Culture of Analytics: Five Management Aspects of KPIs

We can only manage what we measure. Modern business need shape fact-based culture, either executive team or front line workers, measure/metrics/KPIs will help improve productivity, more importantly, it may bring significant opportunities to optimize business process, recognize important patterns and unleash potential of business capabilities.

1. Measure, Metric & KPI

 Measure: Anything that is measured. Such as number of customers, Total Revenue etc. Key thing is that there is nothing inherently good or bad with a measure, it’s a Value Quantified / Qualified against a standard

Metrics: - Qualitative / Quantitative Measure against a trend; a value typically derived by a combination of two or more measures. Financial Ratios, Total Revenue over time etc. Metrics do provide the notion of whether the values are good or bad.

KPI: is a Measure selected specifically to evaluate business performance, usually versus a specified target value. (Sales Revenue Growth%, EBIT $, Net Profit %, Market Share, etc.) 

It is a matter of categorization or differentiation that are used to measure and the difference in the level of measurement is whether it is strategic or operational. Strategic objectives are measured by KPI and KPIs are generated from measures.  KPI, metric & measure can be understood in conjunction and also in isolation to each other.

2. KPI --Strategic Aspect of Organization

 A Key Performance Indicator (KPI) is a strategic metric which always demands a context,  indicative of a strategic aspect of the organization. It is something by which the organization measures how well it is executing its strategy and how well that strategy is enabling it to meet its objectives

KPI -are the Metrics that are the "most" important for senior management. Senior executives should be interested in knowing more, as it's directly related to business strategy execution, so the further question is: How many KPIs are effective, sufficient, but not overwhelming? it may depend on the vertical sector and specific business, but the criteria need be based on "KEY" to business. The scoreboard or dash board with balanced KPIs will help senior executives make fact-base decision, visualize future of business more clearly.

3. Analytic Perspective of KPIs

 From analytic perspective, corporate strategic goals are used to develop high-level metrics called key performance indicators or KPIs. Typical KPIs are revenue, customer satisfaction, or other important business drivers. These KPIs, in turn, are influenced by business unit metrics, which reflect a business process.

A KPI is simply a metric that is tied to a target. More often than not, a KPI represents how far a metric is above or below a pre-determined target. KPI’s are normally shown as a ratio of (actual : target) and are designed to instantly inform a user if they are on track with their plan, without the end user having to specifically focus on the metrics being represented.

4. Story Telling with Metrics & KPIs

A business metric is a measurement that is quantifiable and relates to a business activity.. Metrics need to be clear, objective, measurable, transparent, insightful, and actionable. When properly defined, these metrics should relate to each other and tell a story. In other words, they should be orchestrated in such a way that they provide a framework for analysis. Metric is then analyzed and controllable measures are taken in between to achieve the KPI. A good way to test the importance of a metric/KPI is to ensure that it links to a value driver for the company.

Either IT, Marketing, Finance, Customer Service or HR, KPI-driven story telling will enhance communication and enable business optimization.

5. KPIs in Performance Management

 Top management looks into KPIs to measure goal and objectives while achieving them is done by several measures in the lower levels.

The middle managers may use a set of metrics (PI) to manage staff’s performance which is evaluated via several measures. METRICs are also measurements of importance to business users. These are things that often directly influence pay and bonuses. They are defined to be of importance by the business.

Measure, Metrics, PI, KPI-- business may need well define them all clearly in order to achieve the best performance result, encourage innovation effort, and unleash talent potential.

Provocative Pondering: Today, there’re 17, 000 KPIs around, a bit overwhelming, let's not forget that there is a "K" in KPI for a reason. We've seen lots of good definitions of PIs - a performance indicator puts a metric or measure into context - but not all PIs are KPIs. The KPIs are the PIs that the organisation absolutely must consider, or is obliged to produce for regulation. If too many PIs are called KPIs, then effectively none of them really are key at all, measure what really matters.  

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Win-Win, is Mission Possible

Modern business and society become more complex and interdependent than ever, there’s no any party can dominate at the negotiation table from every perspective. The "Win-Win" could be translated to mean "mutually beneficial" and should be seen as a negotiation guiding principle which emphasizes fairness in business play. Encouraging this mind set of equity and fairness should in theory build better long term business relationships.

The definition of Win-Win offered by author and speaker Roger Dawson:
"Win-win negotiating is not a matter of just getting what you want, but of helping the other person get what he or she wants also. And one of the most powerful thoughts you can have.”

                                            

1.  Is Win-Win Mission Possible?

 The world is full of win-lose, lose-win and lose-lose deals. In fact if you just look at the odds of a win-win without any other factors, the odds of a coin-toss win-win would be only 25%; and even less because win-win's, by their very nature, are so hard to do and require work, constant attention and focus.

(1)   Is Win-Win only theoretic fantasy or realistic possible

Because win-win is hard and is not the norm, it doesn't mean it doesn't exist and isn't the place a person would like to be. It is about finding out what represents a "Win" in the other party's mind and see if it’s possible to give it to them without harm to fulfilling on your "Win" criteria.

(2)   Classic Example of Win-Win:

The classical example of a win-win situation is the situation where two persons compete for an orange.

·        Win/lose Result: They fight and the stronger party gets the orange, the other party gets nothing.

·        Win-Win Results:  can emerge when the two persons stop fighting and begin to share their objectives and interests and discover that one wants the orange for the peel to perfume a cake, while the other one wants it for the juice to make a drink. win/win agreement is to give the peel to one while the other gets the juice. Both objectives are achieved

(3)   Win Enough or Win-More, Win-Less Scenario:

It takes two parties to tango,  many may think inevitably in an arrangement of such,  one party will gain more than the other,  so it is hard to get "even steven"(50/50) which some may argue as a true Win-Win.

Not all business negotiations are about "die hard" winning.  In fact, very few are actually win-lose situations. They are "win enough" situations which are finding out what represents a "Win" in the other party's mind and see if it’s possible to achieve. There are really no options other than win-win, at least win-enough. The problem is not of practicing win-win,  but building a logical, effective way to achieve it without too much compromise. Like all noble things, it’s challenging, but it does pay huge dividends.

 2. Win-Win via Multitude of Lenses

 That said, context of win-win is not about literally winning. It is about negotiating a reasoned and comfortable end point for both parties, to achieve ultimate satisfaction point:

1)      Philosophically Win-Win is about Holism & Balance:

Philosophical speaking, winning without purpose is just like seeing without perceiving,  listening without understanding or learning without gaining wisdom. It's matching and touching the antic Asian philosophical concept of the Yin-Yang, Holism, Balance: a Win-Win Business Deal are made through empathetic understanding, quantitative and qualitative Analysis, "balanced" deal, or a masterful negotiation.

Sufi poet/philosopher Rumi once said something like this. "You never lose anything. Just get it back in some other shape". Or paradoxically,  win-win at one level is often win-lose at another level.

2)      Conceptually, theoretically and practically, is a pursuit of win-win possible?

It seems counter to basic economic or marketing principles. Profit is all about minimizing compromise, extracting the most from your opponent and giving up as little as possible, however morally unfair that may seem. "Winning" to maximizing shareholder's value" as a mantra might be one of the root causes for recent economical recession. Social responsibility and win-win are not antithetical. Its important to be socially responsible while still being responsible to one's shareholders

3)      What happens if “winner-takes-all” organizationally, societally or culturally?

 Then first we must recognize that pervasive systemically entrenched “winner-takes-all“ cultures and practices must be completely discredited as parasitic, myopic, undesirable and unsustainable. Win-Win helps build up last relationship and target long term winning position in strategy making.

4)      Strategically, do most win-win deals have an exit strategy?

The winner may pretend to lose in order to gain the long term advantage; every business changes strategies. A once win-win could become a very competitive environment as both companies evolve.

5)      Psychologically: How does Win-Win stimulate your Happiness Level?

Most win-win situations may leave one feeling frustrated and confused. You’re trying to figure out how you come out a winner. You see how the others win. But your winning seems more like “less losing” or even winning like losing psychologically. But a state of "reasonable happiness" could possibly be achieved for both parties so called "Win-Win" situations, one may not feel extremely happy about it, but satisfy enough.

  

3. Ultimate Level of Win-Win: Deal Made in Heaven

  As we all know diamonds are hard to find. Same is with win-win both in business and in life itself. The facets of the definition win-win that it starts to look as a beautiful high-quality diamond. And it really exists, but as we all know diamonds are hard to find, same as Win-Win.

Win-Win is a specific point in any business deal between two or more parties, where all parties have the utmost satisfaction at the same moment, of going ahead with the deal.

It’s debatable whether that “Highest Point of Satisfaction” for all parties can actually be known and reached, because satisfaction is again each parties' perception, which is not easily defined. But there are deals which are WIN-WIN, where both the parties are equally happy based on their calculation and defined KPI. We may call it: The Deal Made in Heaven, it takes creativity, dedication and empathy to manage one.

Win-Win Matters for Humanity: Living standards, salaries, life expectancies across the world have been consistently rising over the last few hundred years. To a zero-sum, this isn't possible - because someone must be losing for the others to be winning. But in reality, the pie is not of fixed size, via innovation and societal progress, the pie is created bigger enough to advance humanity.

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Airlines: From Golden Old Days into Silver Lining Future

CNN started five-week series of The Traveler’s Psyche in late May, the first series “The golden days of air travel” shared the emotions in industry’s ups and down, from luggage styles to flight attendant fashion, air travel did come a long journey: before deregulation in 1978, airline travels was largely to serve wealthy, in last couple of decades, it opened the gates to the masses and pushed the airlines into a more brutally competitive mode, spurring many innovations we now take for granted, though 9/11 took some of the joy out of flying, and the economy has taken a tolls too.

1. The Golden Old Days in Aviation Luxury

 Folks surely missed of an era when the "stewardesses" wore white gloves, served champagne, tournedos rossini, Gateaux Francaise, actual cocktails, wines from Burgundy and Bordeaux on crisp white linen table, when even "coach" had 36" seat pitch, and 2+3 seating on Boeing narrow-bodies….

While many grumble for the "golden old days" of airline travel, as the article pointed out, “their nostalgia usually doesn't include the high prices, limited routes and cigarette smoke clinging to the air”, the sky has no limit, but golden flight had limitation at the old day.

2. The “Pitfalls” at Rocky Road

  Some arguing what led to the downfall of civilized air travel and an often dysfunctional system in the US was not the "democratization" of deregulation - it was the greed that went with it for market share; the leveraged buy outs; the attempted profit expansion by cutting back on and pay-slashing employees, and a lowering of customer service standards.

For the last decade, also a “lost decade”, the industry suffered with the flying fuel, the 18+ taxes, the nature/human disasters, the weather changes,  the outdated legacy technologies such as air traffic system and the impassionate employees with mysterious union culture.

3. The potential Silver Lining for the Future

 Many of us may not experience the good old days, however, we do not lack of passion and imagination for the future of aviation, what can go better, what are the pain point, what do customers really need--not necessarily the old day luxury, but tomorrow's enchantment, more innovation, push & pull to lift up the sky:  

• Optimize Customer Service

Compared to old day, modern age like today can provide customers more service alternatives to soothe security at check point, to delight customers at touch point and to engage employees at decision point.

The silver lining technology such as cloud, social, mobile and analytics can help airline to listen to customers more deeply, offer customer-tailored service and optimize customer experiences. Modern customers can also make more choices such as self-service check in, on-board entertainment, paperless cabin, and digital collective/rewards  

• Innovation, Innovation, Innovation

Fair to say, airlines also deserve to make more profit at short term and enjoy long term prosperity if possible, as they are the third robust economic engine of all industrial sectors, and they are also the national economic barometer.  

Besides “safety first” as a motto, aviation also need sow the seeds for culture of innovation: to bridge the world via promoting the positive thinking and actionss; to inspire leadership diversity & encourage staff to take extra miles, and to reap the harvest via the prosperous business activities and global trading. Innovation is the key to re-imagine, re-invent this great industry.

• Improve Tourism Ecosystem

 Many of issues facing Airline today are beyond control for which any company can deal with alone, or even industry work as a whole can not solve them radically, it takes collective wisdom & effort to work within and above the value chain and ecosystem, to streamline, modernize and advance the business capabilities, focus on strategic matters, and make long term perspectives.  

With better policy support from government, US airlines including both legacy and LCC need work as coopetitors (cooperator & competitor at the same time), to empower talent, not only airline veteran, the industry also need the fresh mind & new blood, people,  process (via innovation, modernization), technologies should work more collaboratively to overcome the barriers.

As a society, we need rejuvenate airline/transportation industry, though many named investors and strategists categorized it as the most complicated, least profitable industry,  it matters, matters for economy, matters for societal advancement, and matters for cheering up fellow citizens. Moreover, if one can solve the most difficult problems first, other issues may also become easier. 

 May the nostalgia of good old days inspires the new passion and energy for aviation, and bring the silver line future for both industry and customers. 

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Three Perspectives on IT Mattering More Today

Mr. Nicholas Carr wrote 10 years ago "IT doesn't matter" spurred quite many in-depth debates in last couple of years, the book is insightful and resourceful, however, the prediction does not come true, on the opposite, IT matters more than ever at today’s rapidly changing business environment, with the latest technologies emerging, such as cloud, social, mobile and big data,  IT continue to play extraordinary role than ordinary utility in business, IT goes beyond infrastructure, more on innovation, improvement and insight & foresight of business, and become more integral part of business.

 1. IT is a Key Attribute to Business Capabilities

IT has always mattered. What's different is the focus. In the early days, it was more about infrastructure and support. This was the "utility" model of IT may matter less is the future. As the pace of change in technology increased, so did the need to commoditize those early models and concentrate on driving strategic business value.       

IT matters because it becomes integral part and unique characteristics of business, and IT is a key attribute to business capabilities for high-performance enterprise. IT matters not only because it’s pervasive, more about it continues to advance, the "constructive disruption" nature: from enterprise IT for standardization into Consumerization of IT for personalization; from siloed IT into hybrid human/IT intelligence; from user interface into user engagement, from on-time, on-budget to on value, the right business decision need follow with the prompt information/action technology.  

 IT matters also because it's like our brain,  help analyzing, synthesizing, memorizing and most importantly, perceiving the future of business.

2. IT is the Means to the End,  “MEANs” does not Mean Ordinary 

 Either IT or finance is the means to the end, not the end, what is the end? The end means the more mature, value driven, high-performance business,  to unleash human potential, to explore blue ocean, and to make the big economical pie with long term vision. 

From senior leadership survey, technology is the #1 investment goal for next five years in businesses cross-sectors, since they understand it's where their competitive advantage comes from. If businesses do not invest the right technology, they may already lose the game; though every business can approach the similar technology, they may not be able to achieve the same level of business capabilities, as it takes blended ingredients (people, process technology), all of them need go beyond ordinary in order to achieve competitive uniqueness and reach higher performance.

Weather IT matters or not may depend on the level of IT maturity, at level three or under in where most of businesses stick today,  IT is running as utility only. However, high performance business need high level of IT maturity, IT actually becomes one of the key factors to decide  business's life span (now average Fortune 1000 survive 15 years or less), as IT directly drive your competitive advantage.

3. Either “IT” or  IT Leaders, More Matter than Ever

• “I” Matters: IT  is only increasing in importance and relevance with each passing day. IT shifts to be more “I” focus: Information, Intelligence, Innovation, Integration, Improvement, Interface, the numerous perceptions of IT guide business toward the right direction;

• “T” Matters: On technology side, it’s more “Action” driven, there’s no project for pure technology’s sake, every IT project is business project, technology still matters by its very nature of change for better, faster & cheaper. “I” & “T” are the two wings to make enterprise become “flying elephant”. IT also need learn how to present its true value via the right set of KPIs, walk the talk, using data to prove why IT matters

• CIO & IT Organization Matter: CIO and their centralized IT organizations are more critical than ever, on one hand, The biggest challenge as CIO's is keeping up and stepping up - recognizing the responsibility for ensuring that the business are better informed than competitors and more nimble at implementing the disruptive opportunities that are constantly emerging  On the other hand,  today's business blurs the border line, always connect, with instant on information, BYOD, CoIT, application sprawling, shadow IT phenomenon, without centralized IT to help manage GRC/security efficiently, also do consolidation, standardization, integration, and optimization., etc effectively, IT/Business maturity level may decline from level 3 (alignment) back into level I Chaos.

Therefore,  CIOs need gain a seat at big table, it's not about status quo, it's about the voice get heard, the vision get developed, and see the business beyond short-term finance lens only; co-developing business strategy by both business & IT can help avoid blind spot or pitfalls when executing it, and improve project success rate. If CFO sells finance to get a seat at big table via pitching “ the Management of Business Investment Portfolio” in 1980th, then CIO can learn how to pitch a strong value proposition such as “the management of business transformation portfolio” or create more inspiring elevator speeches in 21st century
.
In summary, IT matters to optimize business capabilities for both innovation and productivity; IT matters also because it brings up culture of learning and agility for the changes; IT matters even more broadly as it instills the purpose of STEM education, engineers matter, scientists matter, and knowledge/wisdom matter.

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Seven Ingredients for Future Corporate Leadership

“A good head and a good heart are always a formidable combination.” ~Nelson Mandela

 Leadership is generally defined as "one attempting to influence the behavior or another, for any reason". And the essence of leadership is in achievement, which has not changed and will not change. However, the world we live change significantly, and the change is accelerated: the nature of work, the needs of people, and the environment is different and will continue to evolve, leadership also walk through three stages in pursuit of maturity.

The future will becomes more complex: hyper-connected business working environment, interdependent global dynamic, hybrid talent pools (multi-generational, multi-cultural, multi-tasking workforces)., etc. What do all these mean for the future of leadership? What are those key ingredients for the effective corporate leadership in the future?          

1. Purpose

Leadership is there for a purpose. If the last generation of leadership focuses on winning only, then future of leadership need purpose and wisdom, more deep than loud, as an uncertain and volatile future of business need leadership authentication & uniqueness to help business win for the long term economically, geographically, socially and philosophically.

Leadership as bridge or cornerstone need color, multiple lens vision and style to advance society in where all various areas of human Endeavour continues to evolve. The evolution is a quest for things to be better for Humanity. Leaders envision the better future, in their sphere of calling. Their role is then to crystallize the vision, and mobilize resources towards its purposes.

2. Vision

 The purposeful leadership will drive the vision, the first task of ‘leaders as visionary designers’ involves designing the organization’s governing foundations (i.e. the purpose, vision, mission, and core values) that the organization will live by. To provide for structures on top of the foundations, leaders must translate guiding ideas into business decisions by thoughtfully crafting of an organization’s policy, strategy, and structure. 

Furthermore, we rather live in a "fuzzy vision" epoch when principles of vision (in a given moment) forming are more important than vision itself. It need for true leaders to incorporate the creation of valuable vision in others.

  

3. Trust

 This is the corner stone of any relationship/team. Without TRUST you will never create a positive work place environment. With trust, leaders must then have integrity, that is,  consistency in what you think, what you say and what you act. – Walking the Talk. The leaders must have unwavering commitment to implementation of the plan, because execution is everything. .

Trust – need for leadership interactions that enables trust –in the own resources and abilities as well in those of others, by Trust. Democratically selected Leaders have to be products of Leadership by “Trust”. This is why trust is one of the key ingredients of future corporate leadership. To cope with an uncertain future, leaders need to enable trust. Trust is the only way to deal with uncertain situations, trust can be cultivated by giving the right advices , the right guidance, the right direction.

On the Culture part, it should always be fluid, flexible & fresh, giving employees the space they require to be their best & to be themselves and where Accountability, Responsibility & Transparency in the 'system' are normalcy.

4. Empathy

Many think empathy as one of the necessary ingredients for contemporary leadership, empathy as: - The power of understanding and imaginatively entering into another person's feelings; or the intellectual identification with or vicarious experiencing of the feelings, thoughts, or attitudes of another.  

From leadership perception, if you can understand how people behave, what they desire and what their fears are, you are better armed to manage them in order to gain their support. Therefore, the heterogeneous leadership are needed at today’s dynamic working environment and workforces: 

·        Underdog leadership: it's not just about gender or ethnics, it's more about how to bridge the difference, strengthen the weakest link in the leadership chains; 

·        Collective/Collaborative leadership: leadership is collective effort to inspire and amplify human capabilities, leadership team with cognizant difference can lead more solidly; 

·        Change Agent: Leaders need walk the talk, be part the change they’d like to perceive.

5. Learning Agile

 The future of leaders need have ability & agility to adapt to such changes, mental agility will be as important as the personality or characteristics, The primary leader will thus need to have considerable mental acuity to assimilate all the influences/changes coming from around her/him, to use this to “freshen up ideas”, 

Today business environment makes it imperative that this people do not conform to a particular set of performance , behavioral and demographical parameters. Besides the dynamic business and global environment keeps throwing a new set of situations to deal with .The management process/practice begins with the leader discovering ways to challenge current thinking, beliefs, and assumptions about important elements of the organization. The leader then encourages followers to explore different possibilities and think in new, innovative ways.

The future of leadership is multi-dimensional with entrepreneur’s mindset: being learning agile to adapt to today's over-complex business dynamic;  lies in the ability to not only navigate new waters, but also to create those waters in which the ship will be led.

6. Humility

 The role of ‘leader as servant’ is more of a mindset than an active role, but the leader’s attitude of stewardship is a key enabler of a learning organization. Leadership in the future will be about  listening, observing, encouraging, supporting, recognizing and rewarding.

The emphasis on knowledge creates a pressure for leaders to quite possibly be "the brightest person in the room" (not always the case today!), while the need to engage and enable others emphasizes characteristics like humility and inclusiveness. These characteristics don't always sit comfortably together, that’s why the leaders also need learn how to lead from behind, with sound judgment in recognizing the best talent in organization.

"A leader is best when people barely know he exists, When his work is done, his aim fulfilled, They will say: We did it ourselves." Lao-Tzu

7        People Engagement

 The old structure of command and control does not fit in the business environment today with the increasing demands of specialization and complexity – making with minimum consultation or due respect to interests of the major people, the 99%, the grass root class.

Modern leadership has to become more collaborative in nature empowering others while guiding the group to align with the overall business strategy. At the era of real  business democracy, people will decide you are a leader because you are taking decisions and actions with which include a part of their thought, via caring, listening, mentoring, encouraging, motivating, trusting and rewarding and you, as the leader to unify the diversify thoughts, appreciate collective wisdom, integrate diverse into a whole, doing the right thing and make right decision at the given circumstances will earn a leader respect.

There's not yet enough evidence to confirm the death of command and control, but there is the emergence of a new breed of organization that is held together by vision and inspiration rather than fear and reward; by purpose and engagement rather than short term thinking; by growth and learning than complacency and stagnation.

As Thomas Friedman says, “The 21st century is the century of the 'Super Empowered Individuals' due to the Information Age that we live in, where the only borders are a mouse click away. Super Empowered Minds', which is the new 'normalcy', modern leadership need orchestrate Co-creation, Co-operation, Co-llaboration, Co-hesion to maintain corporate sustainability and lead today's 'Super Empowered Individuals'.” 

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Three Stages of Modern Leadership

Leadership is a timeless topic for every generation, as mankind need effective leadership to advance humanity, also make collective progress & achievement via its influence.

  From nature business evolution perspective, we may define modern leadership into three stages:

1. The first stage: Leading at Business Jungle

 The period during the industrial revolution right through to the beginning of the 2nd world war,  people were largely unskilled in a rapidly advancing market place,  so they need be managed. At this stage, leadership was just like leading in the business jungles: masculine style command-control style might be necessary to manage from the chaos to order. The leadership style was stereotypical,: like roaring lions; 

2. The second stage: Leading at Grand Plain

 After the 2nd world war, as education and knowledge grew,  we saw the emergence of leadership largely because it was a period of rapid change and leadership was tied to change.  Analogically, just like the mankind migrated into great plain, well, the world is more peaceful, the leadership teams were expanded, also added a few underdogs--but mainly kept the traditional theme, still not essential enough to shape the new style and influence; 

3. The third stage: Leading an Ecosystem

  Now we are in a period of uncertainty & ambiguity, risk aversion, low margins and low growth, digitization and globalization, accelerated changes,  so it is about the time to define new processes, the new capabilities and the new effective leadership.

Today, people are more educated, skilled and diversified. They don't need to be led,  they need to be empowered and even self-managed. The last two stages of leadership is no longer as effective as before,  therefore we are evolving new ways of refining more effective leadership.

Metaphorically,  the mankind need get more understand and master the nature ecosystem, the ocean, the mountain, the valley and the sky, so we need the leaders who can swim like fish, or fly like bird, the one who can dive into the valley, or adapt to the mountain. To put the other way, we need more diversified leadership to balance, voice and serve. 

The future of leaders need have ability & agility to adapt to expedited changes, leading through influence than command & control, more tolerate ambiguity and uncertainty, inspire more leaders than only followers, it’s time for the new stage of transformative leadership, and it need the new ingredients for the future corporate leadership. 

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Compliance & Risk Management, Sisters or Cousins

1. Definition of Risk & Compliance

 From Wikipedia:  Risk management is the identification, assessment, and prioritization of risk effect of uncertainty on objectives, whether positive or negative) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.

Compliance means conforming to a rule, such as a specification, policy, standard or law.

Compliance with statutes 

Compliance with regulations 

Compliance with contracts (customer, vendor, supplier (licenses)) 

2. Strategic Value & Operational Mechanism

• Strategic Value at Board Level:

 - Risk, at the Board level, requires a strategic and forward-looking perspective, dealing in uncertainty, if it is to add real value - challenging accepted wisdom, 'thinking the unthinkable' and asking the unpalatable question. Increasingly we need view that strategic risk is a topic for the full board - not only to identify and address key risks, but to understand and convert the best of them to opportunity (the creative side of risk management) for new initiatives and progress. The role of the board is not about 'risk management, more on providing 'risk governance.'

 -Compliance: Compliance may also need look at the outside world as well. Compliance is, or should be more than just looking at internal directives. It is also about looking at how the world and the society are developing itself. Compliance is very much a strategic issue and companies that do not recognize this are blindfolding to a great extend. Now more than ever, as the world has become significantly ‘smaller’ due to the modern social media and interdependent relationships. A good example is ‘durability’ and ‘green’. The board should take this into consideration in regarding external social and political developments. Ensuring and overseeing compliance is an essential part of board’s role, as a good reputation to be seen as a good corporate citizen is one of the biggest assets of a company and most definitely a value creator

• Operational Mechanism

 -Risk Management is the decision mechanism that should be integrated within all management decision trees including those that impact 'Compliance'. Contracts and Compliance decisions aren’t made without weighting the positive risk versus negative risks

-Compliance risk at operational level is mostly unrewarded risk, something you have to do to keep the regulator of your back to ensure your business maintain its license to operate. Most of the time you are avoiding penalty and fines when it comes to being compliant,  in this regard, compliance is “must have” to keep your business light on.

Businesses are focused on risk management and corporate governance as a means of setting guidelines. Both are critical business functions whose responsibility resides with the board and senior executive teams to the point of liability and individual risk.

 3. Intertwined Relationship Between Compliance and Risk  

As part of the effort to run a successful business we have to manage the risks to business operations with an eye on strategic plan. Requirements to ensure legal compliance are another component of the company’s risks.  The challenge is ensuring that the people authorized to make decisions on behalf of the company are able to view the organization and the risks to the organization holistically.

There needs to be a balance and thoughtful approach to manage the risks that could interrupt or negatively impact business, which includes compliance risk. That said, the overarching risk management program should consider compliance risk as part of the enterprise view of risks. Also utilize the Risk Management processes at its core and running through all activities whether by the compliance function or the businesses.

The debate here is: should compliance and risk are treated as sisters to live at the same roof or as separated cousins to visit each other once a while?

• The point of Convergence:

 At some organizations,  compliance functions saying that they never talk to their cousins of Operational Risks; and very often compliance officers who come from a legal environment don't have a smattering of risk management, not to mention statistics or math.  Actually from the company's risk management point of view, such compliance, we may not say it’s useless, but very limited: How do they cover the areas that cross over?  How well they cover the gaps? Can you really understand the risks in a solution if you don't understand it from end to end? 

Managing compliance is a risk, it is a sub-set of operational risk. It is such a large area of risk that most companies have a group dedicated to it, which may create the impression that it is somehow a separate discipline, but it isn't. It's just one risk area that is large enough that it justifies dedicated staff..

• The Counter-point:

 Sadly we have seen too many companies pay the price for grouping Risk with Compliance, and limiting their thinking to the short term, internal perspective. Separation of the Risk and Compliance functions in most organizations should provide the necessary "four eyes" checks and balances to optimize risk mitigation within a firm. This does not mean, however, that there should not be close co-operation between the two areas. Unfortunately, at this point in larger organizations, power politics and point scoring often get in the way of common sense and what is best for the organization!

 Unification Point: The organizational structure maybe situational, but we need to have known risks as a part of compliance process. And also draw compliance parameters for risk management. Either as sisters or cousins, risk and compliance should work really closely in order to create value. Possibly, more important, they should use the same (risk) methodologies and talk the same language.

           

For compliance & risk management professionals, one should aware that compliance is not just about the letter of the law/ regulation, but also very much about the spirit of the law/ regulation. Unwritten rules, based on common decency, mutual respect and integrity should play an equally important role, next to the ‘hard’ compliance

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Ten Inspiring IT Elevator Speeches

 IT and CIO at the tipping point for transformation, with new mindset to create value center, than cost center, move from back office to front brainyard, and with the latest technology such as cloud, mobile, social and Big Data as silver lining,  CIO need learn how to articulate IT's value to the Chairman of the Board in 25 or less simple words.

Though there is no one answer that suits all, IT’s elevator speech is a reflection of the personality and value proposition of the sector and business, need always be tailored to the language and interests of the audience. But collective wisdoms can be shared:

1. IT need be built to change in order for organization built to last and from good to great.

2. IT is the innovation engine of any business in digital era, to equip people with the latest technology & information, help business make the right decision at every level, to capture insight & foresight for the future of organization.

3. IT role is to enable the business to exceed customer expectations, increase profitability and maintain a competitive advantage. IT should provide innovative solutions to meet business needs.

4.  IT is there to provide whatever technology services the business needs to service its customers. IT is only ever going to be strategic to business direction if the CIO has a board role.

5. IT supports all the other business functions, to get the right information to the right people at the right time, so they can make the right decisions.

6. IT manage the technical plumbing and improve efficiencies for the business internally and enable the business to drive revenue and provide innovation externally. 

7. A new emerging theme is the split of strategy and service delivery. Traditional IT is good at service delivery (whatever the sourcing model). What companies really need though is the strategic role to be strengthen and separated from the nuts-and-bolts work. Weather this has the CIO as de facto chief process officer, chief innovation officer, or some other mix - this is where value is generated

 8. IT and the business are intertwined but must be on the same page. IT enables the business to operate effectively and successfully and enables it to grow, change and adapt to future needs. IT is driven by the business , but a great IT department also has the vision to be a driver for the business.

9. IT supports and enables business operations through the efficient and effective usage of technology; IT simplifies & automates today's operations, and envisions & enables tomorrow's aspirations.

10. IT provides progressive technology solution, from business enabler to business transformer, help shape up the high-performance organization at today's hyper-competitive environment

Bonus Offer: CIO’s Elevator Pitch:

The essential of CIO role is more about the magic "I": transforming from infrastructure manager into integration/innovation/influence/intrepreneur/intelligence/improvement officer, be business strategist and technology visionary at the same time, situational driven and value-added, lead by influence. 

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Three Insights from Deloitte & MIT’s Social Business Report

MIT Sloan Management Review and Deloitte conducted a survey from organizations in 115 countries  and 24 industries, to understand the status of social computing: how does business leader think about it, where is the business value from it, and what kind of challenges they face today. Though many mid and large businesses just start experimenting enterprise social tools, most of leaders shows enthusiasm and confidence about the potential it can bring up in the future. 

1.   The Values from Social Computing

From survey, the largest enterprise and small business are more interested in social and perceive more values than mid-size business, the top five social experiments are identified as:

·       Cross-functional collaboration

·       Improve work Effectiveness

·       Voice opinions and share collective wisdom

·        Build more Inter-connected communication platform

·        Reputation/Performance Management

From industry perspective, technology and media sector take a leadership in adopting social, seems culture matters, the social business leaders may have more open culture to embrace new idea and innovation, though all customer-centric industries need speed up the pace to integrate social into the traditional channels to both delight customer and engage employees.

From senior leadership perspective, CEO now becomes better social advocate than CIO & CFO, CIO as IT leaders, feel cautious about social mainly because of the “controller” mindset, think social could become data nightmare or another shadow IT sprawling due to security and privacy concerns. 

The key values the organization can gain from social include, but not limited to:

·   Marketing: businesses are using social tools/media/platform to improve customer relationship, monitor online customer behavior, create & support customer community and develop multi-channel communications;

·      Innovation: Organizations are also using social to source new ideas and refine current products/services, to manage three types of innovation: sustainable innovation, efficiency innovation and disruptive innovation at more systematic way.

·   Operational  Excellence: Social business allows knowledge/information to flow more seamlessly cross functional silo, therefore it can orchestrate enterprise wide collaboration and improve operational performance. 

           ·   Leadership: Social activities & participation can help leaders sharpen strategic insight and extend strategic execution. As via collective wisdom, leadership can expand the tunnel vision, understand the next trend and what the customer need next, when executing it, social can enhance agile methodology and improve communication & corporation.

               

2.   The Challenges to Go Social

Though social is hot, implementing social is a difficult process for many, from Gartner’s estimate, the failure rate for social business projects at 70%, why:

 ·      Using Social without business purpose or problems to solve, to confuse social as enterprise business tool with personal social usage, not set the right boundary and decrease staff productivity;

· Fail to integrate social tools with business’s daily workflow and process, or social tools are not integrated well with other enterprise tools such as CRM, BPM or business analytics.

· Lack of understanding and sponsorship from senior management has been cited the biggest barrier to social adoption.

· Fear lack of control, security concerns, privacy issues, data management concerns;

·     Lack of knowledge sharing culture, employees mistrust or resistance to adopt new things and lack of incentive

·     Experiment social, the metrics may not be critical, but when organization need amplify best practice, no metrics to measure result can cause project inefficiency strategically, tactically and economically.        

              

3. The Survey Q&A Highlight

Q1) What are the primary challenges facing organizations in next two years?

A: Growing revenue, innovation, cost efficiency, customer relationship management and competitive advantage are top five.

Q2) How important do you think social tools will be to organization’s success in next two years?

A: about 40% of responses think it will help manage customer relationship, innovation; about 30% think it will help talent management, revenue growth and improve competitive edge.

Q3): How important do you consider social software to be to your organization?

A: about 20% think it’s important for their business TODAY; about 40% think it’s important for them one year from today; and more than 60% think it’s important for them in three years from today.

Q4): What factors do you see facilitating the adoption of social in your organization:

A: the top three factors include: clear vision of social supporting business strategy; senior management support, good fit for organization’s culture & employee enthusiasm;

Q5) To what extent do each of following functional areas drive the use of social software within the organization?

A: the leading business functions include: marketing/sale, customer service, IT and product design.

The key takeaway from the report is: the social business matters today, will matter more tomorrow.

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From Rocket Science to Parable: Highlight is the Key

One of the big stories in last couple weeks are SpaceX  finished its journey to International Space Station successfully.

Dragon is flying, it makes me think about a little parable: there was a famous painter long time ago, with a reputation of his talent and vivid, lifelike picture. One day, he was traveling, painted four dragons on the wall, but did not draw the eyes. People felt it strange, and asked him why he didn’t draw the eyes, he said: “The eyes are the key of the Dragon, painted eyes, the dragon will fly away”. People didn’t believe what he said, so he picked up a brush, highlighted the eyes on the two dragons, immediately thunder and lightning, the two flew to the sky. Weather it’s a true story or not, people show respect and admiration for the painter.

So what’s rocket science and the parable in common: Highlight is the key, to make dragon flying away,  it means to stay focus on:

1. Wildly Important Business Goals.

The rocket science is still one of the most complex, but inspiring disciplines to attract many young businesses to dream and experiment, as one of the most adventurous, emerging industries, their goal may not be to maximize shareholder’s value, it’s more about to shape human’s big dream, reduce the risks and open the new chapter of Earth’s outer orbit economy. By focusing on these goals, the SpaceX made history as its Dragon spacecraft successfully docked with ISS..

                                           

2. Key Business Process

Actually SpaceX launching was not going so smoothly. The mission, which as suffered several months of delays, just like that painters in Parable: at last moment, he highlighted the dragon’s eyes; the scientists and staff may took the last period of time to re-check and test the key processes, hardware and software, to highlight the key to let Dragon spacecraft fly successfully;

3. Building Up High Performance Talent Team

 The talented painter is a master,  not only be good at the technique skills of art, but can uniquely capture the spirit of dragon. The team to launch SpaceX should be also very talent, bright and intelligent. No matter it’s science or art, the skyrocket ship or modern business management, the writing or speech, imagination need be blended with knowledge, and inspiration need meet with planning and focus.

Though the parable didn’t tell weather the flying dragons came back or not. The real story has a good ending: after a successful trip to the ISS, the spaceX Dragon craft de-coupled from the station and descended towards the Pacific Ocean smoothly on 5/31.  

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