Beyond Process: The Order of Magnitude Experiment

IT organisations are typically “process myopic”: since software models processes, that tends to be what they architect for, design to, and deliver.

Value, however, comes from getting beyond process. That’s going to take a little learning.

I was privileged to be able to sit in one afternoon as the market strategy group at a financial services company undertook a regular practice of theirs: the “Order of Magnitude” experiment. This is something that IT folk could and should do to better understand the business, opportunities, and the robustness of their existing architecture.

In this session, they would postulate that one of the factors important to their current business would radically change.

They seized upon the idea of an order of magnitude (10x) change because they had come to understand that greenfield companies in their sector were able to deliver new innovations at a rate 10x of their own, to be profitable on 1/10 of the “share of wallet” of a client, etc.

Their sessions were designed to understand themselves more, so that they could consider moves that would allow their company to compete — legacy products, established markets and hefty corporate infrastructure and all — effectively against these new and dynamic players.

Why was this occurring in the market strategy group as opposed to elsewhere in the corporation?

In large measure, because they had just spent several years working on new market roll-outs. A key one of these had been via the Internet, entering new regions of the world first via a web presence buttressed by a call centre. Only later did they follow with a visible on-the-ground presence.

Recognizing that there was nothing earth-shaking in this approach, they realized that these new players (typically, in Asia) would be able to use the same model to attack their core markets — with them and their competitors acting to hold up a price umbrella that would make the venture highly profitable.

The point of the order of magnitude experiment is to spend several hours at a stretch — they tended to give over a half day — to pose an order of magnitude challenge and then work out how they could meet it.

What would be required? What changes would be needed internally? By looking at these questions, they hoped to lay out the business case for a set of investments to go into markets already served by the greenfield players — and to compete against them head on, there.

The understanding they would reach from that would allow them to manage margins and costs in their home market, giving them more to work with as the competitive struggle continued.

For IT staff, this takes the form of “how fast could we deliver”, “how many kludges are required to do that”, “when and how do we fix that”, “what does it do to our cost profile”, etc.

What they learned in the first two sessions was that the company really wasn’t ready for a challenge of this type. There were strong vested interests, and a belief in the quality of their existing products, sales channels, systems, etc. that would not easily be shaken.

However, from one of these sessions they did see an opportunity to build a new financial product that bridged several of their existing ones.

This was given the go-ahead, as an overlay on the existing systems. While this was being put together — it was nearly a year long effort, done by an outside firm (thus making it easy to point out the cost to build the new product) — they continued to ask questions for “future products” that kept other parts of the organization thinking about whether layers on layers was the right way to go.

(Getting to the point where doing their own greenfield core was seen as a business investment to be considered instead of rejected out of hand was their goal.)

It is unusual for a market strategy team to take on this sort of longer-range exercise, but, I think, increasingly important. It’s even more important that IT do this.

This particular team doesn’t expect to be able to achieve an order of magnitude change any time soon, either — but they do expect to come up with new segments, new offerings and new price points that will work and create an impetus toward more change. If you’re not occasionally asking this sort of “world changed on us” question, you ought to be. The insights you can gain are worth the struggle the question will give you.

My conclusion? Enterprise architects are generally not looked forward to by their business colleagues. They’re seen as dictating what can’t be done, rather than coming to the table with innovations to propose.

I think a lot of that comes from the process myopia of IT. Break that — these exercises would be a start — and perhaps there’d be ideas to put on the table.

Who knows? The path to really renovate the architecture and portfolio might, too.

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About passionateobserver

I am a passionate observer of our society, the economy, and politics. Mostly I don't like much of what I see, so I write as a concerned citizen. To the fray, I bring a background in the philosophy of history, a lifetime's reading, a work history in information technology management, consulting and education.
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2 Responses to Beyond Process: The Order of Magnitude Experiment

  1. Mark Roman says:

    Great way of re-thinking IT architecture. To confirm your ideas, one simply has to look back at IT architectural changes over the years. Mainframe to mini to PC, hierarchical to networked to relational, home-hosted to cloud, standards to BYOD … each one of these are Order of Magnitude shifts. A 10x change is commonplace in IT, so lets just realize such a dramatic change is a baseline assumption.

    Cheers,
    Mark

    • Thanks, Mark. For some reason almost everyone in IT I talk to doesn’t see this, which is one reason I chose to use a market strategy story to illustrate it.

      Besides, we not only have to see it for ourselves, we have to apply it to the enterprise if IT is to deliver value. You know, what they mean when they say “IT comes to the table with nothing to say”.

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