to the loudest commotion demonstrator our plan wouldn’t work? Nog!
Brain That’s lowest common denominator, Pinky – not loudest commotion demonstrator, although that is a good description of the masses we will someday lead – and yes I did. But our goal is not to get our message out to the lowest common denominator, but the intelligent innovators – the leaders of the pack.
Pinky Pack of what, Brain?
Brain The … never mind, Pinky, just never mind.
Pinky Okay, Brain! Narf!
Brain We don’t want clueless morons, we want fearless leaders, who are interested in taking over the sourcing world!
Pinky Why do we want them, Brain?
Brain Because taking over the sourcing world, just like taking over the world, is a lot easier if you have competent lieutenants. Besides, do you want to be doing all the manual labor all the time?
Pinky Uhmmm … no.
Brain Good.
Pinky And why are we trying to take over the sourcing world? I thought you wanted to take over the world?
Brain I do, Pinky. But don’t you remember how I explained that the key to taking over the world is to take over the sourcing world?
Pinky Well, sort of.
Brain One more time, Pinky. The world is global. No one country has all the power. To take over the world, you have to take over all of the major players at once. And what do all of the major players have in common, Pinky?
Pinky Uhmm … cheese production?
Brain No Pinky! NO! NO! NO! They all have supply chains that cross all of their boundaries.
Pinky Supply whats’its?
Brain They all cooperate in global trade.
Pinky But I thought all of the Brain trading cards were destroyed?
Brain No Pinky. They trade goods and service. In terms you can understand, just as Mr. Cheddam of Australia will supply Cheddam to Great Britian, Mr. Wensleydale of Great Britian will supply Wensleydale to Australia. But all of the big cheese makers in all of the big countries participate.
Pinky Got it. Narf!
Brain So, the world is composed of countries that all participate in supply chains that support global trade which is in turn controlled by …
Pinky The Big Cheese Makers?
Brain No Pinky, sourcing professionals. Sourcing, Pinky, Sourcing. And that’s why we have to take over the sourcing world!
Pinky Narf! Okay, Brain! The Sourcing World it is!
Brain That’s right Pinky … so back to our strategy.
Pinky To market our strategy to take over the sourcing world.
Brain Precisely, Pinky. You got it.
Pinky Uhmm … not really. Nog!
Brain So, we’re going to start with the new media – the bloggers who actually post real content and tackle challenging issues.
Pinky But isn’t the point of the web to get as many page-views as possible? And don’t you get more page-views by posting on the popular sites that appeal to the largest cannon debilitaters?
Brain It’s lowest common denominator – and despite all of the hoop-la that most of the web marketers will have you believe, page views are useless!
Pinky But why, Brain?
Brain What good does it do us if a bunch of nitwits who are not interested in taking over the sourcing world click through to our web-site?
Pinky We have a web-site?
Brain Yes, Pinky. It’s part of marketing our strategy to take over the sourcing world.
Pinky Okay … but how come all of the big sites like Google and Yahoo keep telling us that it’s page views that …
Brain Because they’re selling trinkets to morons, you idiot! We’re marketing a strategy to take over the sourcing world!.
Pinky And it’s different because …
Brain Because everyone wants an iPod, Pinky. But not everyone wants to take over the sourcing world!
Pinky But can’t someone want an iPod to listen to while they take over the sourcing world?
Brain That’s not the point, Pinky. We need to appeal to people who are interested in world conquest, not World of Warcraft. We don’t have time to sift through a ton of chaff to find a single grain of wheat — we need the wheat – and just the wheat!
Pinky What’s “chaff,” Brain? Narf!
Brain Precisely, Pinky. Most marketing people can’t tell the difference, either.
Pinky Nog!
Brain So the first thing we need to do is get our message on a leading blog with the targeted audience that we want to reach!
Pinky You mean something like “World Conquest Matters”?
Brain No, Pinky, we aren’t interested in imaginary weapons systems and gossip about who might conquer whom. We need to find out what the next Napoleon is reading!
Pinky Can the next Neopolitan read, Brain?
Brain It’s Napoleon – and of course he can, Pinky! That’s why he’ll be the next Napoleon!
Pinky What does he read?
Brain He reads what every aspiring Napoleon reads: articles about HOW TO TAKE OVER THE SOURCING WORLD!
Pinky But isn’t that a little boring, Brain?
Brain Boring? Just because you have to think a little bit to comprehend the material? That’s not boring. Pinky, I know it might be difficult for you, but for someone who is interested in taking over the sourcing world, it’s intoxicating!
Pinky But will lots and lots of Neopoliticals read it?
Brain It doesn’t matter, Pinky. As long as a few of the Napoleons click through, that’s all we need. Because they are the grains of wheat that we need to help us take over the sourcing world, they’re worth more to us than the tons of chaff that the other sites get.
Pinky What’s “chaff”, Brain?
Brain Precisely, Pinky. Precisely.

Pinky and the Brain
They’re Pinky and the Brain
Yes, Pinky and the Brain
One is a genius, the other is insane
They’re advertising guys
Their mind is on the prize
They’re dinky
They’re Pinky and the Brain, Brain, Brain, Brain,
Brain, Brain, Brain, Brain, Brain

Before each night is done
Their plan will be unfurled
By the dawning of the sun
Take over the sourcing world

They’re Pinky and the Brain
Yes, Pinky and the Brain
Their twilight campaign
Is easy to explain
To prove their sourcing grace
They’ll overthrow the space
They’re dinky
They’re Pinky and the Brain, Brain, Brain, Brain,
Brain, Brain, Brain, Brain, NARF!

Innovation Metrics for the Chief Executive, Part II

Yesterday’s post discussed “Measuring the Black Box”, a recent article in Chief Executive that made some very good points about innovation metrics. In particular, we discussed the major measurement traps that a company needs to watch out for and indicated that many of the metrics suggested by the author in the input, process, and output categories were quite good. Today we’re going to review and discuss each the suggestions, the good and not-so-good alike.

Input Related Metrics

  • Financial Resources Dedicated to Innovation
    Good. Innovation requires a constant, moderate, financial commitment.
  • Resources Focused on Innovation
    Good. Innovation requires dedicated staffing commitments. It doesn’t happen without people, and expecting them to be innovative in that five minutes of unscheduled time they have a day isn’t going to cut it.
  • Ring-fenced resources for non-core innovation
    Really Good. Establish a small, core group whose sole focus is on long-term innovation and who are constantly evaluating new technologies, markets, and ways the company can bring significant game changing innovations to existing markets. Make sure this group never gets cut, even in bad times – when you need them most.
  • Senior Management Time Invested in New Growth Innovation
    OK. What’s really important is senior management support. Sometimes a manager just needs to stay out of the way, and, more importantly, keep the other managers out of the way of the innovators so that they can be free to innovate. After all, even if you’re smart enough to get it, when you consider that there are still those that will promote someone to his or her level of incompetence, sometimes the best thing you can do is run interference.
  • Number of Patents Filed
    Neutral, at best. Patents are useless unless you can afford to legally defend them, and if we’re talking a software or business process patent, just because some dumb clerk accepted the application, doesn’t mean the fundamentals of what was in the patent was actually patentable. After all, mathematics is not patentable, algorithms are fundamentally mathematical and logical operations, almost all software is built using languages and data structures that have been in the public domain since the beginning, and just about every process you can think of has been used by business for a long time. (Auctions go back 2000 years, for example.) Furthermore, it takes a lot of time, money, and resources to file and get a patent – resources which could be better spent on innovation. And, more importantly, if you don’t make the details public – it’s trade secret, and you can still sue for IP theft if you really want to be litigious.

Process and Oversight Related Metrics

  • Process speed
    OK. Although an ideal innovation process moves quickly from conception to critical decision points (which could be a decision to kill it), not all do.
  • Breadth of idea-generation process
    Good. A good innovation generation process seeks ideas far and wide. It requires the meeting of the minds that can think broad and deep.
  • Innovation portfolio balances
    Good. Projects should range in length from short to long term, be at various development stages, vary in risk, target different domains, and so on. That way, you don’t have all your eggs in one basket and your chances of success are magnified.
  • Growth Gap
    Really Good. A company should understand the gaps between their strategic objectives and current innovation activities, because, if there is one, someone needs to get on the right track.
  • Distinct processes, tools, and metrics for different types of opportunities
    Really Good. There is no one-size fits all when it comes to innovation.

Output Related Metrics

  • Number of new products or services launched
    Good. This is a clear indication of success, but remember it’s not always the number of successes, but the magnitude. One single invention, the iPod, put Apple back on the map. A few big successes can be just as good as a dozen little ones.
  • Percent of revenues in core categories from new products
    OK. It’s nice when innovation helps the core business, but, as pointed out above, sometimes you need to change the core business.
  • Percent of profits from new customers
    Good. A decent percentage indicates that innovation is helping the business expand.
  • Percent of profits from new categories
    Really Good. A decent percentage indicates that innovation is working at your company.
  • Return on Innovation Investment
    Good. Demonstrates that innovation dollars are worthwhile!

The author concluded with a process for implementation, that made some good points. They were:

  1. Focus, Focus, Focus
    Figure out the metrics that are right for you.
  2. Remember Relativity
    It’s not how well you do on each metric, but how well you are doing overall, and in relation to your competition in particular. (Don’t forget the benchmarks!)
  3. Innovate the Metrics
    Understand that you might not get the metrics right the first time. Be prepared to adjust them as needed.
  4. Align up and down the chain
    The metrics should be aligned with the corporate metrics if at all possible. This paints a picture everyone can understand.

Again, not a bad article, especially considering the target audience.

Innovation Metrics for the Chief Executive

Chief Executive recently posted an article on “Measuring the Black Box” that had some decent advice on the design and implementation of innovation metrics, especially considering the intended audience. In the article, the author noted that the challenge for companies seeking to improve their ability to create growth through innovation is that the metrics they use to measure innovation come with a high risk of actually leading them down the wrong path.

The author noted that managers hoping to unleash the innovative potential of the firm need to be mindful of the critical measurement traps, and that if they really need metrics, that they should think about creating a widespread set of metrics. (It also said they should ensure their executive dashboard constantly matters the innovation metrics that matter most – but I have to take serious exception about the use of dysfunctional dashboards. It’s true that executives should monitor the metrics regularly, but I think a better idea would be to, I don’t know, actually talk to the underlings.) The author then outlined three of the major measurement traps, and this was the part of the article that the doctor liked.

Measurement Traps

  • Too short a list of metrics
    The nature of innovation is that there isn’t one – or even one hundred – metrics that can capture is. (After all, if you knew how to measure it, you’d already know what it was.) Many companies often focus on a single innovation metric – such as the annual rate of return on their innovation activities. Although this is a useful historic metric, it can lead companies to inadvertently prioritize easily measurable markets over difficult-to-measure ones or short-term projects over longer term ones, when, in fact, the difficult-to-measure market, emerging market, or the idea that’s five years ahead of its time could be the one that really skyrockets the company from obscurity to the top of the Fortune 500.
  • Encouraging sustaining behavior
    Many metrics implicitly – or explicitly – encourage companies to focus on close-to-the-core sustaining innovations that promise incremental returns at best. Although they might be good, they will prevent substantial growth. And considering that Bain & Co. have found that the average business life-span is now a mere 14 years and that only one third of the Fortune 500 will get through the next decade unscathed, sustaining behavior is just not sustainable any more.
  • Focussing on inputs over outputs
    A company that tracks only input related metrics runs the risk of having resources (and scientific ones in particular) working on interesting but, ultimately, low impact projects.
    Consider the 2006 study referenced by the author that highlighted companies with the largest R&D budgets, where the leader was Ford. I’m sorry, but if they were truly innovative, they would be doing a heck of a lot better than they are. Innovation isn’t about how much money you throw at the problem, it’s about what you get in return. And that, I’m afraid, requires not only giving your people the time and resources they need to be innovative, but the freedom to be innovative.

The author then presents a balanced set of input-related, process-related, and output-related metrics for those that feel the need to constantly measure the company’s innovation-related activities, inspired by the Boston Consulting Group’s suggestion that the metrics must be balanced. Some of the metrics presented are good, some of them, not so good. Thus, in our next post, we will review each of the metrics suggested and briefly discuss their relative worth.