#QuPlan - A Quantum of Planning - Episode 2015/4 - Ongoing - E-service Incentive

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#QuPlan #QuPlan discusses the current status of planning and project management, and then builds up on “unconnected” dots to derive a potential evolution of planning concepts

#QuPlan is part of the “Connecting the dots” series, short pragmatic books (generally, up to 60 pages), based on experience and aiming to inspire re-thinking your business ways #QuPlan Episodes Expanding on the #QuPlan book, this (free. online) series of booklets (“episodes”) is a walkthrough within the lifecycle of a fictional business case concerning a regulatory programme

This fifth “episode” (as the previous and following ones) aims to convert changes in compliance requirements into opportunities- in this case, to reduce costs.

See the back cover for the full list of the planned 2015 episodes

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Whatever the purpose of your project or



programme, you will have three main actors whose motivation and involvement have to be balanced: the team(s) charged with its delivery, the organization that will be accountable for whatever is delivered, and the ubiquitous stakeholders.

As discussed in previous episodes, any Stakeholders

programme delivers a modicum of change, and this generates a stream of ongoing negotiations between the interests of the three main actors.

But “balancing” should not replace the purpose of your project or programme: otherwise, you turn project/programme management into just acting as a PR for your activities, while ignoring “details” such as budget and deadlines.

In this chapter, the left-hand page is shared between the three episodes discussing the “delivery” side, each episode exploring a change during the ongoing fictional activities, with a focus on what each one of the three main actors could do; you can either read the episodes sequentially, or read all the “method” chapters together, before moving onto “business case” and “thinking”.

The right-hand page contains information specific to each episode. © 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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I worked as a consultant since the late 1980s, and therefore I cannot be against externalization “per se”, albeit I am somewhat critical of knowledge-intensive approaches to outsourcing and managed services, as they can and do affect business continuity1 (businesses become captive to their suppliers).

Often the choice to delegate to a third party operational activities is based on a cost/expertise mix analysis, in best cases considering also what would be the real “running costs”, such as keeping the skills in house “alive and kicking” by spending on training, while being unable to really use them at full capacity.

As part of the “shifting bureaucracy outside”, States are routinely setting up ecommerce or e-government services, and international organizations such as the OECD and the EU sponsored events extolling their virtues for almost 20 years.

Externalization without a proper contractual definition of the potential scalability up-and-down (i.e. shrinking as well as expanding) can quickly generate additional overheads (discussed in this same section in the previous episode).

Beside the economic side, obviously (but often forgotten) you must also assess the real potential of your supplier(s) to provide you with the flexibility that will be needed (e.g. those using a pure “economies of scales” model aren’t generally willing to customize services, just volumes): it takes two to tango. 1

See a more detailed discussion within “BFM2013 Knowledge-based organizational change”, http://www.robertolofaro.com/BFM2013 and “#SYNSPEC” http://www.robertolofaro.com/SYNSPEC

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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In most cases, compliance is based on the assumption that what you have to comply with is defined before you start your programme- rules “cast in stone”.

In this case, I followed instead the approach that way too often was followed with compliance in Italy at least since the 1980s (when I started seeing it in businesses, small and large, local and multinational).

In some cases this might be the “new normal”, as instead of “compliance” we should get used to “convergence on compliance”: define the ground rules, define the initial framework, get feed-back by those implementing it, observe how the new regulation solves the issues that it was created to solve, and evolve the regulation.

Sounds familiar? In a way, this is what has been done for most business-related ISO standards, or rules on risk for the financial sector promoted by the BIS in Basel.

Therefore, the main issue is not with the approach- but with the “static” concept of compliance that I found often e.g. around Europe.

We have to get used to a more “agile” mindset, the way traditionally was done in Italy (maybe with less pathos)2.


Suggested short reading: Roumeliotis “Please stop bastardizing Agile” 21 June 2015 https://www.linkedin.com/pulse/please-stop-bastardizing-agile-george-roumeliotis

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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Despite what most politicians and high-level business leaders say, most change and innovation initiatives do not necessarily generate immediate savings, as usually there is a “transition phase” that will see both old and new ways to coexistexcept if you use a “Big Bang” approach.

The latter is feasible only if you have full control of the whole supply chain, by structural design or degree of control on your suppliers’ behavior, but in business I saw more failures that successes, as usually the “Big Bang” did not allow to collect feed-back, and the “informal organizational structure and communication flows” that were in place were simply bulldozed over.

Shifting the implementation and part of the control on implementation de facto on those that have to comply with a regulation is a practice that is becoming increasingly common - a kind of “peer- and supply-chain-based auditing” that alters both governance and government activities.

Enforcing compliance requires first and foremost to understand where you are (the “change” aspect discussed in this section in the previous episode), where you want to go (ditto), but also building within the new organizational system resilience, i.e. “corporate stamina”, to cope with the inevitable changes.

Expect new rules and regulations to become stepping stones, to be managed as you should manage your KPIs: whenever you achieve almost 100% compliance, then it is the right time to move on and set new targets: you have to be a learning organization to survive in the XXI century.

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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Compliance, at least considering the projects and programmes where I either worked or had to review or audit, has impacts on the operational side (nothing new, here, I hope)- and might even dramatically affect your business model.

This implies that, whatever regulatory changes or evolutions will happen during the “delivery” phase, probably you will need first and foremost to minimize the impact on what was painstakingly negotiated before the compliance programme started.

Sometimes, the first choice is to “buffer” changes, i.e. add something that leaves intact what was already agreed, and add on top of that the changes.

Even when this option is feasible, the risk is to create what in French is called “usine à gaz”- an over-engineered set of results that would probably be impossible to maintain and evolve (if it is ever completed).

There are actually three approaches that enable a better long-term sustainability:   

Integrating stakeholders Building a competitive advantage case Triaging ownership and delivery.

Each approach will be briefly discussed on the right-hand page of this section across the three “delivery” episodes, with further analysis in future publications.

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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Ask your ICT department a simple question: how many data flows do we send to government and oversight organizations, how often, and from how many parts of our business- build a map of that, and then build a map showing its evolution across time- say, since 1995.

The “e-service incentive” discussed in this episode is quite common, as it lowers the “cost of being in business” also for governments, and makes oversight and governance cheaper, by enforcing transparency across the board (actually, it is a reason why many economies with a high level of “black economy” have a lower level of “digitalization” in their business and financial transactions).

An element often ignored by the “evangelists” of dematerialization is that any bit and piece of paper or form is associated to processes, and any process is associated with people, and countries usually have a “continuity threshold” higher than most businesses- therefore, they “layer” rules, instead of sweeping away XIX century rules and regulations (but I am experimenting with “E-stonia”, so stay tuned), and therefore often initially dematerialization expands the payroll.

As discussed in this section in the previous episode (“integrating”), creating an online platform that extends your own corporate borders within your supply chain (and viceversa) can become a significant incentive to “network loyalty”- but can also become a “barrier to entry” to smaller, nimbler competitors, who will not be able to so easily replace you if you integrated your own business processes with those of your distributors/agents: yes, a website can be a competitive advantage and the XXI century equivalent of the “power of the incumbent”.

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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If you read the previous episodes, you are probably getting bored of reading once in a while a rephrasing of the same concept: a technical choice shouldn’t be managed just as a technical choice.

Whenever you choose a technology, you “import” within your corporate culture elements belonging to a different culture, moreover when this technology isn’t “compartmentalized”, and affects basic processes that should be considered part of your core business.

As discussed within the “method” chapter (more about this within the “thinking” part of this booklet), converting a service into an e-service has been quite popular, albeit this choice carried a “moral hazard”- regulatory agencies took it for granted, and assumed that anything can be shifted downstream.

If the e-service replaces and existing service, there are obviously additional issues (e.g. what you do with the people currently delivering it), but you have to consider something more than costs (cfr. the “method” chapters in the previous, current, and next episodes); please note in episode 2015/0 the names of those involved…

The example in this business case starts with what I think is the most sensible approach: first, have a review on what are the options contained within the regulatory change, from a technical standpoint, then define the business guidelines, assess (directly or indirectly- it depends on your corporate culture) impacts on stakeholders, and, finally, define the guidelines for implementation.

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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From the audio recordings of the meeting of ICT with business after the initial “technical” assessment

[The meeting would begin with a discussion of scenarios that are possible, based on the regulation change, feasibility would be assessed within the “action” section]

Business: so, according to the new change within the regulation, we have really two options: either we go fully toward an e-service, as you call it, or we will have to set up also a call centre, provide a kind of magazine with “knowledge updates”, set up a training centre and schedule, manage all that…

Frankly, the more they “simplify” these compliance requirements, the more seems that they are creating our business model for us, and piling up costs.

Anyway, from what you said, there are additional benefits from moving to the “full e-service option”, including the possibility of further integrating our distribution network within our own processes in such a way that makes more sense for them to stay, and collaborate in evolving the service.

The obvious choice is therefore to work the other way around: identify if there are any reasons why we should not adopt the full e-service option, but consider that as a priority. [Now it would be the time to distribute action tasks, deadlines, etc. including asking to produce an assessment on the conditions to implement the service.]

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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If you get a clear mandate from the “plan” phase, i.e. if a specific scenario has been chosen as preferential, before implementing you should confirm constraints.

Again: whenever there is a change, you should first verify where you are, what are the guidelines, and then start working- not the other way around.

In this business case, as you read in the previous section, the cost of not “going the e-service way” can be quite steep.

There are a couple of complications: you are asked to define a new e-service for something that doesn’t exist (i.e. your organization might lack skills and capabilities), and you have to consider that, whatever your management’s choice, you (or your management) might have to win all those involved over.

The “win over” part will be discussed within the “transition” section, as in this phase what matters is to identify what is missing/what is needed.

The two aren’t mutually exclusive: you can lack some skills, but those could be needed only for some implementation options.

A caveat: what you read in the next page might make sense only if you have a participative culture with your network: in a command-and-control structure, collecting the same information might require a different, more indirect approach.

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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From the audio recordings of the meeting of ICT with business after the business assessment based on the guidelines received in the previous meeting (continues)

[The meeting would begin with a discussion of the information collected] ICT: implementing the full e-service option implies that all those that will access this information service will have a connection with our systems- and this is not the case.

We did a preliminary assessment by simply using what we have already in place, and saw that 10% of our distribution network doesn’t use our existing e-services at all (isn’t even registered), while a further 10% registered but never used it; we did not have time to check with everybody, so we used a quick “direct marketing approach” to check with a sample if they would be interested in seeing an expansion of our e-services- and the general answer was “what is in it for me”.

For the time being, as agreed in the previous meeting, we studied the implementation costs assuming that the “full e-service” scenario is the chosen one.

It would make sense to outsource it- but there is a catch: we do not have anything like this new e-service in house (both the existing helpdesk and customer support are “reactive” services, answering questions), and therefore it might make sense to do it internally until it is stabilized, and then explore the option of either outsourcing it, or converting it into a service managed by a supplier, either in house or outside. [A discussion on the options would follow, including on the cost of providing a connection to those lacking it, and potential incentives such as converting into eservices what currently requires paperwork by the distribution network]..

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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What happens when you have changes “en route”? “Transition”, the last element, involves first assessing what to do with what is affected, then phasing-out what is not needed anymore, and phase-in the changes.

The aim? To ensure that, by the completion of the project/programme activities, whatever changes you introduced are fully integrated with what was pre-existing.

This does not imply that the difference “disappears”- but while in computing and equipment often it is possible to be “integrated and distinct”, in other cases that could be just the best way to make it impossible to work.

Imagine that your programme, as in this case, delivers a service: would you think sensible to teach to your service representatives the “history” of each process that they are supposed to execute?

Wouldn’t be better (and less confusing) to simply teach them what they are expected to do?

While the right-hand page is focused on this episode, this introduction is shared between the three “delivery” episodes.

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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From the audio recordings of the meeting of ICT with business after the business assessment based on the guidelines received in the previous meeting (continued)

Business: so, there is not really a resistance to the idea of expanding our e-services, it is just a matter of feeling like we are feeling vs. this new “simplified” version of compliance, i.e. it is a shifting of costs downstream.

Looking long-term, we agree with what you said, also because it is consistent with the idea underlining our guidelines and how we managed the previous change [see episode 2015/3]: it is an opportunity to expand our reach, get more information, and further integrate our distribution network. [Summarizes- e-service approach using internal resource and later third parties]

As per the implementation, there are three elements: 1. Provide a connection to those that haven’t one, for the first year, as an investment from our part- our current telco providers [discussion on contracts] 2. Add a “social” element, by replicating what we have for our internal uses, so that we can both let our distribution network identify opportunities for improvement, and also increase our contacts with them 3. Remove paperwork, by integrating within the platform some of the most frequent information exchanges on support (RMAs, etc.) 4. … [Further discussion on details of the transition toward the new approach.]

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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There are few bureaucratic hurdles that cannot be reduced by using “virtual services”- be it an external supplier, or just a website (not necessarily e-commerce).

As discussed within the “thinking” section of the previous episode, since the late 1990s e-government and e-governance inspired the definition of incentives (and regulations) built around the idea of “efficiency”, more than “efficacy”.

Obviously, some would say that both elements were part of those initiatives, but often the services delivered online replicated existing processes, and it took a while before efficiency (doing something faster and with less resources) was coupled with efficacy (doing something better).

Actually, some “e-enthusiasts” often ignored what was already discussed in this series: in human organizations, often what you officially do (and who is officially involved in doing it) isn’t a fair representation of everyday business life.

If you “dematerialize” “as is” your activities via virtual services (both an external provider using its own people and online variants), you are actually reducing the degrees of freedom, i.e. the flexibility that is embedded in any human system.

Many business processes weren’t developed in one day, and their structure is the result of repeated negotiations, evolutions of the organizational structure and culture, often with some “relics” left in “just in case” or “just because it was agreed so”.

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro


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BPR (Business Process Reengineering) had its own field day in the 1990s, but it should be the first step before any “virtualization” or “externalization”.

In “virtual” services obviously there are further considerations that should be involved in any “make or buy” decision, e.g. the opportunity to refocus your staff on “core” activities has to be balanced with the risk of losing information by transferring the first contact with customers or your “presence in the market” to a third party.

I worked in and with outsourcing and managed services and processes (including BPO) since the late 1980s, in few countries, using “in house” (another organizational unit or entity within the same company), near-shore (external suppliers but close enough to be e.g. within the same timezone or even location), and offshore (e.g few timezones away, usually wherever it was more convenient- and not just purely from a cost perspective)1.

Whenever I was asked to design “virtual services” (either from scratch or by converting existing services), I always considered three basic requirements: 1. Ensure knowledge continuity, i.e. the ability of the organization to evolve 2. Continuous monitoring of the ability of the supplier (internal or external) to comply with the Service Level Agreements (SLAs) and evolve 3. Continuous monitoring of the ability of those interfacing with the supplier to comply with the Operational Level Agreements (OLAs) associated with the SLAs (i.e. what they should do so that the supplier can do its own work). See lessons learned in http://www.robertolofaro.com/BFM2013

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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Auditing has much in common with setting up virtual services. The first step is to think outside the box- the second is to avoid to create a new box, based on what you did elsewhere- and this is true for both the customers and the suppliers.

It all starts with a first period that should be used to “tune” the service, followed then by the actual service, but, as a difference vs. a “standard” service such as auditing accounts, a contract for a “virtual service” should include a “continuous improvement clause”.

An excessive focus on purely economic objectives usually is an incentive on both sides to “cut the corners”, and remove activities that have no immediate economic value: short-sighted, but quite common, e.g. in contracts requiring to reduce the price each year by % due to supposed increased efficiency.

Sometimes contracts replacing existing services with their “virtualization” include a timeline for cost reduction (i.e. the longer they go, the less they cost), but the real improvement is provided by the creation of a “communication exchange”.

Should you outsource first-level contacts with your agents, distributors, networks? Only if you ensure that you have direct access to the information on any exchanges between your “service agents” and their contacts (customers, etc.)

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro

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The real issue, while you embrace “virtualization” of your services, is to avoid building a new black box that is detached from the evolution of your organization.

What should you obtain from your managed or outsourced services provider?   

Identifying service improvement needs Assessing the potential of cutting down costs by expanding training and knowledge transfer (e.g. by improving documentation or ergonomics) Advice on potential evolution of service, based on their experience elsewhere.

If you cannot ensure that the appropriate communication exchange can be enforced, there are usually two options.

You can either delegate members of your organization to become part of the “virtualized service team”, to act as a living communication channel, or keep the service in house, using just external experts and resources as members of your teams, until when you will be ready to properly structure the “virtual service”.

Obviously, I am ignoring the third option, i.e. “act now and think later”, as, in my experience, it doesn’t take long for any organization that adopts such an approach to start losing valuable information- and see costs increase.

As you can see, this was the overall rationale of the choices made within the “business case” chapter, compounded by further business aims that clearly made impossible the cheapest options (outsourcing/BPO and managed service) from day one.

© 2015 Roberto Lofaro http:/www.linkedin.com/in/robertolofaro