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IT Advantage◊ The IT Organization of the Future: Driving Business Change ◊ Capturing the Value of Cloud Computing◊ Strategic IT Workforce Management: Building Tomorrow’s Key Capabilities Today◊ Lean Banking: A Holistic Approach to Significant and Sustainable Value◊ Remember the Future: Using Scenarios as an Aid to Strategic IT Planning
Spring 2010
Technology as a Diff erentiatorAn Interview with Derek McManus of Telefónica O2 UK
IT Advantage
Issue Three (Spring 2010)
For a complete list of BCG publications and information about how to obtain copies, please visit our Web site at www.bcg.com/publications.
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3/10
Note to the Reader
AcknowledgmentsThe authors thank their many colleagues at The Boston Consulting Group who contributed to this publication, including Robert Hosea and Jan Jamrich, and especially Astrid Blumstengel.
We also thank Gary Callahan, Angela DiBattista, Kim Friedman, Gerry Hill, Simon Targett, and Janice Willett for their help in the writing, editing, design, and production of this publication.
For Further ContactWolfgang ThielSenior Partner and Managing DirectorGlobal Leader, Information Technology PracticeBCG Cologne+49 221 55 00 [email protected]
Simon BartlettaPartner and Managing DirectorBCG Boston+1 617 973 [email protected]
Rozinder BhatiaTopic SpecialistBCG New York+1 212 446 [email protected]
Melanie BockemühlPartner and Managing DirectorBCG Düsseldorf+49 2 11 30 11 [email protected]
David DeanSenior Partner and Managing DirectorBCG Munich+49 89 231 [email protected]
Luc de BrabanderePartner and Managing DirectorBCG Paris+33 1 40 17 10 [email protected]
Ralf DreischmeierPartner and Managing DirectorBCG London+44 207 753 [email protected]
Christophe DuthoitSenior Partner and Managing DirectorBCG New York+1 212 446 [email protected]
Antoine GourévitchPartner and Managing DirectorBCG Paris+33 1 40 17 10 [email protected]
Alexandra LehmannProject LeaderBCG Munich+49 89 231 [email protected]
Tamim SalehPartner and Managing DirectorBCG London+44 207 753 [email protected]
Stuart ScantleburySenior AdvisorBCG Boston+1 617 973 [email protected]
Rainer StrackSenior Partner and Managing DirectorBCG Düsseldorf+49 2 11 30 11 [email protected]
The Boston Consulting Group (BCG) is a global manage-ment consulting fi rm and the world’s leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep in-sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet-itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 69 offi ces in 40 countries. For more infor-mation, please visit www.bcg.com.
IT A
PrefaceAs The Boston Consulting Group has written else-where, the world economy is entering a period of pro-longed slow growth. Still, leading companies tend to signifi cantly outperform their competitors during such periods. What powers these fi rms? Strong leadership and the willingness to challenge conventional wisdom,
certainly. But in the digital economy, we o en see another commonal-ity: an IT organization that drives business change.
The lead article in our latest issue of IT Advantage discusses a recent survey of CIOs, conducted jointly by MIT’s Center for Information Sys-tems Research and BCG, on the changing IT organization. The survey found that the benefi ts from IT acting as a change driver are substantial and that the characteristics of IT units that drive change are quite dis-tinct—in structure, roles, HR practices, outsourcing, and governance.
Following that article is an interview with Derek McManus, CTO of Telefónica O2 UK, a company at the vanguard of mobile telecommu-nications. He discusses his transformation of the company’s technol-ogy function and the role technology plays in reinventing the compa-ny’s business model and in diff erentiating O2 from its competitors.
Next is a distinct view on the “cloud.” We believe that cloud computing presents a new paradigm but that, given its infancy, companies should proceed carefully. This article suggests a measured approach to explor-ing the benefi ts and managing adoption risk.
We then have two pieces on the “human” factor in IT, so vital an ele-ment in driving change. The fi rst centers on strategic IT workforce man-agement and off ers a blueprint for managing your people base with a forward-looking lens. We bring a similar slant to the discussion of lean and banks in the following article, which describes two pillars of success-ful lean implementation: a holistic, end-to-end approach and engage-ment of the people who actually perform the critical tasks. We conclude with an article on an invaluable tool for coping with intrinsic uncer-tainty: scenario analysis. Scenario analysis forces a company to consider the full spectrum of possibilities and to think about potential actions—as demonstrated by a session undertaken with a group of CIOs.
We hope you fi nd these articles stimulating. Please feel free to send any comments to [email protected]. We value your input.
Wolfgang ThielSenior Partner and Managing DirectorGlobal Leader, Information Technology Practice
FOCUSThe IT Organization of the Future: Driving Business Change 2
FOCUS: Q&ATechnology as a Differentiator: An Interview with Derek McManus of Telefónica O2 UK 8
HOT TOPICCapturing the Value of Cloud Computing: How Enterprises Can Chart Their Course to the Next Level 13
VIEWPOINTStrategic IT Workforce Management: Building Tomorrow’s Key Capabilities Today 21
INDUSTRY SPOTLIGHT: BANKINGLean Banking: A Holistic Approach to Significant and Sustainable Value 26
OUTLOOKRemember the Future: Using Scenarios as an Aid to Strategic IT Planning 32
Contents
T B C G
The IT Organization of the FutureDriving Business Change
by Jeanne W. Ross, Stephanie L. Woerner, Stuart Scantlebury, and Cynthia Beath
This article is an expanded version of a research briefi ng pub-lished in December 2009 by the MIT Sloan School of Manage-ment’s Center for Information Systems Research (MIT CISR). Here we focus more deeply on IT organizations that help drive business change, the shi ing role requirements in such organ-izations, and the management practices that develop the needed competencies to exercise these new roles eff ectively.
As companies build digitized process plat-forms to replace large portfolios of isolated,and o en redundant, systems and process-es, they are fundamentally transforming the business.1 But business transforma-
tion demands leadership. Where does that leadership come from?
MIT CISR and The Boston Consulting Group recently surveyed the CIOs of 104 companies on the changing IT organization—and this question featured prominently. One of the survey’s key fi ndings was that CIOs believe that business leaders are not positioned to lead IT-enabled business transformations. In fact, only 33 percent of the CIOs surveyed consider their company’s senior executives eff ective at driving business value with IT. And only 40 percent consider their senior executives eff ective at prioritizing IT investments.
If, despite the emergence of a digital or information econ-omy, business leaders are not able to drive the digitization of business processes, the need for IT to do so becomes acute. And the rewards for IT organizations that capably fi ll this role, as well as the benefi ts to their companies, are sizable. Indeed, CIOs of companies that are building and leveraging digitized process platforms are much more likely to describe the IT unit’s role as “business change driver” rather than “order taker.”2 What characterizes
these IT organizations—the ones that are not just sup-porting transformation but driving it? And what benefi ts have they realized? We summarize our fi ndings below.
Why Should the IT Unit Drive Business Change?
MIT CISR has written about CEOs who led a technology vision in their companies,3 but these instances are the exception. More o en, the CIO—in partnership, to be sure, with his or her counterparts on the business side—provides pivotal leadership both in developing a vision for and in implementing a digitized process platform.4
The benefi ts to companies in which the IT unit acts as a change driver are substantial. According to our survey,
FOCUS
1. We define a digitized process platform as a coherent set of busi-ness processes, along with supporting technology, applications, and data.2. We relied on respondents’ descriptions of their architecture ma-turity to assess whether IT was building a digitized platform. For more information, see Jeanne W. Ross, “Maturity Matters: How Firms Generate Value from Enterprise Architecture,” MIT Sloan CISR Research Briefing, Vol. IV, No. 2B ( July 2004, revised February 2006). MIT Sloan CISR working papers and research briefings are available for download at http://cisr.mit.edu.3. See, for example, K. Nagayama and P. Weill, “7-Eleven Japan Co., Ltd.: Reinventing the Retail Business Model,” MIT Sloan CISR Working Paper No. 338 ( January 2004); and C. Gibson, “Turnaround at Aetna: The IT Factor,” MIT Sloan CISR Working Paper No. 362 (August 2006).4. See, for example, J. Ross and C. Beath, “Campbell Soup Company: Harmonizing Processes and Empowering Workers,” MIT Sloan CISR Working Paper No. 374 ( June 2008), “Building Business Agil-ity at Southwest Airlines,” MIT Sloan CISR Working Paper No.369 (May 2007), and “Information and Transformation at Swiss Re: Maximizing Economic Value,” MIT Sloan CISR Working Paper No. 373 (December 2007); and J. Ross et al., “United Parcel Service: Business Transformation Through Information Technology,” MIT Sloan CISR Working Paper No. 331 (September 2002).
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such companies spend a smaller percentage of their IT budget running—as opposed to building—systems. The 45 IT units described as order takers spent, on average, almost 70 percent of their IT budgets on running their systems, compared with only 62 percent for IT units that fi lled the role of business change driver. The spending ra-tio is important because we found that companies that apportion more of their IT spending to new initiatives, rather than to sustaining initiatives, had a signifi cantly higher overall return on assets and higher net margins relative to their competitors.
In addition, IT units that act as change drivers enjoy fast-er realization of the business benefi ts from new systems. On average, business change drivers reported an interval of nine months between the project’s start date and the delivery of business value. This is 33 percent faster than in companies where IT’s role is that of an order taker.
Finally, scores on IT employee-satisfaction surveys are higher in business-change-driving IT units. The enhanced satisfaction translates into recruitment advantages. In-deed, CIOs in IT units that drive business change report-ed signifi cantly greater eff ectiveness in recruiting the talent they need.
Characteristics of IT Units That Drive Business Change
The diff erences between business change drivers and order takers are quite stark. They are particularly evi-dent along a number of dimensions, including the fol-lowing:
Shi ing Role Requirements.◊ In general, CIOs told us that internal IT staff roles are shi ing away from applica-tion development and toward process analysis and engineering, business relationship management, proj-ect management, and architecture design and imple-mentation. Future role requirements are perceived by both order takers and change drivers to be largely the same, apart from the role of business relationship management. Order takers place greater importance on this role than do business change drivers, perhaps because business change drivers have, in many cases, incorporated the responsibility for business relation-ship management into multiple roles. But business change drivers report signifi cantly higher formaliza-tion and maturity of these roles, suggesting that they will be better able to deliver these important capabili-ties. (See Exhibit 1.)
More formalization
Less formalization
5
4
3
2
1Enterprisearchitect1
Businessrelationshipmanager1
Projectmanager1
Businessanalyst1
Programmanager
Businessprocess
engineer1
Vendorrelationshipmanager1
Productmanager,
IT services1
Datamanager1
Businessapplicationdeveloper
Technologyfellow
Business change drivers Order takers
Veryimportant
Less important
5
4
3
2
1
Exhibit 1. Formalization of 11 IT Roles
Source: BCG and MIT CISR survey, December 2009.Note: The bars represent the perceived importance of each role across both samples; the lines represent the extent to which role expectations are formally defined in the two samples.1There was a statistically significant difference between the two samples.
T B C G
FOCUS
High firminvestment
Low firminvestment
5
4
3
2
1
Comprehensive, multiyear
strategic IT workforce
plan
Definedcareer pathsfor IT general
managers leading to CIO
Definedcareer pathfor technical
experts
Resource pools, like centers ofexcellence,
rather than “hard assignments”
Rotations from IT into
businessfunctions
Internallyprovided
training and education
programs forIT staff
Rotations from
businessfunctions
into IT
External training
and educationfor IT staff
Business change drivers Order takers
Exhibit 2. Companies’ Investment in IT Professional Development Practices
Source: BCG and MIT CISR survey, December 2009.Note: Differences are statistically significant for all but “external training and education for IT staff.”
Focus on IT Staff Development.◊ Business change drivers tend to invest more heavily in their people than do order takers. They develop workforce plans and mul-tiple defi ned career paths, provide internal and exter-nal training programs, and off er rotations between business and IT roles. (See Exhibit 2.)
Centralization.◊ The trend toward centralization is some-what more pronounced in IT units that drive change (83 percent of business change drivers reported a cen-tralized structure versus 78 percent of order takers). In their centralized IT units, business change drivers hold tighter reins on IT—reporting 26 percent lower levels of unauthorized “shadow” IT.
Shared Services Model. ◊ Business change drivers deliver, on average, 60 percent of their IT services as shared services and place more emphasis on alternative ser-vice levels, related prices, and clarifying service units than do order takers. In addition, business change drivers have more responsibility for other services, such as facilities management, supply chain, human resources, and fi nance. And internal company surveys
suggest that, in comparison with users of IT services at order takers, internal users at business change driv-ers are generally more satisfi ed with the services they receive.
Outsourcing. ◊ As IT units increase their emphasis on driving business change, they increase their outsourc-ing of not only application development and mainte-nance but also operations. The causal relationship is not clear—it is possible that IT units increase their emphasis on driving business change as they out-source more.
Eff ective IT Governance. ◊ Relative to order takers, busi-ness change drivers report signifi cantly higher eff ec-tiveness of governance mechanisms, such as standard-ized project methodologies, post-implementation reviews, and service level agreements. In companies where IT is a business change driver, nearly 60 per-cent of the senior business partners can describe the organization’s IT governance. In companies where the IT unit is an order taker, that proportion falls to 46 percent.
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Adopting the Mindset of a Business Change Driver
The fi ndings from this and previous MIT CISR research suggest that, as part of a company’s transition to greater digitization, IT staff must shed an order-taking mentality and work to identify ways in which they can contribute to business success. One CIO we interviewed is pushing this shi by reminding both the business and IT people that they wear the same company badge and thus have shared goals. IT and business leaders can drive business value by focusing on those goals.
Chris Perretta, CIO of State Street Corpora-tion, told us, “I think the real challenge is whether the job I’m doing is relevant to the things that the CEO really cares about. For instance, I know that our CEO wants to extend lean, which is business process de-sign, throughout the whole organization. If I incorporate business process design into the IT function, then I posi-tion the IT organization in a leadership role. If I retreat, then I am simply a service provider, and we waste a lot of knowledge capital.”
Frank Luijckx, The Dow Chemical Company’s director of business services and environment, health, and safety for India, the Middle East, and Africa, told us that the CIOs in his company have been very active in “shaping the company’s future.” He noted, “The CIOs have been very close to the transformation of the company—they have enabled it, probably because they have the most struc-tured approach to it. I think leadership in information systems is increasingly important. The technology is decreasingly important.” He also said that the company does not do IT projects anymore; rather, it does projects for the company. In a supply chain project, for example, the people who are skilled at doing the IT part and the people who do major product and facilities engineering all work together in one big project organization. Accord-ing to Luijckx, “Our project support center is no longer called the IT Project Support Center. It’s broader and we continue to pull more and more functions into it.”
Luijckx believes that the business leaders may have for-gotten what it takes to run a business, because so much is automated in the background. He told us, “We increas-ingly fi nd that we need to reeducate the business leaders about the engine on which they rely on a daily basis.”
A CIO for a manufacturing company told us, “I think the boundaries of IT are expanding. What we have done well up till now, which is all of the basic plumbing—operations, security, controls, disaster recovery, continuity, and so forth—doesn’t stop being important. As a matter of fact, as you do those things better, you can move up the value pyramid in IT. We started with standardizing and deliver-
ing infrastructure and operations services. Then we moved to shared applications and we helped the business get the most value from them. Now it’s really about expand-ing into process leadership. We went from being a service provider and a process participant to being a process leader, mainly because business processes are increasingly built into the applications. Everything is in-
tegrated, so IT has a greater impact on the defi ning and transforming of processes through the use of technology.”
Recently, this CIO said that his IT organization estab-lished the role of chief business process offi cer, responsi-ble for optimizing business processes—both general proc-esses, such as an internally developed proprietary process that is similar to Lean Six Sigma, and specifi c end-to-end processes, such as hire to retire, bench to plan, order to cash, make to ship, and account to report. The people in his area now have a much higher level of business acumen than was previously typical in the company’s IT unit.
Developing the Capabilities Necessary to Drive Business Change
Ensuring the right talent to realize the IT organization’s ambitions is a critical challenge, many CIOs told us. In fact, only 7 percent of the CIOs we surveyed said that their IT organization’s current skills are an excellent match to their needs—and almost 60 percent reported signifi cant skill gaps. Looking out three years at their pro-jected skill requirements, only 38 percent of CIOs were fairly confi dent about being able to meet them.
Many CIOs also told us that, in particular, they are cur-rently struggling to hire or develop strong IT architects, business process engineers, and business-relationship managers. Part of the problem is a market shortage of such talent. However, a number of CIOs noted that do-main knowledge and existing relationships with the busi-ness areas that IT serves were extremely valuable for
Almost 60 percent
of the CIOs reported
significant skill gaps in
their organizations.
T B C G
such roles, and these CIOs felt that it makes far more sense to try to develop those talents internally than to try to fi nd them in the marketplace.
But developing such talent isn’t easy. A number of CIOs said that they had tried to transform good developers into IT architects, only to fi nd that the talents intrinsic to good developers do not necessarily make for good architects. One CIO said that she could identify developers who would make good architects by the con-sistency with which they asked questions about how their projects linked to other projects.
One popular development technique, according to our survey, is to recruit people into the IT organization from the business functions—especially people with project or program management or technol-ogy management expertise. Said Luijckx of Dow Chem-ical, “I think IT professionals are going to have to be more rounded individuals. They probably will come out of the business and go back to the business, and come out of the [IT] function and go back to the [IT] func-tion.” Almost 78 percent of the CIOs who described their IT organizations as business change drivers said that their organization used this approach.
The CIO of a manufacturing company, for example, told us, “Our head of sales systems for North America is some-one who had been an outstanding technical program manager and happened to be part of the sales force. We recruited him into the IT organization and he brought his business experience and acumen, along with his techni-cal project leadership. We’ve done the same thing in some of our supply-chain areas, where we’ve taken folks out of the supply chain who were strong project and pro-gram managers and made them heads of these applica-tion areas in the IT organization. Though there are some IT people who have been around the block enough to know the business, and who make the leap quite well, largely we’re looking for people who have lived in the business function world.”
Another method used by business-change-driving IT organizations to develop necessary capabilities is formal-ized talent management. Almost 90 percent of these or-ganizations, according to our survey, have defi ned multi-ple career paths, such as general management, technology
expert, and project management. And more than 95 per-cent of these organizations have some type of multiyear IT workforce-development plan. Further, almost all of these organizations use resource pools, centers of excel-lence, and competency centers to some extent. Several CIOs said that their organizations have instituted care-fully developed job families and career ladders, specifying
the skills and learning required for each employee to advance along a path that ap-peals to the individual and that addresses the company’s emerging IT-staff needs.
One of the keys to developing an IT work-force plan and ensuring the right capabili-ties is to defi ne the competencies needed and assess how well the IT organization is
positioned with respect to the number of people who possess those competencies. There are several ways to do this. The CIO of a manufacturer, for example, told us that his organization had developed what he calls an “IT compass.” He elaborated, “The compass highlights 20 competencies that we expect IT people to have.” These competencies include the ability to drive value realiza-tion, understand the business environment, drive innova-tion, develop and integrate applications, and manage a range of elements and functions, including enterprise architecture, service delivery, risk, projects, processes, IT assets, relationships, and talent.
This CIO said that by using the 20 competencies, the organization has developed a series of role profi les. For example, in security service delivery, there are role pro-fi les for analyst, senior analyst, specialist, senior special-ist, and manager. According to the CIO, “For every one of those roles, we go across the 20 competencies and ask what level is required. So, for example, for a business IT director, you need mastery across all the business acu-men skills: driving value realization, understanding the business environment, aligning with other functions, and managing relationships. You probably need some profi -ciency and mastery throughout the functional areas. You need mastery in functional leadership. And you need pro-fi ciency in some of the global capabilities.”
Engaging Business Leaders
Finally, our survey found that business executives o en rely on IT for leadership in digitization eff orts. Thus, IT leaders need to be prepared to step up to the task. But a
FOCUS
More than 95 percent
of change drivers have
a multiyear workforce-
development plan.
IT A
litany of failed ERP, CRM, and other technology-inspired initiatives bear witness to the limitations of IT leadership. If business leaders do not share ownership of both the implementation process and the outcomes, the IT unit cannot bring about a transformation.
Given that they cannot “go it alone,” IT leaders are work-ing to engage business leaders in the types of visioning exercises, governance processes, and business change ef-forts needed for eff ective digitization. Our interviews indi-cated that CIOs are encouraging engagement by delivering IT services effi ciently and eff ectively. These eff orts build credibility and trust. IT organizations that are not provid-ing excellent traditional-IT services (such as infrastructure, applications, and help desk services) are rarely asked to expand their service off erings into business process design, product design, business-transformation program leader-ship, business strategy, and other activities that business-change-driving IT organizations o en take on.
Beyond building credibility, CIOs in companies where IT drives change spend a great deal of time talking with their colleagues on the business side about business op-portunities that might involve IT. These discussions aff ord CIOs some insight into how IT can make a diff erence.
If a CIO cannot generate widespread agreement among business executives on the desirability of a vision and the IT-enabled business changes it requires, any eff orts to increase business process digitization will constitute a lonely, and ultimately disastrous, journey. But CIOs who create demand for increased business process digitization are likely to create critical leadership roles for them-selves—and potentially a powerful competitive advan-tage for their companies.
Jeanne W. Ross is the director and principal research scientist of the MIT Sloan Center for Information Systems Research. You may contact her by e-mail at [email protected].
Stephanie L. Woerner is a research scientist at the MIT Sloan Center for Information Systems Research. You may contact her by e-mail at [email protected].
Stuart Scantlebury is a senior advisor of The Boston Consulting Group. You may contact him by e-mail at [email protected].
Cynthia Beath is a professor emerita at the University of Texas, Austin. You may contact her by e-mail at [email protected].
T B C G
Technology as a Diff erentiator
Derek McManus, CTO of Telefónica O2 UK, Talks to Ralf Dreischmeier, a Partner at
The Boston Consulting Group
Derek McManus is the chief technology of-ficer of Telefónica O2 UK, one of Eu-rope’s leading mo-
bile operators. He recently spoke with The Boston Consulting Group’s Ralf Dreischmeier about technolo-gy’s role in the rapidly evolving mobile-communications industry, how O2 is using technology to its advantage, and the transformation he is leading to drive that eff ort—in short, his company’s use of technol-ogy as a strategic weapon.
Derek, the mobile industry’s com-petitive backdrop continues to shi . What do you see as today’s key challenges for industry participants and, in particular, for O2?
It’s all about data. We’ve seen a general explosion of data over the last several years, and over the last 18 months or so we’ve seen that explosion happen in mobile. This has three implications for the indus-try and O2. First, customers are now using data completely diff erently—they’re on the move, and they’re always connected—and their ex-pectations are changing very quick-ly. So the fi rst challenge for us is to understand and deliver what cus-
tomers need—and to do so in a way that’s diff erent from our traditional model. Challenge number two is about the economics of data. How can we monetize customers’ de-mand for data? And how do we change our investment in technol-ogy to support the necessary deliv-ery capabilities?
The third challenge is a combina-tion of the fi rst two. Because of data, we have to change how we run our business—how we market, how we service, and how the technology teams underpin the capability. And we need to do this in a way that keeps us apace of the changes hap-pening in data while we simultane-ously run our business from day to day and continue to be successful in our marketplace.
What role does technology play in the industry’s dynamics?
Technology is a fundamental part of this revolution. And consumers are increasingly savvy about it. Not long ago, the big brands would have to tell customers about a new technol-ogy and how to use it. But that’s gone. Customers now are more com-fortable with technology than they’ve ever been. They don’t neces-sarily need the big brands to tell them what to do, because they have options and can do a lot of it for themselves. So yes, technology is a fundamental part of this connectiv-ity world. The challenge for us is to make it relevant, make it intuitive, and make it valuable. Because if we don’t, customers can quite easily fi nd another route.
Derek McManus
With more than 21 years’ experience in the telecommunications industry, predominantly in the network space, McManus has been with Telefónica O2 UK since its earlier incarnation as BT Cellnet. He has served in his current position as chief technology offi cer for nearly two years, and is also a member of the board. His role
covers all aspects of technology—including products, service, the network, and IT areas. His team is responsible for everything from strategy (and its alignment with Telefónica O2 Europe) to 24/7/365 support. Currently, his two main areas of focus are customers and people development.
McManus was born in 1965 and grew up in Southside, Glasgow. He holds a master’s degree in telecommunications business management from University College London. He sits on a number of advisory and industry bodies.
FOCUS: Q&A
IT A
A complicating factor is that, as an industry, we anticipated that cus-tomers would continue to consume more and more data. And we de-signed and dimensioned our net-works based on that expectation. But what we’re actually seeing, par-ticularly with some of the smart-phones that are on the market to-day, is that many of the applications customers are using really don’t consume a huge amount of data. In-stead, they’re what I’d call “chatty.” They’re based on real-time updates or very snappy conversations.
So a challenge for us and the rest of the industry is that we were dimen-sioned on volume but now have to dimension on processing power. And it’s a real labor, because we have to measure different things and work with the people who provide the equipment across the network to redimension the whole network. It’s proving to be very chal-lenging from a technical point of view.
It sounds like O2 is essentially reinventing its business.
Yes, we are. But it’s a new world and O2 needs to move with it. Our cus-tomers are always connected to each other, either online or via their mo-bile phones. As a result, we asked ourselves the following: How do we interact with those customers in that medium? How do we become much more of an online business, so that when customers are online, we’re there and easy for them to do busi-ness and interact with?
We determined that we needed to move away from our traditional business of being a mobile operator and toward becoming a trusted
brand for customers. We want to manage many services for them, not just voice and text. So our aim is to become a connectivity service brand. What this eff ectively means is that we want to provide custom-ers with really neat products, like an
Apple or Amazon does—products that are intuitive and easy to use. As an example, we just launched an O2 money card, based on the idea that the three things that customers car-ry around with them all the time are their keys, their mobile phone, and their wallet. We reasoned that if we could somehow leverage that idea and our own capabilities, we could grow our business.
We also want to provide customers with great service so that they actu-ally want to do business with us. Those challenges—great products and great service—are what we think people will value and what will separate us from the compe-tition.
As part of O2’s overall transfor-mation agenda, you have also launched a very specifi c technol-ogy transformation. What moti-vated that launch?
I started the transformation pro-gram, which we named “50/50/50,” about two years ago. What drove it was our view that the economics of the business were changing and therefore our business model had to
change. The specifi c challenge for the technology people in our organi-zation was that they would not only have to transform themselves, they would also have to get there before anyone else so that they could help the rest of the business in its trans-formation. So we had an ambitious agenda.
Why did you call the transforma-tion “50/50/50”?
The program actually had four key goals. The fi rst three were to reduce our cost base by 50 percent, improve our time to market by 50 percent, and raise our return on investment by 50 percent—hence 50/50/50. The fourth goal was to provide the peo-ple and skills capabilities that make O2 the best technical place to work in the United Kingdom.
With regard to the numbers, the eco-nomics and our projections were tell-ing us that we probably had to im-prove on those dimensions by “only” about 30 percent. But to me, 30 per-cent is an incrementalist strategy. So we went to 50 percent primarily for what it says to our people, our busi-ness, and our partners and suppliers. It says that the program is about real transformation. To achieve the 50 percent targets, you can’t just move incrementally. You need to stand back and think fundamentally about doing things diff erently.
That’s quite bold in terms of goals and objectives. What was the reaction within the technology group and from the business when you announced it?
From the technology team, it was denial. They heard it but really didn’t believe it—particularly my
“We were dimensioned
on volume, but now we
have to dimension on
processing power.”
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management team. I spent probably a year with my management team repeatedly going through the impli-cations of 50/50/50 until they un-derstood that this was part of what they had to do every day. The rest of the business didn’t believe that we were serious. So the reaction was a bit of both denial and disbelief.
What happened in the fi rst few months of the transformation?
We made good progress, and I think mobilization was key. We had a number of important conversations within technology, across the busi-ness, and with our outside partners. The great thing about 50/50/50 is that, because it establishes very con-crete targets, there’s no room for argument. If one of my suppliers told me that they could cut costs by 20 percent, I’d say, “Which part of 50/50/50 don’t you understand?” So that part was nice and clear.
The conversations we had on the inside were similar. Someone would say to me, “Derek, do you really mean 50/50/50? Surely you don’t.” And I’d say, “Yes, I do.” But once we’d had that initial conversation, the discussion would quickly move on to, “So, does this mean we don’t have to do this anymore, or we don’t have to do that anymore, because we’re now doing things diff erently?” And at that point I was essentially letting go of the problem, because they were taking it on themselves. And they were experiencing how refreshing it is to be able to attack something in a diff erent way.
But the conversations I had with my leadership team were probably the biggest challenge. They’d come into my offi ce and tell me it couldn’t be
done, and I’d say, “Well, do you want us to rename the program ‘20/20/20’ or something similar? It’s going to be pretty awkward, since we’ve already taken credit for tak-ing on this challenge.” So there was resistance. All told, it took a full year
to reach the point where my team was saying, “There’s no point in say-ing it can’t be done, because it has to be done.”
You said you’re about two years into the transformation. Where are you in terms of both timeline and achievements?
From a cost point of view, we are two-thirds of the way through and more than two-thirds of the way to the target. In fact, I would say we’re probably only about 15 percent short in terms of achieving the tar-get. So it’s been a fairly sizable chal-lenge, but I’m pretty confi dent. For return on investment, we’re there—in fact, we’re exceeding the target.
Time to market is probably the big-gest challenge we’ve had. We’re now radically looking at how we do our IT and bringing in a number of skills and approaches that are closer to Web 2.0 and Internet-type ap-proaches than they are to traditional IT. In fact, we feel a bit like pioneers with our IT, both within our busi-ness and as part of our parent, Telefónica. But we’re beginning to get some traction, and I would say
that, of the three 50s, time to mar-ket is the one I’m now most excited about. And as a result of what we’ve done, our innovation capability has risen dramatically—because we be-lieve that the only way we can really achieve our goal sustainably is through innovation.
Meeting our people target has been a challenge because, as part of any transformation, you do many diff er-ent things to the shape and size of the organization. But we now have a cultural change capability and a training capability that I’m really excited about. We’re also now pull-ing a small number of key people in from outside and moving a number of people into roles that are orient-ed toward the future. All of this leaves me very excited about the capability of the organization going forward.
What do you think the critical success factors have been for what the transformation has achieved to date?
I think the clarity of the statement—50/50/50—has really helped. A pro-gram called 50/50/50 is a real atten-tion-getter, particularly with engineers. We could have given the program a diff erent name, perhaps an ethereal one that was a variant on a word from another language that meant change or transforma-tion or something similar. But I don’t think engineers would have engaged with that. By naming it 50/50/50, we made it very easy for them to understand what we in-tended. So I think that the name was a critical success factor. I also think that the management and leadership team demonstrating real commitment in actions, as opposed
“The clarity of
the statement—
50/50/50—has
really helped.”
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to words, was critical. The last key factor was getting some successes on the scoreboard early.
Are there any lessons learned thus far or things you would do diff erently?
I would have tackled innovation and time to market earlier. I think we focused too much on the fi nan-cial side early on, although we did that for a good reason, because we knew we’d gain credibility once people could see the money landing on the desk. But having reached the other side, I wish I’d started innova-tion and time to market a lot earlier, because it’s a real challenge now to hit those targets.
What type of leadership style was required to get people to buy into 50/50/50?
Foremost, it required a team eff ort, since the transformations we had to go through couldn’t be done in pockets—they had to be done on quite a broad basis. It also required a lot of eff ort invested in getting people to open up. Resistance to change comes in many forms. And what I found in the fi rst year was that resistance would come when people were really personally un-comfortable with the change they had to go through. It would manifest itself in off ering technical reasons for why things couldn’t be done. So we spent a lot of time with the man-agement team to get our engineers to open up on an emotional level as well as on a practical level, which was no mean feat with my leader-ship team. But as a result of these eff orts, we’re now able to have much more honest, meaningful, and pro-ductive conversations than we were
two years ago. So that element has been very important in implement-ing 50/50/50.
Did the arrival of the downturn have any impact on the transfor-mation?
It heightened the sense of urgency in terms of the cost agenda, certain-ly. But we had already taken out a signifi cant amount of cost and were therefore ahead of the game, so the downturn found us in a relatively strong position. But this was more about luck than insight, since none of us foresaw the downturn.
Are there any additional or fu-ture challenges for O2 in general or the technology function in par-ticular that you can foresee com-ing on top of 50/50/50?
We have several challenges facing us. One is determining the next act. When I went to my colleagues in Telefónica and said that I was doing 50/50/50, they were skeptical. But about a year and a half into it, they told me they really liked 50/50/50—and that I should do it every two years! I nearly fell off my chair when I heard that. But there’s an element of truth there, because a transformation on the scale of this one really has to continue. You can’t just do it for three years and then sit back and admire what you’ve done. So I’m now thinking about what the follow-on is.
A second challenge, and perhaps our biggest one, is to change our operating model to be much more regionally and globally based. We should be developing services on a global level, and we should have technical interfaces that simplify doing so. Another big challenge for me is, how do I innovate like a small company when I’m part of such a large one? How do I drive the U.K. business forward but also make the corporation feel comfortable mov-ing quite dramatically away from its comfort zone? And I’m recognizing that a lot more of my conversations now are around whether people’s heads and hearts are comfortable with the next set of transformations that I think we need to do.
How important a role does inno-vation play?
Last summer we held a series of conferences that were all about innovation. We think it’s vital, and we’re trying to actively engage ev-erybody on the technology team. We’re also defining innovation broadly. We believe it’s about more than fancy products and designs—it’s about staying one step ahead and looking at things differently. And this applies to everything and everyone. It applies as much to the people who are monitoring the net-work, who are thinking about how we might do things in a diff erent way that enhances effi ciency and the customer experience, as it does to product design.
In short, I think innovation will be how we succeed. This is particularly true because, through 50/50/50, we’ve already addressed the really obvious things that we needed to do to become leaner, quicker, and faster
“How do I innovate
like a small company
when I’m part of such
a large one?”
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to market. So now we need to look for things that aren’t obvious, or that maybe are risky or are things we’re uncomfortable with. And we feel that if we can develop a work-force that is engaged in innovation and feels comfortable expressing it-self, we’ll be in good shape. Innova-tion will be how we succeed.
Do you have dedicated innova-tion capabilities? If so, how do they relate to your broader inno-vation campaign?
I have an innovation team, and part of its job is to engage the entire organization. Telefónica off ers a lot on the innovation front. It has a considerable amount of engineer-ing resources devoted to innovation, and I’m trying to leverage those in the United Kingdom and apply them to the customer. One way we’re doing that is through some-thing we call O2 Crowd, which is essentially a vehicle for the internal “crowdsourcing” of our own ideas. We post ideas and encourage the organization to react. This is some-thing that we see tremendous value in because the customer-service agents who talk to customers, or the
engineers who go out and do things in real time on our network, o en have more ideas about how to make things work than the specialists sit-ting in the ivory tower. So yes, we have a separate innovation func-tion. But part of its job is to make innovation accessible to the wider community.
You said that there was disbelief from your colleagues on the busi-ness side when you announced 50/50/50. What does the business think now of the technology group and its eff orts?
We’re being held up as an example. In fact, all of O2 UK is now engaged in a transformation program. Telefónica is also holding the U.K. technology team up as a model of the type of success that’s possible. So 50/50/50 has become part of the company’s vernacular.
What would be your advice to other CTOs and CIOs who plan to embark on a similar journey?
I think it’s critical that you make what you’re trying to do really clear so that people understand it fully.
There shouldn’t be any myths or misunderstandings about what the objectives are. I also think it’s im-portant to engage with the people in the organization who want to engage with you. Lastly, I think it’s vital to lead by example. I’ve had to be very, very passionate about this eff ort from the start, because if I hadn’t been, we would have come off the rails very early. And that’s meant having tough conversations with my leadership team, tough conversations with my boss, tough conversations with the corporation, and tough conversations with the organization. So you need to put yourself under a bit of pressure. But I think as long as you’re honest and driven and clear, you can probably achieve your objective, assuming it’s attainable.
Derek, thanks for your time.
My pleasure.
Ralf Dreischmeier is a partner and manag-ing director in the London offi ce of The Bos-ton Consulting Group. You may contact him by e-mail at [email protected].
FOCUS: Q&A
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HOT TOPIC
Capturing the Value of Cloud Computing
How Enterprises Can Chart Their Course to the Next Level
by David Dean and Tamim Saleh
Some of the biggest and most powerful IT players—Microsoft, Google, IBM, SAP, and Wipro Technologies—are jostling for position in the emerging cloud-computing market. Countless start-ups, many telecommunications
companies, and several other unexpected players—Amazon.com, in particular—have joined the party, too.
Analysts estimate that in 2012, the size of the enterprise cloud-computing business may reach $60 billion to $80 billion—or about 10 percent of the global IT-services and enterprise-so ware market. Although its double-digit growth rate is welcome relief for vendors in this downturn, the cloud-computing market is still early in its life cycle.
So is cloud computing overblown hype or a real opportu-nity to transform how IT is consumed and deployed with-in an enterprise? The truth is more subtle than some analysts and service providers might suggest. As with other technologies, it is easy to overestimate the short-term eff ect of cloud computing while underestimating its longer-term consequences.
Similar to Web 2.0’s disruption of traditional business models in the entertainment, media, and telecommunica-tions industries, cloud computing presents a new para-digm. It extends the Web 2.0 concepts of common archi-tecture, abundant bandwidth, and community to computing resources, and could help spark the creation of new business models built around collaboration, net-works, and information in nearly all industries.
The Potential of Cloud Computing
To explain the potential of cloud computing, it is useful to start with a defi nition. Cloud computing is commonly
defi ned as the deployment of IT resources as a service over the Web and other networks. Those resources—such as processing power, storage, computing platforms, and applications—are remote from the user, or “in the clouds,” and are paid for only as they are used. (For a more complete definition, see the sidebar “Defining Cloud Computing.”)
The nature of computing changes when IT resources be-come more abundant and can be instantly and aff ordably deployed, fl exibly managed, and universally accessed from a broad range of devices, including PCs and mobile hand-sets. This “variabilization” of both the costs and scope of IT resources is central to the promise of cloud computing and helps explain the growing interest in it. In the enter-prise environment, cloud computing has the following advantages, not only for the CIO but for all IT users:
Accelerated deployment of new applications without ◊ consuming the computing resources of the enterprise
Reduced capital requirements for up-front investments ◊ in IT because the enterprise is able to utilize the infra-structure, applications, and platforms in the cloud
The fl exibility to meet peaks and troughs and sudden ◊ changes in demand
The capability to provide applications or services ◊ that meet demand precisely and can match future demand
Signifi cant cost savings in selected situations, notably ◊ when the scale of an enterprise’s computing resources is relatively small compared with that of cloud pro-viders
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Data-sharing and collaboration capabilities for proc-◊ esses that involve many parties; cloud solutions are o en more economical and faster to deploy than their alternatives
The ability to effi ciently deploy greenfi eld business ◊ processes; cloud computing frequently enables enter-prises to launch new initiatives without having to rely on legacy systems and architecture
Although the enterprise cloud-computing market is developing rapidly, it will take time for enterprises to realize these advantages. Challenges involving data security, privacy, and regulation will slow implementa-tion in some cases. To date, cloud technology has been deployed in areas with low perceived risk, such as e-mail, backup and recovery, batch processing, testing, and qual-ity assurance.
Other emerging cloud applications include customer relationship management, workfl ow, unifi ed communi-cations, and simple enterprise-resource planning. Appli-cations that are more sophisticated will be deployed as the market matures. For example, research and develop-ment in the pharmaceutical, automotive, and other industries is increasingly moving to the cloud.
The Levels of Clouds
In our work with clients, we see three distinct levels of value in cloud computing. (See Exhibit 1.) Each level builds on the previous one and requires a shi in current business processes. But each level also enables value creation up to an order of magnitude larger than the previous level.
Utility Level.◊ Enterprises can benefi t from lower costs and higher service levels through the availability of elastic computing resources and pay-per-use models.
Process Transformation Level. ◊ Enterprises can introduce new and improved business processes by leveraging the common and scalable assets and collaborative potential of cloud computing.
Business-Model-Innovation Level.◊ New business models can be created by linking, sharing, and combining resources using cloud computing in an entire business ecosystem.
Although utility-level cloud services can produce bottom-line results quickly, the benefi ts of the process transfor-
Cloud computing has sparked several competing defi ni-tions. One commonly accepted defi nition explains cloud computing as a pay-per-use model for enabling conven-ient, on-demand access to a shared pool of confi gurable computing resources—such as networks, servers, storage, applications, and services—that can be rapidly and easily deployed and released.1 This defi nition focuses on public clouds, but private clouds—those dedicated to an organi-zation or group of organizations—will likely spur large enterprises to adopt cloud computing. Private-cloud off er-ings will lead to hybrid models that combine public- and private-cloud infrastructures.
The cloud-computing model off ers four general types of services:
So ware as a service ◊ is the provision of applications, such as customer-relationship-management so ware, which is off ered over a network and does not require users to install and run the application on their own computers.
Of the four cloud services, so ware as a service cur-rently has the largest market by a wide margin.
Infrastructure as a service ◊ is the availability of storage, processing, and network capacity that is billed on the basis of consumption.
Platform as a service ◊ refers to a development environ-ment and associated tools and services that are off ered to customers for building their own applications.
Process as a service ◊ is the logical extension of so ware as a service—the full provisioning of a process, such as accounts-receivable collection, in the cloud.
Defining Cloud Computing
1. Over the last decade, BCG has developed a comprehensive IT benchmarking database, which allows for industry-specific, apples-to-apples comparisons.
HOT TOPIC
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mation and business-model-innovation levels will take longer to realize because they represent fundamental shi s in the way that work gets done within enterprises and among business partners. Many companies have be-gun to benefi t from the utility level; however, far fewer have explored the process transformation and business-model-innovation levels. To do so, CIOs will need to work closely with executives to develop a strong understanding of the strategic and operational require-ments of their businesses. But as companies are discover-ing, the benefi ts of each level are considerable. (See Ex-hibit 2.)
The Utility Level: Lower Costs and Higher Service Levels
Although small and midsize enterprises and start-ups may have been early adopters of cloud computing, larger companies are now beginning to improve their deploy-ment of labor, hardware, so ware, and power by selec-tively picking applications that take advantage of the greater effi ciency, scale, and focus of cloud service pro-viders. Genentech, the biotechnology company acquired last year by F. Hoff man-La Roche, is an example of a company that has turned to Google Apps for its e-mail and calendar programs and a host of other applications for its 11,000 employees. At the time of its migration to the cloud-computing model a year ago, Genentech had 36 terabytes of e-mail and 2 million scheduled meetings stored in its systems. It was contemplating spending tens
of millions of dollars on a new data center. Genentech avoided that capital expense and reduced its anticipated cost of ownership by several million dollars over the next fi ve years by using cloud service providers and virtualiza-tion technologies.
Even the public sector is using cloud computing. Carls-bad, a city in southern California, is relying on Microso ’s cloud off ering for e-mail and collaboration services, such as meeting scheduling and instant messaging. The city is saving more than 30 percent annually. On a potentially much larger scale, the U.S. government has launched Apps.gov, a portal that helps government agencies mi-grate their computing resources to the cloud-computing model. This is part of President Barack Obama’s initiative to modernize and reduce the cost of IT infrastructure in government agencies.
Labor. Most CIOs recognize that their departments spend too much time “keeping the business running.” These responsibilities decline signifi cantly in a cloud environment. Rather than fi xing the plumbing, IT staff can be improving the functionality and features of IT systems while CIOs work on transforming the busi-ness. IT organizations can become smaller and more strategic.
Hardware. Companies can benefi t from the presumed higher effi ciency of cloud service providers. A typical cor-porate data center needs to carefully balance many com-
Source: BCG analysis.
Exhibit 1. Cloud Computing Offers Three Levels of Value
Utility level
Lower costs and higher service levels through the elastic computing resources and pay-per-use models of cloud computing
“Variabilization” of costs: capital ◊ costs become operating expenses
Lower and more predictable costs◊
Less time required to roll out new ◊ applications
Process transformation level
Improved integration of and collabora-tion in business processes by leveraging the common assets of cloud computing
Acceleration of business processes◊
Common data and process ◊ standards
Shared linkages◊
Requires new ways of working◊
Business-model-innovation level
New business models and ecosystems through linking, sharing, and combin-ing resources among enterprises using the scalable assets of cloud computing
Requires an understanding of core ◊ and noncore activities, and a willingness to share data across the ecosystem
Considerable organizational and ◊ cultural implications
Shi from current business practices
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peting demands—in particular, optimizing utilization while managing large spikes in volume and delivering high levels of service. Cloud service providers aim to achieve a better balance across these demands by lever-aging scale and standardization along with smarter tech-nologies, such as server virtualization. Consequently, they can potentially operate at a lower cost than a typical en-terprise-IT data center. To be sure, traditional outsourcing arrangements also convey many of these labor and hard-ware benefi ts, but they generally lock customers into longer-term contracts with less fl exibility.
So ware. Enterprise consumption of so ware is driven by demand. With cloud computing, companies can more easily deploy new applications and adjust usage up or down than with a conventional setup. Traditional main-tenance and support are performed by the cloud service provider, signifi cantly reducing the operating costs of en-terprises.
Power. Enterprises can take advantage of the advanced power-management capabilities of cloud service provid-ers. They can also make use of their renewable-energy supplies and other green initiatives that reduce the car-bon footprint of computers and servers.
The Process Transformation Level: Improved Business Processes
Although the value of utility-level cloud services may ap-peal mostly to CIOs, the benefi ts of process transforma-tion should accrue throughout an enterprise—allowing the fi nance staff to conduct transactions more effi ciently, researchers to set up and modify their computer models more swi ly, and sales professionals to serve their cus-tomers more eff ectively.
Companies frequently have a diffi cult time improving business processes and systems, despite the best eff orts of both business and IT executives. Business processes are o en inadequately supported by the underlying tech-nologies—which o en consist of an array of diff erent systems and incompatible data structures. The cloud-computing model of standardized applications, data for-mats, and development tools helps enable the implemen-tation of processes that depend on access to shared data, collaboration, and mobile or remote access.
One company that off ers digital document management and storage aims to undercut its competitors by 30 to 50 percent by moving to the cloud-computing model. The
HOT TOPIC
Source: BCG case experience.
Exhibit 2. The Benefits of Cloud Computing Are Considerable at Each Level
Utility level
Example: a global energy company
Complete virtualization of servers results in:
Increased server utilization◊
Improved database functionality◊
Less time spent managing the ◊ operating system
Fewer so ware licenses◊
Lower storage costs◊
Process transformation level
Example: a small-to-midsize business
Implementation of shared services in document management produces:
Workfl ow improvements through ◊ remote scanning, data entry, and processing of back-offi ce activities, such as accounts receivable and payable and claims management
Business-model-innovation level
Example: a global health-care company
Standardization and automation of the elements of the research process yield:
Ability to access data management and ◊ data-mining applications on an open platform that connects pharmaceutical companies and their research partners
Readily available collaboration tools, ◊ security, data management, data diagnostics, and analysis
Estimated impact:
Savings of 10 to 12 percent, or◊ $45 million a year, on IT costs
Estimated impact:
A 50 percent improvement in effi ciency ◊
Labor arbitrage benefi ts◊
Estimated impact:
Up to a 30 percent increase in speed ◊ to trial
Savings of up to $400 million◊ per drug
IT A
vendor is building a delivery model involving document scanning and off shore processing. The model relies on workfl ow, business-process-management applications, a common database, and storage available through cloud computing.
Another example of a company using cloud computing is Bechtel, a large engineering and construc-tion company, which is on a journey to standardize construction management. The company has created a large private cloud, based on a common and shared set of processes and applications, that allows employees, contractors, and partners to work together.
Retailers, too, may eventually be benefi ciaries of process transformations enabled by the cloud-computing model. These companies require vast computing resources to analyze the mushrooming amount of data—which is doubling every nine months—about customers and prod-ucts. Cloud computing can provide the resources needed to perform real-time analysis not only of customer behav-ior, such as heavy spending patterns, but also of econom-ic incentives, such as how product placement aff ects sales of merchandise.
The Business-Model-Innovation Level: New Business Models
All companies rely to a greater or lesser extent on part-nerships and cooperation with other companies and or-ganizations. Some of these so-called business ecosystems are well known, highly developed, and very successful, such as Procter & Gamble’s Connect + Develop program and Toyota Motor’s network of suppliers.
Cloud computing can help power the next generation of business ecosystems by enabling the deconstruction of value chains and the emergence of new, innovative busi-ness models. The value chain of the health care indus-try, for example, consists of pharmaceutical companies, insurers, physicians, hospitals, and patients. Under the current crazy-quilt system seen in many markets, bits and pieces of a patient’s health record are stored in sev-eral locations, but the complete record is rarely in one place. Slowly, patient data and health histories are being made available through cloud providers. Quest Diagnos-tics, for example, makes lab results available to patients
through Google Health and Microso HealthVault, both cloud services. Although this is a small step, it could eventually lead to more readily available information that can help make it possible to deliver medical care more effi ciently and eff ectively.
Pharmaceutical companies are also exploring ways to fundamentally reshape their processes for discovering new drugs by using cloud com-puting to simplify collaboration on basic, nonproprietary—but expensive—research. Through the creation of a common set of data standards, tools, and processes, these companies can dramatically increase their ability to work with outside researchers and partners, and save up to 30 percent of
the cost of discovery—which could amount to several hundred million dollars per drug.
Cloud computing could reshape the business models of other industries as well. The media industry, for exam-ple, is in the process of digitizing content while facing substantial business challenges, including piracy, declin-ing audiences, and new forms of entertainment, such as user-created videos. Competitors, such as television net-works or cable channels, could conceivably agree to operate common content production, distribution, and storage platforms in order to create a radically lower cost basis.
Cloud computing is not a panacea—and it is certainly not the only way that companies can achieve greater collabo-ration. Toyota began collaborating with its partners long before the birth of cloud computing. But cloud comput-ing does provide a common platform that eases the way. Companies will still need to rewire the way they operate, for example, by putting their data and content in a stan-dard form. They will also need to make fundamental choices about where they possess competitive advantage and derive value, and where they can cooperate without jeopardy.
The View of the Cloud from the Inside
CIOs are still fi guring out whether and how they want to take advantage of cloud computing. The Boston Consult-ing Group recently surveyed about 30 CIOs in several industries and countries and found that most of them were thinking through the performance, availability, and
Cloud computing can
help power the
next generation of
business ecosystems.
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security concerns of cloud computing—but also consider-ing its operational and strategic implications. About one-third of the CIOs were experimenting with or deploying cloud services for activities such as e-mail and data storage. Another third had developed clear plans and strategies to fi t cloud computing into their overall IT framework. And the last third did not have clear plans but said that they will be investigating or developing strategies that address the role of cloud computing.
We found that the CIOs in the pharmaceutical, health care, media, and logistics industries were particularly advanced in their thinking. Many of the interviewees in these industries had moved beyond viewing cloud computing simply as a way to save money and manage resources. They were considering ways that cloud com-puting could improve the technical environment and their business processes, and also enable new business models.
While recognizing cloud computing’s potential, many of the CIOs we interviewed were still concerned about its performance, availability, ability to integrate with existing IT systems, and security. Most of the CIOs recognized that cloud computing poses risk and reward tradeoff s that must be carefully assessed. Some of the hurdles will dis-
appear with technological advances. Others depend on an amenable regulatory environment, both national and global. But some of the most important hurdles are inter-nal—the cultural, organizational, and legacy barriers of moving applications to the cloud. (See Exhibit 3.)
The Path Forward
Given that cloud computing is in its infancy, enterprises need to chart their course carefully. They need to under-stand both the immediate needs of their businesses and their longer-term aspirations. Some companies may be content with lower costs and higher service levels. Others will have greater ambitions or want to tackle strategic business challenges. Enterprises also need to fully under-stand the risks and rewards of cloud computing and the competitive landscape. All cloud-service providers are not created equal. Their market ambition and service and support levels vary considerably. Some provide inte-gration with other IT systems, while others are selling basic, standalone services. Furthermore, companies should understand how their outsourcing partners view cloud computing and what role they play in fulfi lling the enterprise’s IT needs. Are outsourcing partners embrac-ing cloud computing themselves? Does it make sense to migrate outsourced applications to the cloud?
HOT TOPIC
Source: BCG interviews and analysis.
Performance, availability, scalability, and adaptability
Concerns about latency of data networks and service interruptions◊
Uncertainty about ability to handle large numbers of users simultaneously◊
Simple and standardized cloud solutions less suitable for complex processes◊
Diffi culty in customizing cloud applications◊ Security and regulation
Anxiety about data security, especially of critical customer information◊
Strict regulation of data privacy and protection in some regions◊
Underdeveloped rules on cross-border data exchange◊ Vendor landscape
Road maps of some vendors lack clarity about functionality, performance, and cost◊
Concerns about long-term viability of some vendors◊
Undeveloped cloud-computing standards, making migration between vendors diffi cult◊ Organizational inertia
Cultural resistance to sharing data and changing traditional ways of working◊
Lack of clarity on IT processes◊
Large investments in traditional applications, infrastructure, and other resources◊
Exhibit 3. Despite the Promise of Cloud Computing, Several Hurdles Still Hinder Wider Adoption
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Finally, enterprises need to be willing to change how they operate. Within the IT department, work may become more strategic and less operational. The ability to enforce and maintain common architectural standards will be a prerequisite for success. A number of cloud services re-quire a cultural shi to greater collaboration, sharing, and trust within the enterprise. Although many employees will embrace this change, others will fi nd it unsettling. (See Exhibit 4 for an outline of key issues that enterprises need to address.)
CIOs should take the lead and help prepare their organi-zations by making both short- and long-term plans to diagnose current operations, identify opportunities, and act.
In the short term, CIOs should consider the following steps:
Explore the cost savings opportunities off ered by the ◊ more mature and relatively stable cloud off erings, such as backup, storage, and e-mail
Initiate controlled pilot programs in areas such as ap-◊ plication development, batch processing, and “burst” capacity needs
Develop a road map for integrating cloud computing ◊ into the IT agenda by identifying potential areas in which the cloud model can be a source of value cre-ation
Evaluate specifi c cloud applications in light of their ◊ ease of implementation and the readiness of the organization
Set up a governance structure to manage and deliver ◊ cloud applications
For the long term, CIOs should work with senior execu-tives on a more ambitious set of initiatives. As a group, they should fi rst develop a common understanding of the potential of cloud computing and its consequences for business process transformation and business model in-novation. They should put cloud computing on the busi-ness agenda.
Second, the team should create an overall plan that enables fundamental business transformation through cloud computing. The plan should quantify the busi-ness case and track it through the use of clear mile-stones in order to ensure that cloud investments are justifi ed.
Source: BCG analysis.
Exhibit 4. Enterprises Should Plot a Course to Cloud Computing
Risks and rewards
Which applications are most suited to cloud computing?
Are the economics as benefi cial as some vendors claim?
Is a private cloud more appropriate than the public cloud?
Are risks related to data security, privacy, performance, and regulation in proportion to the benefi ts?
What value does cloud computing off er beyond the utility level? Are fundamental process-transformation and business-model innovations achievable?
Competitive landscape
How clearly defi ned, stable, and suitable are vendors’ current off erings and future road maps?
What are vendors’ market ambitions and service and support levels?
What is the longer-term viability of vendors, especially those providing critical applications?
Role of outsourcing
How do current outsourcing partners view cloud comput-ing? Are they embracing it in their own off erings?
How competitive is outsourc-ing versus alternative cloud off erings?
What role does outsourcing play in current and potential future applications when compared with cloud computing?
What is the potential to migrate outsourced applica-tions to the cloud-computing model?
Change management
How signifi cant are the change management challenges of cloud computing and how can they be addressed? For example:
Workforce deployment as ◊ tasks become more strategic
Ability to enforce and ◊ maintain common architectural standards
Cultural shi to greater ◊ sharing, collaboration, and trust within the enterprise
T B C G
Third, the group should defi ne the role of cloud comput-ing in the overall IT strategy, taking into account the fol-lowing areas:
Architecture. ◊ What standards can be adopted that ben-efi t from cloud technology and provide the foundation for further development?
Infrastructure. ◊ What is the role of cloud computing in managing data centers and delivering infrastructure services? How will traditional and cloud infrastruc-tures be managed?
Applications. ◊ Which traditional applications can or should be replaced by cloud applications? What is the role of cloud computing in the applications road map?
Data Protection, Privacy, and Jurisdiction.◊ What data can be moved to the cloud? How can security and privacy concerns be rigorously managed? What are the regula-tions across jurisdictions?
IT Processes and Governance.◊ How will IT processes change, and what capabilities are needed to man-age them?
Outsourcing and Partnerships. ◊ How will outsourcing models leverage the cloud-computing model? How will strategic alliances and partnership models change?
By following a systematic and measured approach, enter-prises can explore the benefi ts of cloud computing, man-age the risk of adoption, and achieve advantages in cost, speed, effi ciency, and competitive positioning. For some, it will be suffi cient to focus on realizing the benefi ts of the utility level; for others, the true value of cloud com-puting will lie in a fundamental reappraisal of business processes or the development of entirely new business models.
David Dean is a senior partner and managing director in the Munich offi ce of The Boston Consulting Group. You may contact him by e-mail at [email protected].
Tamim Saleh is a partner and managing director in the fi rm’s Lon-don offi ce. You may contact him by e-mail at [email protected].
HOT TOPIC
IT A
T he demands on IT organ-izations continue to change and expand. To-day’s IT organization is far more centralized, out-
sourced, and complex than it was just a few short years ago. It also off ers the business a much wider range of prod-ucts and services. And this evolution promises to continue. Tomorrow’s IT organization may be expected to sup-port the business on any number of additional, high-value-added fronts, in-cluding business process design, prod-uct design, innovation, business trans-formation, and even business strategy development. In short, IT may be ex-pected to serve as a genuine partner to the business. The question is, will your workforce be equipped to respond?
If you are not actively thinking about this now—and most CIOs and IT lead-ers are not—the answer might be no. The roles, skill sets, and head count that serve you well today could prove inadequate, excessive, or fundamen-tally misaligned by 2015, depending on industry developments and your company’s business strategy. And your ability to adjust quickly and ef-fectively could be greatly compro-mised by a host of factors, including an aging demographic, specifi c skill shortages in the market, and competi-tive activity.
In short, this is a topic that should be at the top of the CIO agenda. Yes, the current environment remains unset-tled and demands your focus. But the future will be here before you know it. Taking a proactive, strategic ap-proach to workforce management will ensure that the IT organization is in the best possible position to support the business—in whatever capacities the business needs—when the future arrives.
Active Management of the IT Workforce
Strategic IT workforce management is the antithesis of a reactive or passive approach. It means taking a longer-term (for example, a fi ve- to ten-year) perspective on personnel, and active-ly thinking about possibilities, needs, and constraints with regard to the company’s business and IT strategies. It means asking questions such as the following:
Where is the CEO taking the com-◊ pany, and how will IT be expected to support that?
What size IT organization will be ◊ required? What new roles will we need to establish, and which roles should we consolidate or elim-inate?
Which skills will be necessary, and ◊ where are we currently defi cient?
If we need to add people, where ◊ and how quickly will we be able to fi nd them, and what salaries will we need to off er to be competitive? Alternatively, if we need to shrink the IT organization, how and when should we start that process?
What percentage of our current ◊ workforce is approaching retire-ment, and what steps should we be taking to prepare? What is our voluntary attrition rate?
The questions will vary depending on a company’s particular circumstances. (See Exhibit 1.) Nonetheless, asking these types of questions, and follow-ing up with rigorous analysis and planning, will ensure that there are no surprises around the corner and that the appropriate capacity and capabili-ties are in place at the right time. IT is seizing the reins and actively prepar-ing for its own and the company’s future—rather than simply waiting passively and reacting.
Note that this approach is not meant to replace standard HR practices and activities (employee qualification, training, recruiting, and head-count reduction strategies) as they are ap-
Strategic IT Workforce Management
Building Tomorrow’s Key Capabilities Today
by Melanie Bockemühl, Rainer Strack, and Alexandra Lehmann
VIEWPOINT
T B C G
plied to IT. Rather, it is meant to in-form and strengthen those practices and activities, take them several criti-cal steps further, and add a long-term, strategic lens.
Strategic IT Workforce Management Defined
Taken on a high level, strategic IT workforce management has four steps: determining how exposed the IT organization is to demographic risk; projecting internal demand for IT resources; identifying gaps revealed by these analyses; and defi ning and launching corrective measures.
Determining Demographic Risk. The fi rst step in the process is to deter-mine how exposed the IT organiza-tion is over the medium to longer term (that is, over the next fi ve to ten years) to demographic risk. If no active hir-ing or firing decisions were made, where and when would there be vul-nerabilities (that is, shortages in key positions and skill sets) due to such
variables as retirements, unforced at-trition, and changes or advancements in career paths? This analysis should be done for each and every role and position in IT. (See Exhibit 2.) It should also be performed for freelancers—that is, external contractors who work on a full-time basis fi lling roles that the company would ideally like per-formed in-house. Most IT organiza-tions require from 15 to 25 discrete roles.1 These roles can be refi ned into subroles as warranted on the basis of IT architecture domains or technolo-gies. The “business analyst” role, for example, might require separate posi-tions for CRM and ERP analysis.
The results of this exercise can be sur-prising. One company determined that its IT workforce faced no demo-graphic threat over the next five years—but that head count stood to plunge by roughly 50 percent over the following fi ve years, particularly in positions that demanded a signifi cant degree of experience. Given common staff -development paths, the company
realized that it needed to take action immediately to ensure that it would be prepared.
Gauging Internal Demand. The sec-ond step is to gauge internal demand for IT personnel, which starts with the establishment of a budget. There are two components to this step. The fi rst is the establishment of long-term IT-effi ciency targets. This can be done on the basis of a variety of metrics—for example, IT costs as a percentage of company revenues—benchmarked against industry standards. The sec-ond component, which can signifi-cantly infl uence how rigidly the com-pany adheres to its effi ciency targets over a specifi c time period, is a deter-mination of the IT organization’s near- to medium-term goals and ob-jectives. If the IT organization is plan-ning a major transformation over the next 12 months—or if the business is
A well-established,stable IT organization
A lean, heavily outsourced IT orchestrator
A legacy IT unitfacing major change
How can we reduceour dependence on
external staff?
How can we achievea skill shi towardnew technologies?
How can we controldemographic risk?
What skill mixdo we need in-houseto add value to the
business?
How should we developIT staff in view of futurebusiness requirements?
How can we ensuresufficient skills capabilities
for an architecture transformation . . .
. . . while reducing andreorganizing an oversizedIT organization for better
performance?
Source: BCG analysis.
Exhibit 1. Companies Must Address Their IT Workforce Needs According to Their Circumstances
VIEWPOINT
1. The roles defined by the Information Technology Infrastructure Library provide a good starting point for this analysis.
IT A
undergoing a dramatic change—the budgetary implications will be far diff erent than if IT expects to oper-ate in a business-as-usual mode.
Once a target budget has been de-termined, the optimal IT head count, roles, and skill sets can be estimated on the basis of projections about the company’s future business strategy and corresponding IT requirements, which will infl uence such things as the IT architecture and organiza-tional structure. This requires both top-down and bottom-up analysis. Top-down modeling is used to de-
fi ne the targeted size of the work-force and the optimal mix of roles and skills. Bottom-up analysis using industry or functional benchmarks is used to validate those fi ndings.
To get an accurate sense of head-count and budgetary needs, it is im-portant to treat each IT unit sepa-rately and to calculate budgets for the “plan” and “build” functions (that is, projects) separately from the budget for the “run” function (that is, operations). Forecasts for the plan and build functions should be based on the anticipated project pipeline.
The run budget should be devel-oped on the basis of industry bench-marks and previous years’ run bud-gets, adjusted for any planned growth or reduction targets.
Estimation of the required skills is mainly driven by the type of func-tion. For each IT unit, the relevant roles are determined on the basis of the services and products delivered, the processes and tasks performed, and the IT architecture domains and technologies covered. The sizing of the skill mix is done on the basis of typical spans of control and role
Application managerBusiness analystCapacity managerChange managerConfiguration managerContinuity managerData quality managerInternal supportIT supporterIT-business architectIT-security managerPartner managerProblem managerProject managerQuality managerRelease managerService level managerSystems analystSystems architectSystems engineer
–46–77–11
54
–544–8
1256
–2027
–354–169–100
–630
–632
–14
–7–24–11
54
–543
3120
5–1827
–264–129–80–52922
52
2420
–1154
–54211
2735
–1626
–193–101
–64–52882
813
4843
–1153
–54118
2665
–1524
–138–78–52
–428
1351024
7076
–1143
–54023
2635
–1323
–88–58–41
–327
1781232
7784
–1243
–54024
2565
–1322
–71–50–37–326
1931335
< –80% –60% to–80% > 80%60% to
80%40% to
60%5% to20%
5% to–5%
–5% to–20%
–20% to–40%
–40% to–60%
20% to40%
IT role1 2010 2011 2012 2013 2014 2015
Urgent need for problem
managers, project managers, and
quality managers
Projected surplusof IT support staffbecause incidentmanagement is being outsourced
Surplus of dataquality managers
owing to newsoware
capabilities
Shortage Surplus
An illustration of a company’s projected shortages and surpluses (number of FTEs)
Source: BCG analysis.Note: FTEs are full-time-equivalent staff.1List of roles is for illustration only.
Exhibit 2. Gap Analysis Can Identify Roles That Require Action
T B C G
ratios. While the type of function has a major impact on skill requirements, the type of project—contrary to what one might expect—is relatively unim-portant. The diff erences in the skills demanded by diff erent kinds of proj-ects—for example, systems consolida-tion versus upgrade—are rather minor and tend to cancel each other out as long as the pipeline has a mix of proj-ect types.
The results of the head-count and re-quired-skills modeling should be com-plemented and validated by industry benchmarks and the company’s own experience. O en, this reality check can lead to signifi cant adjustments to the top-down calculations. One com-pany’s top-down estimates, for exam-ple, suggested that it needed roughly three business analysts for every sys-tems analyst. Bottom-up analysis and benchmarking, however, revealed that the typical industry ratio was approxi-mately one business analyst for every two to four systems analysts. On the basis of this finding, the company made a major revision to its numbers, settling on a ratio of one business ana-lyst for every two systems analysts.
Gap Analysis and Remedial Steps. The third step in strategic IT work-force management is a comparison of the supply and demand assessments. This will reveal shortages or surpluses in IT capacity and skill sets for the time period under consideration. It will also provide the IT organization with a highly informative, quantita-tive basis for taking corrective action through such HR measures as hiring, training, outsourcing, qualification and transfer, head count reduction, and temporary staffi ng.
Gap analysis not only allows the IT organization to systematically deter-
mine the orientation and scope of the required measures, it also allows for the simulation of the direct ef-fects of those actions. Further, it al-lows the set of measures to be mod-eled and optimized with regard to costs. For example, if there is a sig-
nificant surplus of head count or skills in some departments but short-ages in others, this can o en be rem-edied most cost-effectively by the qualifi cation and transfer of suitable employees, which avoids the costs arising from head count reduction and part of the cost of hiring and training new staff . Gap analysis per-mits a “dry run” of such potential moves and a look at probable fi nan-cial outcomes.
The Approach in Practice
A look at how one company utilized and benefi ted from strategic IT work-force management is instructive. The company’s demand analysis revealed the need for a sizable decrease—more than 50 percent—in the required IT workforce over the next seven years. Driving that targeted decrease was a confl uence of forces—the company’s revenues were expected to decline, the company’s IT budget as a percent-age of revenue was more than 35 per-cent above the industry benchmark and therefore needed to be reduced, and IT workforce costs were growing annually. The challenge was how to accomplish the reduction while main-taining and building critical capabili-
ties—the IT organization was plan-ning a major transformation of the IT architecture—and doing so in as cost-effi cient and humane a manner as possible.
The company’s assessment of key roles and skill sets indicated that cuts could not be made indiscriminately or across the board. Top-down analy-sis revealed that the company would have a strong future need for project and problem managers, in particular.2 Bottom-up analysis confirmed that fi nding but also indicated that IT’s projected need for other roles was too high. The need for business analysts, for example, had to be adjusted down-ward by fully 50 percent.
To minimize the number of layoff s and associated costs, IT and HR worked hard to identify and qualify people in soon-to-be-obsolete roles who might be suited to in-demand roles (including those typically fi lled by external contractors). Some appli-cation managers and systems engi-neers, for example, were vetted to see if they might qualify to be problem managers. IT and HR also used the fi ndings of their analysis to lower IT costs by more than 10 percent by re-ducing the number of external con-tractors in selected capacities.
The upshot of these and related eff orts was that IT put itself on the critical path toward an optimized workforce relative to the company’s evolving needs—and did so while keeping re-lated costs to a minimum and sparing as many jobs as possible. Ultimately, IT and HR concluded that layoff s could be avoided completely in the fi rst three
VIEWPOINT
2. Problem managers are responsible for rec-tifying and preventing problems and result-ing incidents related to IT services.
Gap analysis permits
a “dry run” and a
look at probable
financial outcomes.
IT A
years and that the extent of internal layoff s could ultimately be held to 35 percent, even though the total planned workforce reduction (including full-time external contractors) would ex-ceed 50 percent.
Strategic IT workforce manage-ment offers practitioners a range of benefi ts. It ensures that
the IT organization is appropriately sized relative to the company’s future business strategies and IT’s agreed-
upon role in supporting the company. It identifies needed resource shifts toward new roles and skills that are necessary for IT to become a trusted business partner. It addresses the management of capacity risks due to looming retirements and attrition, and identifi es roles with critical short-ages. It helps establish eff ective HR management of the IT staff by adapt-ing qualifi cation programs and bud-gets to arising needs. In short, it is a powerful competitive weapon and one that we believe all IT organiza-tions would do well to utilize.
Melanie Bockemühl is a partner and manag-ing director in the Düsseldorf offi ce of The Boston Consulting Group. You may contact her by e-mail at [email protected].
Rainer Strack is a senior partner and manag-ing director in the fi rm’s Düsseldorf offi ce. You may contact him by e-mail at [email protected].
Alexandra Lehmann is a project leader in BCG’s Munich offi ce. You may contact her by e-mail at [email protected].
T B C G
In response to the economy’s ongoing woes, banks have placed a growing premium on reducing costs and improving operational efficiencies—and many banks have turned to lean programs as a useful tool. Most of these banks will fi nd them-
selves disappointed, however, because few lean initia-tives, in our experience, deliver the expected results. The near- and longer-term impact on costs proves to be far less than expected, and any gains in effi ciency prove to be either temporary or too limited in scope to make a real diff erence. There is no fundamental, lasting change in the way the bank conducts its operations—and hence little impact on long-term performance.
The problem is not with lean itself, however. Indeed, we believe that lean has much to off er banks. The problem lies in the approach and implementation. Typically, banks go wrong in one of two ways. One, they apply lean too narrowly and from too limited a perspective. There is no cohesive, end-to-end view of the process itself or the alignment of all of its elements. Alternatively, the eff ort is driven solely from the top down and fails to engage and involve the key people who actually perform the critical tasks within the process. This leads to a lack of process ownership and accountability. The end result, in either case, is that the lean eff ort delivers only a fraction of its potential benefi ts.
In this article, we discuss what we consider to be the optimal means of deploying lean in the banking sector. Specifi cally, we advocate a holistic lean program that addresses underlying processes and employee behaviors and attitudes. We also recommend an incremental, pilot-based approach to adoption, one that allows banks to generate quick wins and establish a culture of continuous self-improvement. These elements, we believe, can mean
the diff erence between an unsuccessful lean initiative and a truly transformational one.
Why Lean?
Lean off ers banks many advantages.1 It can eff ectively address anywhere from 25 to 30 percent of a retail bank’s cost base and is a particularly potent tool for lowering front-offi ce and operations costs. Gains in process cycle times can be even more dramatic, with improvements of 30 to 60 percent possible. Improved operational controls, reduced risk, fewer errors, and greater speed lead, in turn, to improved customer experiences and satisfaction.
But lean’s benefi ts go even further. Lean-based thinking can help management understand what customers value most—and where it makes the most sense to focus im-provements in operations and service levels. Improved organizational engagement via lean—particularly among the frontline staff —can lead to increased morale and reduced attrition. And a successful lean-transformation eff ort can instill a fi rmwide mindset of self-reliance and continuous improvement, one that keeps performance on an upward trajectory.
The challenge lies in the application. Lean needs to be applied holistically—that is, from an organization-wide, cross-functional perspective. Targeting only individual “silos” will doom the eff ort to failure. Lean also needs to be supported by true cultural change, from the top of the organization to the bottom. The senior leadership team
Lean BankingA Holistic Approach to Signifi cant and Sustainable Value
by Christophe Duthoit, Simon Bartletta, and Rozinder Bhatia
INDUSTRY SPOTLIGHT: BANKING
1. See our first article on the topic, “Lean Advantage in Banking: Bringing Together IT and Operations to Deliver Customer Value,” in IT Advantage: Putting Information Technology at the Core of Busi-ness, BCG report (February 2009).
IT A
must believe in and demonstrate commitment to the eff ort, and middle managers and frontline workers must feel engaged and be empowered to contribute. Lean thinking—and a culture of continuously raising the bar on performance—must permeate the organization’s psyche and become part of its DNA and its performance-management system.
To facilitate this process, lean must be phased in incrementally rather than through a “big bang” approach. A series of well-targeted and well-sequenced pilot programs, whereby success breeds success, will lay the groundwork for the necessary organizational and cultural changes to “stick” and for lean’s benefi ts to last.
A Holistic Approach
A holistic, multifaceted approach to a lean initiative will incorporate top-down, bottom-up, and “middle-out” com-ponents. The top-down component consists of identifying clear goals; focusing on processes that tie directly to com-petitive advantage and value creation; taking a cross-functional, end-to-end view that starts with the customer and works backward; and securing executive commit-ment. The bottom-up component consists of engaging frontline workers and managers and empowering them to own and drive process improvement, not just once but on an ongoing basis. The middle-out component is the empowerment of middle managers to apply checks and balances to frontline-driven change recommendations and implement change across the organization. Collec-tively, these measures lay the groundwork for fundamen-tal and self-sustaining process improvement.
How might this work in practice? Let’s look at the mort-gage-application process. This is a process that, in most banks, is plagued by a multitude of ineffi ciencies, includ-ing long cycle times from application to approval, numer-ous handoff s throughout the process, and the involve-ment of too many functional silos, o en leading to a poor customer experience. To optimize this process via lean, a bank would start with the things that are most important to the customer, such as access to the mortgage applica-tion form through multiple channels, clear presentation of and directions for completing all necessary documen-tation, ease of data entry and immediate identifi cation of entry errors, and a rapid approval process. Working back-
ward through the process chain, the bank would examine the specifi cs of the process—for example, the roles of those involved, the performance metrics, and the me-chanics of the handoff s—from start to fi nish. It would apply lean principles to optimize performance—for ex-ample, to minimize or eliminate paper fl ow throughout the process, optimize data entry and error-proofi ng, and
ensure that automation is used where logistically and economically feasible. Managers and, in particular, frontline staff would be actively engaged throughout this eff ort and would continue to try to identify areas where the process might be im-proved and streamlined.
The underlying philosophy—a continuous focus on customers, value drivers, and cost optimiza-tion—accompanied by supportive changes to organiza-tional behaviors and attitudes are what allow the lean program to deliver its transformational eff ects. Improve-ment spans multiple functions, is sustainable, and lays a foundation for additional, broader improvement across the organization.
Development of Organizational Alignment
The organizational alignment achieved via this three-pronged approach is a key enabler of lean. Senior man-agement, middle management, and frontline personnel become of one mind regarding the vision and objectives of the transformation and play their respective roles in making it a success. Senior management provides visible leadership and commitment to the eff ort and communi-cates that commitment consistently and strategically. Frontline staff members work actively to identify solu-tions and improve results. Middle management vets the frontline staff ’s solutions and assures stakeholders that any recommendations being implemented are sound. And both middle and senior management confi rm that changes are being made across business and functional units.
A Focus on Change Management
A closely related element, and one to which most banks give short shri when trying to implement lean, is change management. Eff ective change-management practices can identify and address behavioral and organizational
Lean must be phased
in incrementally rather
than through a “big
bang” approach.
T B C G
issues that hamper process effi ciency. This capability is particularly vital for lean initiatives, which require banks to engage workers in unfamiliar ways—for example, em-powering and encouraging frontline workers to actively challenge the status quo and work on problem solving. Change management can also establish momentum for supportive cultural change by instilling mindsets and be-haviors that encourage continuous learning and self-improvement.
In fact, we consider change management to be as impor-tant as the “hard” work behind process optimization—and we believe it should be actively managed from day one. Some managers might view this as a hindrance, but ultimately it can simplify their task and improve the eventual outcome. Experience shows that employees are
more likely to resist new approaches when they don’t un-derstand their role and how they can contribute. It is vital to remove such stumbling blocks so that the staff is fully engaged and committed. (See the sidebar “The Impor-tance of Engaging Frontline Employees.”)
But change management can also ease the transition to lean for middle management. Many of the bank process-es that are ultimately reconfi gured through a lean initia-tive were originally established by middle managers, and seeing their processes challenged can be diffi cult for those managers. Eff ective change-management eff orts can counter such frustrations and make middle managers more accepting.
Incremental Implementation
How a bank introduces and follows through on lean is equally critical to the eff ort’s success. Many banks take what amounts to a one-time, big-bang approach, o en led by experts (“black belts” and “master black belts”), and assume that the problem will be solved. This typically generates gains, but the gains are short-lived. Once the black belts leave, the organization reverts to its old pat-terns and behaviors.
Far better results can be achieved, in our experience, through an incremental approach based on a series of pilots. Such a “do-learn-do” approach allows a bank to produce quick wins and “minitransformations,” one proc-ess at a time, to set the stage and build momentum for a broader transformation.
The series of minitransformations should be rapid and should target processes where results can be achieved quickly—that is, in under six months—and where trans-formation will have the largest and broadest impact. (See Exhibit 1.) The approach should also be designed to be minimally invasive, allowing implementation of the pro-gram without a disruption of the target processes’ day-to-day operations.
Within each minitransformation, the focus should be on optimizing value levers to eliminate waste, reduce vari-ability, and ultimately maximize systemwide perfor-mance. Enablers such as information technology, which can allow the automation of many tasks—resulting in fewer processing errors, shorter cycle times, and a freeing up of manpower to focus on higher-value-added activi-
INDUSTRY SPOTLIGHT: BANKING
Frontline employees—those closest to the process—typically have many ideas that can improve process effi ciency and add value. But those ideas are o en not aired, either because there is no forum for sharing them or because the employees feel undervalued and hence are reluctant to speak out. The end result is that the bank fails to leverage what could be a key com-petitive weapon.
A properly implemented lean program places a heavy emphasis on engaging these employees and ac-tively tapping into their insights and expertise. This delivers a range of benefi ts. The most immediate is that process effi ciency does, indeed, improve. Em-ployees are also considerably more willing to buy into a new approach or program, because they now feel that they are a valued and vital part of the process.
But the advantages go further. They include greater job satisfaction, increased opportunities for training and career development, and lower attrition owing to the reduction of busywork. The benefi ts of lower attri-tion, in particular, cannot be overstated. Most banks lose from 15 to 25 percent of their frontline employ-ees and fi rst-line managers in operational areas annually. Hence, there is always a large percentage of the staff that is learning how to do its job. Shaving this percentage by even a few points via lowered attrition can have a signifi cant impact on productivity.
The Importance of Engaging Frontline Employees
IT A
Training of participants
Workshop 2 (four half-days)
Kaizen setup◊ Actions to be taken◊ Participants◊ Scheduling of rollout◊ Definition of measures of success
Activities
Deliverables
Participants
Design workshops Implementation of kaizens by pilot teams
A Hypothetical Example for a Ten-Week Pilot
Workshop 1 (four days)
Current-state mappingthrough the value-streammapping method
Expected future-statemapping
Identification of key issues and ranking of kaizens
Identification of quick wins
Day-to-day work byeach team:◊ Finalize the target process◊ Start the test on a limited scope◊ Implement quick wins
Day-to-day work byeach team:◊ Finalize the test◊ Start rolling out more complex kaizens
Validation of test and preparation of continuous- improvement process
Week 1 Week 2 Weeks 3 to 5 Weeks 6 to 10
Value-stream mapping(current and future)
First list of kaizens
Kaizen charter◊ Action plan◊ Qualitative objectives◊ KPIs◊ Proposal of targets
Finalized processmaps
Daily progress reportfor each team
Weekly progressreport for each team
Visual managementreporting
Workshop lean facilitator(full-time)
One or two frontlinestaff members from eachteam in the pilot (six to eight persons full-time)
Management of eachteam present at the beginning and end ofthe workshop
Workshop lean facilitator(full-time)
Enlarged workshop◊ Six to eight frontline staff members who participated in the week 1 workshop (half-time)◊ Six to eight additional attendees for kaizen preparation (max 20% time)
Field managers andtheir teams
Support of leanfacilitators to getkaizens running
Field managers andtheir teams
Support of leanfacilitators if the team is struggling
Source: BCG analysis.
Exhibit 1. Each Pilot Should Be Carefully Planned and Supported to Deliver Maximum Results
ties—should be incorporated into the eff ort, and lean tools such as kaizen and value-stream mapping should be utilized heavily to identify improvement opportunities and solutions.
The transformations can be structured to deliver bene-fi ts in three waves. (See Exhibit 2.) The fi rst wave is the delivery of quick wins (for example, process improve-ments and quick system fi xes) and the establishment of momentum. The second wave involves breaking down broader organizational barriers (for example, risk poli-cies and procedures), engaging more personnel, and gaining buy-in for the full rollout. The third wave en-compasses more difficult actions (such as decisions about outsourcing or off shoring and more comprehen-sive IT changes) and the full rollout.
Success Stories
A number of fi nancial institutions have employed lean in the manner we describe and achieved impressive re-sults. One major U.S.-based global asset manager used it to redesign its core back-offi ce processes, targeting both a signifi cant increase in productivity and a revital-ized, improvement-focused culture. The institution initi-ated the eff ort with a 12-week pilot focused on the secu-rities-pricing process—and it conducted workshops utilizing value-stream mapping and other lean tools to engage frontline workers and managers and solicit their ideas on how the process could be improved.
These workshops generated a range of actionable ideas that were subsequently developed further and validated.
T B C G
For example, the institution identifi ed and eliminated multiple redundant verifi cations of individual equity prices throughout the value chain. Employees did not realize that they had all been performing those checks against the same reference data—nor were they aware of the rigorous validation process performed by the cen-tralized pricing group before the prices were sent out in the fi rst place. The institution conducted similar work-shops for frontline managers, which led to additional ideas that could be implemented broadly across the organization.
Throughout the pilot, and as the transformation was ex-tended to other processes, the institution focused not just on the mechanics of process improvement but also on related organizational issues such as training, coaching, mentorship, and work allocation. It also instituted rigor-ous governance and change-management programs to sustain momentum.
As a result of these eff orts, the institution was able to achieve reductions of approximately 20 percent in the number of full-time employees needed to fulfi ll the tar-geted processes. It also signifi cantly reduced the probabil-ity of errors and achieved greater client satisfaction. Em-ployee engagement and satisfaction also rose signifi cantly, which, in turn, enhanced the institution’s ability to broad-en the overall lean transformation program.
A leading North American bank seeking overall process improvement launched a similar initiative and had com-
parable success. The bank initiated the eff ort with simul-taneous eight-week pilots focused on its retail-mortgage and commercial-lending processes. It examined the proc-esses end to end, working backward from the customer. It employed lean tools to engage management and front-line staff and to solicit, vet, and validate ideas for im-provement. It placed a heavy emphasis on change man-agement to ensure that the necessary cultural changes were initiated and reinforced.
The result: the bank signifi cantly reduced cycle times and cost—and improved quality. It also identifi ed opportuni-ties to realize signifi cant longer-term gains in effi ciency, including reductions of roughly 40 percent in processing time and 60 percent in total lead time in its retail-mortgage process—and even larger gains in those areas in its commercial-lending process. The bank also gained confi dence in its ability to execute additional lean trans-formations.
A global corporate and investment bank achieved similar gains through its deployment of lean. Through a series of minitransformations over a period of 16 months, the bank made signifi cant improvements in its credit-approv-al processes, whose operations spanned nearly 30 coun-tries. The improvements occurred across three categories: process effi ciency, the operating model, and employee behaviors. The bank’s credit fi le, for example, was signifi -cantly simplifi ed and standardized, and the application process was redesigned to take into account diff erent clients and credit types. Measurable improvements
INDUSTRY SPOTLIGHT: BANKING
Client groups, businessunits, and regions
Process 1Process 2Process 3Process 4Process 5Process 6
Process 1Process 2Process 3Process 4Process 5Process 6
Process 1Process 2Process 3Process 4Process 5Process 6
Wave 1 Wave 2 Full rollout
Demonstratequick wins and
build momentum
Client groups, businessunits, and regions
Client groups, businessunits, and regions
Break down barriers, engage more personnel,
and gain buy-in for full rollout
Result: a committed, engaged, capable organization readyto realize its full potential
Source: BCG analysis.
Exhibit 2. Lean Should Be Phased In Incrementally, Allowing Success to Build Upon Success
IT A
included a 30 to 50 percent reduction in response time, a 15 to 30 percent boost in the productivity of credit ana-lysts, and a freeing up of roughly 20 percent of relation-ship managers’ time.
Lean can be a truly transformational tool for banks, one that delivers a step change in process effi cien-cies and builds a foundation for ongoing, organiza-
tion-wide improvement. The key is to approach and im-plement it correctly. A holistic, end-to-end approach that is phased in incrementally and that eff ectively engages the frontline staff will realize all of lean’s potential and ensure that the gains last.
Christophe Duthoit is a senior partner and managing director in the New York offi ce of The Boston Consulting Group. You may reach him by e-mail at [email protected].
Simon Bartletta is a partner and managing director in the fi rm’s Bos-ton offi ce. You may reach him by e-mail at [email protected].
Rozinder Bhatia is a topic specialist in BCG’s New York offi ce. You may reach her by e-mail at [email protected].
T B C G
Strategic planning can be challenging under the best of circumstances, especially in the informa-tion technology space,
where technology trends change so quickly. But it is particularly diffi cult in times of heightened uncertainty, such as the present. How can you plan with any confi dence when in-stability reigns?
A tool that can help considerably, we believe, is scenario planning. Scenario planning forces you to con-sider the full spectrum of possibili-ties—not just what you believe will happen but what could happen—and to think through both probabil-ities and potential actions. It forces you to think expansively and out-side your comfort zone. In so doing, it drastically improves the odds that your company will be in a stronger competitive position tomorrow. It is an exercise that every CIO would do well, we think, to engage in.
Scenario Planning Defined
We all possess a main strategic vision or orientation that is the ba-sis on which we make decisions. This vision—“probably X or Y will occur”—can help us cope with un-
certainty. But it can also prevent us from seeing the world as it truly is.
Scenario planning provides a clear lens. A scenario, as defi ned here, is a story about how the future of the business environment could unfold. It consists of the description of an end state, a related interpretation of current reality, and an account of how the world could get from one state to the other. Scenarios are based on a range of variables, such as the economy, demographics, tech-nology, ecosystems, and regulation. Some of these variables, such as demographics, are relatively predict-able, while others, such as technol-ogy, are more diffi cult to forecast. But by combining them and imagin-ing a range of outcomes based on selected developments, we can de-velop a fairly comprehensive picture of how the world of tomorrow might take shape.
Of course, none of the individual scenarios we construct will happen precisely as imagined. But the fu-ture will almost certainly include elements of each, and looking at the scenarios collectively can pro-vide a useful framework for think-ing about what lies ahead—and for taking action today. It can also help us test the robustness of current
strategies and identify potential new opportunities.
Scenario Planning in Practice
An eff ective scenario-planning exer-cise would include the construction of a number of diff erent scenarios, generally three to fi ve, to ensure that the scenarios are suffi ciently diverse, both structurally and quali-tatively; that the most probable al-ternative futures are covered; that the paths that might lead to those futures are explored and discussed; and that the received wisdom about the future is truly challenged.
An IT-specifi c example is illustra-tive. On July 1, 2009, at the second annual Université du Système d’Information conference in Paris, the CIOs of 15 companies, including AXA, Bouygues Telecom, Calyon, Carrefour, Danone, Essilor, Generali, Michelin, Orange, and Renault, gath-ered to discuss ways to improve business and IT practices. As part of their discussions, the CIOs partici-pated in a session designed to ex-plore how the IT ecosystem could evolve by 2020. The CIOs were pre-sented with four previously devel-oped scenarios that they reviewed together, as outlined below.
Remember the FutureUsing Scenarios as an Aid to Strategic IT Planning
by Antoine Gourévitch, Luc de Brabandere, and Wolfgang Thiel
OUTLOOK
IT A
The exercise yielded new insights for all participants. It also yielded a range of potential high-value-added moves to make—some of them inex-pensive, others needing CEO approv-al and potentially a rethinking of IT positioning or sourcing strategy.
Scenario 1: “Big Is Beautiful”The IT services market consolidates around three giants: IBM, Oracle, and ATSys ( formed by the merger of AT&T and Infosys). Now able to supply com-prehensive, global solutions, the three collectively dominate the landscape—IBM specializes in fi nance, Oracle in industrial goods, and ATSys in high tech—and quickly outsmart any com-petition. They propose “lifetime” busi-ness-process-outsourcing contracts indexed to the results of the client company. IBM and ATSys have just won their appeal against the Europe-an Commission, which had accused them of abuse of their dominant posi-tion. The former prime minister of India, now the CEO of ATSys, congrat-ulates himself on the victory.
As a result of this industry restructur-ing, most companies fully outsource their IT capabilities to one of the three leaders, with the bulk of the work performed in India and China. For corporations, IT has become a commodity—and the chief informa-tion offi cer a contract manager.
The CIOs evaluating this scenario said that they deemed industry con-solidation inevitable—and that this degree of consolidation was a realis-tic possibility, one they were quite concerned about. (One CIO said that to avoid becoming overly de-pendent on one supplier, he had purposely divided the work he out-sourced among several different
players.) The question was, what could be done about it?
The CIOs saw two broad options. The fi rst was to attempt to delay or discourage large-scale consolidation by fostering industry-specifi c alter-natives. One CIO observed that in
the banking industry, for example, optimizing unit costs was a key issue and that most back-office operations could be outsourced. The creation of a mutualized “back offi ce factory” among a group of banks that would be independent of large outsourcers could provide an alternative that would keep the power of the three big players in check. The CEOs also saw a second option, which was to accept that consolidation is unavoidable but to adjust their business practices to strengthen their individual bar-gaining power. A way to do that, one CIO suggested, was to hire pur-chasing executives from the auto-motive industry, who are accus-tomed to negotiating with strong suppliers.
The CIOs agreed that the discussion of this scenario had forced them to think about the basis of their com-panies’ competitive advantage—and what should and should not be outsourced.
Scenario 2: “App Storm”Apple and Google merge and launch an à la carte platform of business ap-plications based on Apple’s App Store model. Standardized infrastructures and a catalogue of applications allow a company to assemble a complete “made-to-order” information system.
The best IT talent is spread among specialized software applications, such as pricers, invoicing modules, and production line monitoring. These individuals work both on their own and in communities. Many of them, some already retired, make a fortune working from home. Wikipedia serves as a backbone for knowledge exchange within these global communities.
Developing applications is no longer a nightmare. It is easy and quick, since the platform allows applications to be developed incrementally. It is so easy, in fact, that in some cases business people are able to “mash up” existing applications on their own to create new applications that fi t their needs.
The CIOs concluded that, regardless of whether or to what degree this scenario materializes, IT would need to respond to the business forces
driving it. Specifi cally, the CIOs de-termined that being able to quickly develop applications for the busi-
T B C G
ness is a must, as is setting up a small team of agile developers who can work closely with the business to help foster innovation. Several CIOs also thought that giving such a team the task of developing mobile applications for the iPhone could be a good way to get that team pre-pared. One CIO noted that Generali had already developed France’s fi rst iPhone application for the insurance workforce.
Thinking through this scenario also prompted the CIOs to conclude that offshoring strategies that leave a company without any development capabilities should probably be re-considered. The CIOs agreed that talent management is a key issue that requires new thinking.
Scenario 3: “Green Detox”Following the “water war” in the Middle East, the rewritten Kyoto Treaty dictates that global energy consumption should be reduced by 15 percent over the next fi ve years. IT resources, which currently represent more than 20 percent of overall con-sumption, are under considerable scrutiny and are subject to an un-precedented energy-taxation policy. Google searches are taxed at $5 each.
In response, companies are beginning to replace their traditional data cen-ters with virtual and mutualized pro-duction platforms. But this is not
enough. The taxation policy challeng-es the logic behind the IT “arms race” that has generated so many useless functionalities. (One study has shown that less than 30 percent of lines of code are ultimately used.)
Entire systems are therefore being unplugged. New energy-effi cient meth-ods of operation are being created, a version of Java without a virtual machine is being developed,1 and pro-gramming in machine language is once again standard.
The U.S. Department of Defense deliv-ers to the open-source community its “Green OS” operating system. SAP, which released a “Logan” version of its enterprise resource planning (ERP) so ware,2 is gaining market share. In the manner of the automotive indus-try in 2010, the IT industry is restruc-turing.
All of the CIOs agreed that this sce-nario will partially materialize—and that IT’s energy profile was something they needed to address now and in partnership with the business side. All agreed, in particu-lar, on the need to rationalize appli-cations. They also agreed on the need to institute energy-related met-rics, both to advance the dialogue with the business and to reinforce IT’s position as a business partner. Finally, the CIOs agreed that be-cause one of the main factors be-hind IT’s energy consumption is the growth of data, CIOs should work with the business to reduce the amount of data stored and to iden-tify the data-drive business value.
Scenario 4: “Reboot”Following a protracted fi nancial cri-sis, there is a surge in anticapitalist sentiment—and it infi ltrates the IT
sphere. The “Spoutnik” and “Long March” viruses have combined, eras-ing 30 percent of calculation centers’ data and shutting down the Internet for eight weeks. The IT industry has thus experienced its own 9/11.
Ten large banks go bankrupt a er the loss of their data. Out of caution, the banks cut off all communication with
each other and with customers. Other industries are in a similar panic. In a rush to resume business, some compa-nies that trust each other create par-allel, shared networks. But this comes too late for the 20 percent of compa-nies worldwide that disappear, unable to produce or invoice.
There is a broad rush to insource IT activity, resulting in a shortage of IT specialists. Many senior IT personnel are asked to come out of retirement, and the search for maximal security leads companies to try to reduce IT turnover as much as possible. Infra-structure becomes strategic, and com-panies are redeveloping proprietary technologies. “Never again” is the new motto.
OUTLOOK
1. A virtual machine is a software program that emulates a hardware system. Multiple virtual machines can coexist on a single computer.
2. The Logan is a no-frills, low-cost car that is manufactured jointly by Renault and its subsidiary Dacia of Romania. It is particu-larly popular in developing countries and in much of Europe.
IT A
The CIOs considered this scenario a possibility and debated defensive actions. All agreed that having trust-ed networks and in-house compe-tencies would be critical but proba-bly not suffi cient to prevent a major business disruption. One CIO con-cluded that he should probably call back from retirement his experts in IT infrastructure architecture to have them redevelop in-house secu-rity systems. All of the CIOs agreed that the notion of putting every-thing in external “clouds” needed to be thought through with care.
Scenario planning is not a crys-tal ball. No single imagined scenario could possibly be
entirely accurate. But the future will almost certainly hold elements of each of the scenarios that you construct. Hence, scenarios can be an invaluable tool for strategic plan-ning, particularly in times of uncer-tainty. They leave no stone un-turned and offer a platform for prudent, proactive decision-making and action. Ultimately, scenario planning provides a basis for confi -dence.
Antoine Gourévitch is a partner and man-aging director in the Paris offi ce of The Bos-ton Consulting Group. You may contact him by e-mail at [email protected].
Luc de Brabandere is a partner and managing director in the fi rm’s Paris offi ce. You may contact him by e-mail at [email protected].
Wolfgang Thiel is a senior partner and managing director in BCG’s Cologne offi ce and the global leader of the Information Technology practice. You may contact him by e-mail at [email protected].
© The Boston Consulting Group, Inc. 2010. All rights reserved.
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3/10
Note to the Reader
AcknowledgmentsThe authors thank their many colleagues at The Boston Consulting Group who contributed to this publication, including Robert Hosea and Jan Jamrich, and especially Astrid Blumstengel.
We also thank Gary Callahan, Angela DiBattista, Kim Friedman, Gerry Hill, Simon Targett, and Janice Willett for their help in the writing, editing, design, and production of this publication.
For Further ContactWolfgang ThielSenior Partner and Managing DirectorGlobal Leader, Information Technology PracticeBCG Cologne+49 221 55 00 [email protected]
Simon BartlettaPartner and Managing DirectorBCG Boston+1 617 973 [email protected]
Rozinder BhatiaTopic SpecialistBCG New York+1 212 446 [email protected]
Melanie BockemühlPartner and Managing DirectorBCG Düsseldorf+49 2 11 30 11 [email protected]
David DeanSenior Partner and Managing DirectorBCG Munich+49 89 231 [email protected]
Luc de BrabanderePartner and Managing DirectorBCG Paris+33 1 40 17 10 [email protected]
Ralf DreischmeierPartner and Managing DirectorBCG London+44 207 753 [email protected]
Christophe DuthoitSenior Partner and Managing DirectorBCG New York+1 212 446 [email protected]
Antoine GourévitchPartner and Managing DirectorBCG Paris+33 1 40 17 10 [email protected]
Alexandra LehmannProject LeaderBCG Munich+49 89 231 [email protected]
Tamim SalehPartner and Managing DirectorBCG London+44 207 753 [email protected]
Stuart ScantleburySenior AdvisorBCG Boston+1 617 973 [email protected]
Rainer StrackSenior Partner and Managing DirectorBCG Düsseldorf+49 2 11 30 11 [email protected]
The Boston Consulting Group (BCG) is a global manage-ment consulting fi rm and the world’s leading advisor on business strategy. We partner with clients in all sectors and regions to identify their highest-value opportunities, address their most critical challenges, and transform their businesses. Our customized approach combines deep in-sight into the dynamics of companies and markets with close collaboration at all levels of the client organization. This ensures that our clients achieve sustainable compet-itive advantage, build more capable organizations, and secure lasting results. Founded in 1963, BCG is a private company with 69 offi ces in 40 countries. For more infor-mation, please visit www.bcg.com.
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Spring 2010
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