>Lessons from GE and Enterprise Architecture

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General Electric (GE) is one of the largest, most successful, and most respected companies in the world. What lessons can we learn from their CIO to more successfully architect and manage our enterprises?

Fortune Magazine, 21 July 2008, reports on an interview with Gary Reiner, the CIO of GE, who has been in his role for a dozen years and oversees a $4 billion IT budget.

Reverse auctions

In purchasing IT, a major corporate expense these days, buying on reverse auction can save your enterprise mega bucks. A reverse auction is one where the purchaser puts out the specs for what they are looking to buy, and sellers bid their lowest price they are willing to sell at. (This is the opposite of a traditional auction where a seller puts out their wares for buyers to bid their highest price they are willing to purchase at). You want to avoid selling on auction at the lowest price (by differentiating you product so it isn’t treated as a commodity), but you want to purchase on reverse auction to get the best price for your purchases. In our organizations, perhaps enterprise architecture can partner with procurement and finance to leverage reverse auctions in planning for and purchasing major IT investments to reduce total cost of ownership (TCO) thereby more effectively managing scarce IT resource dollars i.e. getting more modernization/transformation for the IT dollar.

Process Improvement

GE’s CIO is responsible for Six Sigma, driving down deviances and defects in its processes. GE’s CIO says that “Six Sigma is a wonderful tool, but it is [just] a tool. What we are talking about as a company is outcomes, and the two outcomes we really want are product reliability and customer responsiveness…on the responsiveness side, it’s often less about Six Sigma and more about getting the right people in the room to map out [the processes for] how long it takes for us to do something…[and] take out those things in the way of meeting customer needs responsibly.” From an enterprise architecture perspective this is closely aligned to the idea of IT as an enabler for business, but one where business process improvement and reengineering comes first.

Information-based business

GE businesses are information-based. “In every one of our infrastructure businesses, we do something called remote monitoring and diagnostics, where we attach sensors to our equipment. So there are sensors in every locomotive, every gas turbine, every aircraft engine, [and] every turbo compressor. We’ve got software that resides with our customer or in our shops…that analyzes that data and is able in many cases to predict problems before they occur. We can prevent outages from occurring.” This information-based approach is similar to enterprise architecture and IT governance. The enterprise architecture is the information-based planning for the organization’s business and IT. And the IT governance is the information-based management and monitoring for selecting, controlling, and evaluating investments. Together enterprise architecture and IT governance are our “sensors” for predicting/planning the change and preventing problems/ensuring more successful IT project delivery.

Emerging technologies

GE sees a number of emerging technologies as having a major impact in coming years. The first, man-machine interface will evolve from keyboards and mice to “multitouch gestures,” such as “the ability to use your hands directly on screens.” Secondly, organic light-emitting diodes (OLED), “extremely thin screens…so thin that you’ll be bale to roll them up and fold them and carry them…you’ll be carrying around your screen.” And third, is cloud-computing, ‘having all your applications centrally located…[with] almost every document you create is for collaboration” and built on the web. In short, it’s really all about increased mobility of communications and ubiquity of information. Enterprise architecture should help facilitate the adoption of these new technologies.

Innovation

At GE speed to market is critical to bringing new product innovations to market, providing value to customers, and maintain an edge on the competition. IT is an enabler for new product development processes. In enterprise architecture, innovation is critical to breaking old paradigms and thinking out of the box and making real change that has contributes to significant improvements in organizational results. In product development, for example, I believe this involves everything from next generation computer aided design and manufacturing tools (CAD/CAM) to business intelligence systems and fusion engines for analyzing your customers and market changes to advances in automation and robotics for speeding and improving the manufacturing process.

GE is helping lead the way building sound enterprise architectures in corporate America!

>Competitive Sourcing and Enterprise Architecture

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Our economy is heavily based on ensuring a competitive environment to drive innovation, cost-competition, and consumer value.

One of the reasons why mergers and acquisitions are reviewed so carefully is to ensure that they are not anti-competitive, which would result in anti-trust action.

Competition law, known in the United States as “antitrust law,” has three main elements:

  • Prohibiting agreements or practices that restrict free trading and competition between business entities. This includes in particular the repression of cartels.
  • Banning abusive behavior by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position.…
  • Supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to “remedies” such as an obligation to divest part of the merged business or to offer licenses or access to facilities to enable other businesses to continue competing. (Wikipedia)

Competition law has been extended to the federal workforce as follows:

The Office of Management and Budget Circular A-76 mandates that “To ensure that the American people receive maximum value for their tax dollars, commercial activities should be subject to the forces of competition.” This includes the following activities:

“a. Identify all activities performed by government personnel as either commercial or inherently governmental.

b. Perform inherently governmental activities with government personnel.

c. Use a streamlined or standard competition to determine if government personnel should perform a commercial activity.”

The concept of A-76 is that without federal workers having to compete for their positions against for example, the private sector, then there is no way to ensure value for the American taxpayer. Where is the incentive for the federal workforce to perform if when they aren’t performing competitively, and they are not threatened with replacement by a better, more effective and efficient provider?

Federal Times, 12 May 2008 reports that “all indications are that as the Bush administration winds down, so too has its most controversial government reform: competitive sourcing.”

“Many in Congress have aggressively challenged the practice as being unfair and demoralizing to federal employees and last year they passed myriad reforms and restrictions that are already being felt.”

While I agree that competitions drive efficiency in the marketplace, I think A-76 has missed the mark in terms of reforming federal human capital.

Why?

Competing federal workforce against private sector contractors on a cost basis does not necessarily ensure best value. From an enterprise architecture perspective, we are missing something crucial in A-76 and that is the human capital perspective.

The human capital perspective on EA is one that was initially proposed by John Zachman, the founder of EA, and I am a strong proponent of it. Essentially, it says that just like the other business and technology perspectives of the EA, human capital is a filter through which you must make organizational decisions.

The human capital perspective of the architecture provides us an opportunity to optimize federal workforce performance in the first place, before getting to an outsourcing decision point. Additionally, if you can’t effectively manage your own workforce, what makes you think you can better manage a contracted-out function? (In the same issue of Federal Times, there was an article about how the federal procurement officials are resigning in droves!)

What can we do to first improve performance results from the federal workforce (and I’m not saying that there is any problem to begin with)? The same as with any organization—provide strong leadership to them. Provide them with a bold vision. Hire the best and the brightest. Accelerate the hiring and clearance processes. Make clear their roles. Inspire them as President Kennedy did when he stated “Ask not what your country can do for you, ask what you can do for your country.” Challenge the workforce and empower them. Provide training, career growth, and financial and other incentives. With these, the federal workforce can truly be competitive and best value—if not all the time, then certainly much of the time.

The enterprise architecture way to do this is to first, baseline your current workforce. Then, look at best practices, benchmark, and set the targets for your people. And finally, develop a transition plan to move your workforce from the baseline to the target.

There is much more work to be done in this area, and obviously this is just a cursory overview or sketch of what the human capital perspective of EA would do. On a personal note, this is an area of great interest to me and I look forward to exploring it further.