Managing Enabling Technology

This Southbeach model shows an impact analysis for using Technology in business. Reading from bottom left (Technology) to top right (Increasing Profit), we can see a chain of useful and harmful effects as the intended results of automation and combining information in new ways to create new capabilities and business oportunities have their shadow harmful consequences of loss of control, information overload, and increasing cost and complexity resulting in risk of technology outages.

There is a significant management overhead for all enabling technologies. Additional risk management erodes away profits still further, whilst the use of technologies like Business Intelligence to find correlations in market indicators through data mining and provision of multi-level active drill-down reports for management to make sense of the increasing information overload permits evidence based decision making at the highest level in the organisation.

New business opportunities are identified and this often results in yet more technology to overcome the limitations of previous IT systems, and restore control to the business so that opportunities can be properly exploited.

This represents an interlocking of two evolutionary systems in an organisation; the business, and the Information Technology. They enable each other. The boundaries become blurred with time, and the politics of deciding which side of the fence to pitch your tent increase as the cycle of improvement on one side amplifies the other, and technology and business change fall out of sync resulting in solutions that were intended for one purpose being used for another, or investment being targetted at exploitation of existing technology beyond its capacity to support the growth in demand from the business.

Managing enabling technology requires a thorough understanding of both the business and the Technology, and a foot in both camps. In today's world, neither can exist without the other; Building value with business-led inovation requires a supporting culture in the people and a collaboration rooted in relationships built on trust.

Climbing the Wall of Worry

"Wall of Worry" is a phrase used to describe a bullish market trend occurring in the face of negative uncertainties. Risks that have been realised in the market lead to investors thinking that things can only get better - it creates a buying opportunity that through prices rising leads to profit. However, once the risks are resolved, this destroys the wall of worry, causing prices to fall back to their natural level.

This tension between rising and falling prices is explored in more detail in the following model (click to enlarge).

The above Southbeach model shows the tension between rational and emotional behaviour in the investment markets along with their causes and effects. This is a complex situation involving multiple feedback loops that essentially creates a self sustaining system that oscillates between stability and instability as rationality and experience struggle to win out over greed, fear, and emotional behaviour.

Central to this model is a self-sustaining feedback loop of irrational investing resulting in volatility in the market that produces negative feedback causing further irrational, or short term, investing. In the centre of this triumvirate of effects is greed and fear, which perpetuate the situation by creating more emotional behaviour that creates even more volatility in the market, and destroying rational behaviour, which is insufficiently counteracting the negative feedback loop that is creating a "vortex of misery" in the market. This vortex of misery is characterised by the interplay between speculators that are in adulation at the profits they are making on their short sells and the rational investors with their more conventional practice of going long, who become excluded by those seeking to perpetuate the bubble. Eventually this vortex creates a tipping point (the point at which the bubble bursts). As this MarketWatch article explains, 'For those trying to take the pulse of the market, the size of the proverbial "wall of worry" can mean the difference between a correction and a change in trend'. As Charles Mackay, in his 'Memoirs of Extraordinary Popular Delusions and the Madness of Crowds' wrote almost 200 years ago, 'men go mad in crowds but come to their senses slowly, and one by one'; The change in trend is a tipping point in the market, which in this model creates a return to sanity that removes the speculators and emotional behaviour from the game, restoring rational behaviour and adding to experience that in turn hones instinct to return the market to a positive investing cycle based on an understanding of the emotional factors that led to the original volatility and downward spiral.

At the root of this repeating cycle in the market is a causal chain shown below. In this Southbeach model, the same chain of causes and effects is shown from two perspectives. In both cases, complacency leads to emotional distortion which leads to a market bubble that increases the emotional distortion further, increasing the size of the market bubble... and so on, until the tipping point is reached and the inevitable market collapse ensues. As the market is collapsing, this leads to realisations that further feed the collapse, finally once the market has returned to 'normal', complacency sets in once again and the cycle repeats. In the model on the left, the Speculators perspective, this market bubble is seen as a good thing as it creates an opportunity to create wealth through short selling, the market collapse being harmful to them both due to the stocks they purchased at inflated prices, and due to the lost ability to short-sell and make short term profits. The rational investor, on the other hand, has exactly the opposite perspective - the reality is the same; the causes and effects play out in exactly the same way, they simply see the bubble as harmful as it destabilises the market and the collapse as useful as it marks a return to normality.

This series of Southbeach models was created by Jason McIntosh, a sales trader at Nomura and Mark Burnett, a management consultant at BearingPoint.

Goal Planning

This Southbeach template provides a structure for goal planning. This can be used for setting personal objectives, or planning company strategies.

The focus areas are the objectives themselves. However, these are arrived at by understanding the goal and what it means to have achieved that goal in terms of Key Result Areas. 

Here is an example of a partially filled in template:

Increasing revenue improves profit. Capability, new solution areas and building on success all increase revenue. However, insufficient skills counteracts capability; not knowing where to invest counteracts creation of new solution areas; no case studies makes it difficult to build on success. The root causes of new solution areas, too many options and failure to write up successes are counteracted by the useful enabling actions of recruitment, market research and enabling success.

In general:

Identify the Key Performance Indicators (what you will measure - your measures of success) for each Key Result Area. Set objectives designed to achieve these. Then assess the situation to determine your Critical Success Factors - the things that need to be in place in order for you to succeed at your objectives and achieve your Key Performance Indicators. Some of these CSFs may be missing, so identify the blockers and the root causes of those blockers so that you can create enablers to overcome them and pave the way to achieving your goals.