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Beware of the Budget: Why Continual Planning is Critical for Ongoing Success

In this competitive era, a business will have a hard time surviving without a well-designed, aligned, repeatable and continually improved business model.

Budgets and budget concerns drive people to do strange things. First and foremost, businesses and business people are survivalists. If a certain transformation initiative or IT project does not readily prove that it can and will deliver value, decision-makers are quick to pull the plug and look back with a skeptical eye. The business must survive, they conclude, so the project is cut, budget salvaged and funds redirected to ensure that ongoing operational activity and expense can be managed.

Just how many IT projects fail? According to the Standish Group's 2003 Chaos Report, the "good news" is that roughly one-third of all IT projects succeed. The bad news: two-thirds fail! A success rate of 33 percent is great for a baseball hitter, but not for corporate America's technology initiatives.

Why do so many projects fail? Obviously, there are myriad reasons for such an anemic track record. I would argue, however, that fear of project failure and squeamishness around budgets play a significant role. Fear of failure makes people cautious, not wanting to over-commit resources. It also exacerbates knee-jerk reactions and often leads to projects being nixed prematurely. This sort of gun-shy behavior can result in a triple whammy of negative impact: money wasted, morale damaged and a potentially value-creating project derailed.

There's another major reason why projects fail. An old cliché offers wisdom here: Well begun is half done. The message of that platitude is to plan carefully, to look before you leap, to get your ducks in a row. Every investment is risky and requires due diligence to understand the potential short-term and long-term value, the level of funds appropriate to deliver that value, and how the project will be tracked and managed. So, what is a good investment? Perhaps more importantly, how can a company greatly increase its odds of IT project success?

Another old saying states that nobody plans to fail; they simply fail to plan. And though the best-laid plans of mice and men oft go astray, nonetheless, the process of planning provides value in numerous ways: ideas are discovered, options vetted, contingencies prepared. If done wisely and documented clearly, planning can also yield benefits down the road, as professionals look back at old plans to understand how a course of action originated, progressed, then either worked or faltered.

Three-Dimensional, Aligned, Ongoing Planning the Key

Business plans come in a variety of forms. Some consist of word-processing documents that outline goals, strategies and courses of action to be taken. Others exist solely in someone's head - an acceptable option for a one-man operation but decidedly dangerous for any company larger in size. Ideally, a corporate business plan should include not just words, but diagrams (e.g., models) that depict critical business processes, including the relationships between them: handoffs, decision and control points, hierarchies.

Although many companies do maintain such detailed plans, they manage their business models, process maps (if they have any) and systems architectures in a piece-meal fashion. In many cases, different teams in various departments manage their own plans independently, with little or no interaction with other teams. Lack of connected and related business models and designs account for a major part of the time and money spent in discovery and creation of new designs whenever change forces adaptation and evolution. The time and money spent in discovery mode would be better budgeted and spent on building an integrated and aligned business model.

Business process maps that do not clearly denote the connections or handoffs between processes provide limited value. It's true that all businesses boil down to a set of processes and that by understanding those processes, professionals can make informed decisions. But the connections between processes are just as crucial as the processes themselves. Not knowing where and when a handoff should occur can and often does result in balls being dropped, especially when the pressure of market forces bears down on a company or when someone leaves the organization.

Over the last decade or so, many businesses have purchased IT system solutions, spending thousands or even millions of dollars on licenses and hardware, only to pull the plug months or years later on the very projects engaged to implement those systems. All too often, this malady occurs because of poor planning up front. Without a business model that defines how the organization will ideally operate, no company should ever purchase an expensive software product. The model must drive the evaluation process and lead the business to - and through - the purchase decision. (And keep in mind that software providers rarely stress the importance of having a business model to direct and drive the evaluation of the software, and later the implementation of it. They just want to make the sale.)

It's no wonder that projects fail and business leaders become disillusioned with such IT initiatives. These projects are like virtual black holes, sucking investment into the maw of the monster, then delivering little or nothing on the other end of the vortex. Business leaders and IT teams and professionals are all to blame for such failed projects. Businesses must define their model and thus the requirements for the solution, or failure is all but inevitable.

Many companies use spreadsheets as a means to describe their business road maps, but then struggle to understand how a change in one spreadsheet will impact all the other spreadsheets. Other businesses have invested in business modeling and architecture platforms, done a relatively good job at describing their business models and architectures, but still may not have them integrated/aligned to the degree that they can be adaptive and quick responders to change within their business.

A consultant asked me a while back whether we haven't squeezed all the waste out of our business processes by now. He noted that we've been focused for years now on reengineering and business optimization. It was a fair question, but when we see businesses spending man-years of work on spreadsheets in an attempt to manage business and IT architecture changes and also see varying forms of un-integrated and misaligned business models, it's obvious that we clearly have not squeezed out all the waste.

Of course, consultants and product suppliers will try to convince us that all of their products and services are the solution. There's surely something good about all of them, but the question is: how will that good be realized in your business? One size does not fit all, and no panacea will be found. Business analysts and executives must not only understand their company's value propositions and processes; they also need a detailed business model and plan that they can analyze, monitor and change efficiently and effectively as market forces dictate. Such a dynamic model will allow them to measure the results of business functions and processes, which in turn will enable the business to adapt more quickly and effectively than the competition.

What's the Answer?

Many pundits have talked about business modeling, reengineering, business process improvement and quality management. Names such as Harrington, Hammer, Peters and Zachman come to mind. And yet, we continue to see companies attempting to manage their business models, plans and road maps on spreadsheets, in two-dimensional graphical formats and in word-processing documents. I couldn't count on ten hands the number of companies I've encountered that have binders jammed full of diagrams and text-based paper formats - many of which are never used once created. I ask them forthrightly how long it takes them to introduce some new idea or regulatory change to such material, and the answer is almost always weeks or months. Is it any wonder that businesses are cutting budgets just to survive?

At a March 2005 enterprise architecture conference in Orlando, Florida, a META Group VP presented the concept of enterprise architecture applied to portfolio management. He said, "To tackle the cost going into running the business, you will have to use and implement a business architecture; otherwise, there is no way to discover duplication, redundancy and excess costs."

In this modern information age, a business will not survive if it does not invest in a well-designed, aligned, electronically stored, repeatedly managed and continually improved business model or set of models. Why? Simply because your competitors are investing in such models and systems, and when change comes along they will respond faster than you can respond; they will save money in assessing the impacts of change and implementing the necessary modifications; and they will ultimately win more business than companies that are not so equipped.

Enough is Enough

Some would say that you must model everything in your business to gain real value from business process modeling/management. That fallacy is a prime reason why many companies have not done due diligence in modeling. They see it as an endless activity, a money pit. Fact is: modeling has gotten a bad rap; it must be done within reason and it needs to be specific to your business and purpose. Modeling must be applied to your business needs; and the models themselves must be stored for future use. If this recipe is followed, over time many critical pieces of intellectual property will be developed and available for reference, training and reuse as changes in your industry and business mandate change to the models. The key is to become efficient, effective, and proactive in managing the business, the business model(s) and changes to the organization over time.

As CASE (Computer Aided Software Engineering) came to life over that last 20+ years, tools and software systems have been developed to support the definition, documentation, architectures and detail requirements for both the business and the IT solutions that are expected to automate and support the business. Some businesses have done a great job at using such tools to not only build an initial set of business models and architectures, but also continually manage and improve business processes. These CASE and modeling tools and systems have become the new flowcharting templates for business and IT. They are much more than pretty diagramming tools; many of them deliver business information integration and alignment capabilities that permit quick assessments of change impacts across the business models, plans and architectures. They also have repositories that become the store or warehouse for all the models so that there is no question about what the latest version of any process or system architecture is.

Businesses have struggled for years with the application development and implementation life cycle. Many of us have been burned multiple times because the bubble of work in that life cycle was pushed toward the development and testing phases, instead of the upfront business modeling, design, documentation and functional specification definition. Here we have that issue of "well begun is half done." If a business dedicates ample time and resources in the planning and requirements-gathering phases of a project (i.e., where the business modeling must be done to aid in the requirements specification definition), many costly pitfalls will be avoided. (See Figures 1 and 2.)

Figure 1

Figure 2

Outsourcing Not a Way Out

Now we see businesses struggling with some of their outsourcing decisions. In an article in the December 2004 issue of CFO magazine ("Buyer Beware" by Don Durfee), there is reference to input from "analysts and consultants saying that companies continue to make another error - outsourcing as a way of shifting responsibility for bad process." Even with outsourcing, the business must still make the correct level of investment in the definition of their requirements and functional specification. That process cannot be outsourced because it is inherently internal: at the end of the day, only the company knows what the company needs. If the business hands off a defective process or design, the process simply gets worse.

When laying out the budgets for the business, we must make sure that we do not ignore the need to define and manage change to the business models, processes and architectures. This should never be handed off to another firm (outsourced) because only the principals of a business can fully understand the exact nature and purpose of their processes and protocols. Consultants can help the business define their next stage of business model, plan and architecture, but in the end the business must own and manage it. Given a good up-front model, plan and design, the outsourcing service provider can do an effective job and deliver what the business seeks.

Budgets will be slashed. Projects will come and go. And modeling will not fix all the budgeting ails of our business world. But for survival in this information age, developing and managing a detailed set of business models will help in the definition and justification of required investments. Commitment to this process will also help define the value that the business can realize. The set of aligned business models, plans and architectural views become the business requirements and specifications, whether you are pursuing new products, serving new customers or deploying new IT solutions.

Staying on track and not being diverted from the long-term goal of the investment, the project and the continual improvement goals of the business will require that leaders have the models to make informed decisions. The models will also permit executives to assess the implications of a change to the investment and budgets allocated. And when it is necessary to cease investment in a project, the model will also let them know what cannot be done, or facilitate in finding alternative means for satisfying goals and objectives. The key is to use the models, plans and architectural views as a key resource to not only define your business road map, but also follow it.


With more than 38 years of experience in managing both business and IT environments, Steven Arbogast specializes in defining, mapping, integrating and changing corporate processes. A veteran of enterprise architecture design and maintenance, he understands both the technical and organizational components necessary for effective business change management. An internationally published author and presenter, Arbogast spent his first 31 years with IBM. In 1999, Arbogast formed Advanced Enterprise Services (www.advent-services.com), a professional services business focused on overall business change management. In 2001, he also assumed the role of president for enterprise software vendor QualiWare, Inc., a subsidiary of Denmark-based QualiWare APS, where he worked through 2005. Arbogast still provides management services to Qualiware (www.qualiware.com), while also providing professional services to a variety of businesses.

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