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The Six “C’s” of Generating Success

Tuesday, September 22nd, 2009

Success = Components + Collection + Consolidation + Cohesion + Capability + Conclusion

By Mark P. Dangelo

www.Innovative-Relevance.com

Also published at the National Mortgage Bankers Association

With all the media sound bites and dire messages, sometimes you just want to hide in your cubicle and do nothing new. It is understandable. However, pragmatically we must move forward ensuring that people, processes, and technologies are once again relevant for the decade facing us, and our vastly different operating ecosystems (see, “Peering Forward into the Next Decade”).

So, where should we invest? What technologies or infrastructures should we use? How could we outsource more business and knowledge processes? Should we hire FTE’s or layoff? How do we measure success, and more to the point, is it merely about profits, government conformance, risk mitigation, or social responsibility?

After two brutal years where finance and mortgage groups (FMG’s) have shed hundreds of thousands of quality jobs, will the recovery be a “V,” a “U,” a “L,” or a “W?” Additionally, what will your competitors do? Who are the “desired” consumers? What are your organizational social and community responsibilities?

Indeed, there are many questions all encased by considerable economic uncertainty. Yet, the time for action is now. The time for pervasive technological and process transformations is past due.

So, what is the formula for success as we close out 2009 and peer into 2010? Whereas, no one formula or idea can capture all aspects of viability and the technology needed to deliver quality profits, the following simple framework is able to create desired organizational action.

Success = Components + Collection + Consolidation + Cohesion + Capability + Conclusion

I know, it sounds like a lot. However, let’s briefly explore the six “C’s” of success, and what you might be able to do to capitalize on the operating environment and constraints, which are poised to completely redefine FMG players, processes, and BAU (i.e., competition and intent).

Components, the Sum of the Parts is Greater

Historically, process and technology solutions were frequently viewed as one-offs left to astute and charismatic divisional heads. Technology investments, and the business lines / products they supported, were made against segmented silos of functionality and compartmentalized budgets. As the current decade draws to an undesirable conclusion, the idiosyncratic nature of these sunken ROI projections becomes all too apparent measured against new markets and upstart competitors.

In general, future technologies and co-dependent processes appear to be taking on increased importance outside of the once hallowed walls of IT – that is, “not invented here” personnel have been translated into “no longer work here.” Technology and the capital investments needed for their realization are being created in foreign cities with little geographical familiarity for domestic personnel.

Although, as the component technology pieces are being created elsewhere, the heralded death of internal IT (i.e., the “IT Killer”) by the Cloud, by SaaS, by virtualization, or even by outsourcers, are mere pipedreams.

To be sure, the IT roles of the next decade and dogmatic desires to “control from within” a corporate center are no longer a critical success factor. The roles of CIO’s and CTO’s will increasingly disappear – to be redefined in a new technology world ripe with continuous transformations and multi-faceted governance. With a historical FMG tenure of 5 years and an average salary exceeding $300K, IT leaders will have a lot to justify this next decade.

For internal IT, the ability to rapidly integrate and adapt externally developed and defined components will be greater than traditional technology provisioning. The sum of the parts is rapidly the greatest enabler for the next decade spurred by changing consumer behavior, fast cycle product demands, and competitive reactions requiring collection and cohesion of widely dispersed data sources.

Collection, It is No Longer Just About Money

Collection activities for bankers today have taken on a huge importance. Yet, collection today and tomorrow is frequently more about data than it is mere money. Not just data within a given set of delinquency or workout processes, but data that spans the over 60 distinct functional processes throughout the comprehensive mortgage cycles.

Data collection is just the first aspect of a new decade of new requirements for corporate governance and compliance. The ability to transcend the interlinked processes, both forward and backward, can no longer rely on any manual item, faxed document, or singular “swim lanes.” To achieve proper consolidation and cohesion of increasingly specialized data sources, collection must first accept the challenges of interconnectivity, while preparing for aggregation of compartmentalized data spread throughout siloed applications.

Or more simply, if garbage (inaccessible and non-searchable data sources) is allowed into the value chain of data, it pollutes the entire downstream series of demands needed for risk, decision making, and compliance.

I have to wonder, if we had electronically stored, catalogued, and managed the entire master sources of data for the millions of loans in distress during the last five, would the modifications, legal fees, and political backlash be this pronounced?

Consolidation, the Devil is in the Data

Data. Data. Data. Consequently, if data is everywhere and widely available, why is it that decisions are made that prove inadequate or let’s face it, are out-and-out wrong?

Some would argue that collection challenges are the root of evil when it comes to success driven by sound data (e.g., KPI’s) and decisioning analytics. However, FMG CEO’s ask an important question of why nearly $2 billion annually is spent on power for data center computer equipment? With a compounded yearly increase of data storage now, by some estimates, exceeding 50% annually, what should be contained or consolidated on this equipment that isn’t already there? Where’s the value?

Consolidation of data sources for future success resides with disciplines and technologies that are still not widely in use within the mortgage industry (e.g., master data management, data deduplication, aggregation, augmentation, scrubbing, federations, structured, non-structured, et al). Some of this is cost related and others are more about skill sets and perceived need by executives for investment or action.

Consolidation, within the success formula, is also about the growing third-party portals and data providers along the segmented mortgage processes – fraud, reporting, servicing, investments, hedge funds, FOREX, systems of record, and the list grows with each passing week, and sorry to say, new government program introduced (or withdrawn). Without the first three “C’s” internalized and properly framed, the last three variables in the success formula can lead to money traps and false security.

Cohesion, Leveraging more than IT

Cohesion in this context is defined as “the ability to positively relate various sources of information to each other.” To borrow a term from the pharmaceutical industry, it is about data efficacy. Moreover, driven by new markets and required insights, integrations of the past are not the integrations of the future. In fact, the ability to efficiently and accurately integrate growing and sometimes conflicting data has recently cost many good IT professionals their career and livelihood.

The new decade dawning is already being dominated by new, virtually provisioned infrastructures (e.g., IaaS) supporting fast-cycle business functionality– e.g., Amazon, Sales Force, Microsoft, and Google. As these initial “cloud” identified offerings evolve, their robustness and business criticality takes on new importance across the enterprise. And what do these new layers of infrastructure create spanning processes and business lines? Data. Data. Data.

Therefore, the cohesion of these growing sources increases in importance. The challenge of their integration is not merely an ETL (i.e., extraction, transformation, and load), but a core shift in competencies that was once viewed only from an internal IT need. As systems are provisioned within layers of cloud infrastructures (e.g., data, voice, processes), the skill sets of cohesion and the efficacy it demands are in short supply and represents a job growth area for every IT leader and astute business person.

Capability, Fenced by Risk and Regulation

If we thought the rules of operation were cumbersome and draconian in the past, we may be severely disappointed with the future. In various speeches and interviews, the Executive and Congressional offices are all positioning for changes. Politics and lobbying being what it is, the final regulations may be some time coming – but something will change, especially if this drags into the 2010 election year.

Therefore, as more and more capabilities are delivered via cloud technologies and outsourcing relationships (just look at the numbers, acquisitions, and press releases), organization capabilities will be fenced by how quick we can react to shortened regulation cycles and risk aversion advocates (e.g., Fed, regulators, public sentiments).

Capability moving forward will be still be about systems and technology – but the time needed and patience for “failures” will be drastically shortened. Tolerance to achieve meaningful capability success will be shortened not by mere history, but by decreased CAPEX budgets, time-to-market, consumer products and their profitability, and of course, regulatory compliance.

If we are indeed confronted with a jobless recovery (the “L” or “U” scenario), how much will budgets be increased for new functional capability? What happens if a “W,” or double bottoming, is experienced in 2010? Future success requires new capabilities, but the methods and techniques of defining, provisioning, and bringing on-line will test our operations and vendor partners alike.

Conclusion, Achieving Incremental Reality from Ambiguity

With five of the six “C’s” integrated into the algorithm for success, you might be tempted to think that 83% of the equation is a passing grade. Uh, no. This last variable has proven to be the most difficult to achieve with accuracy and consistency — as it is subject to internal influences and organizational biases of beliefs. The historic methods for conclusions were often more about art than science – hubris over content

Today and more importantly tomorrow, the art of the conclusion or decision is being hurriedly replaced with analytics. Objectivity based upon vetted facts, statistics, and the other five “C’s” is ruling the discussions in the boardrooms and with investors.

In fact, spending on business intelligence tools which support robust decision making continue to increase at double-digit growth rates – an aggregated market that exceeds $60 billion. All-in-one solution sets are being deployed along the entire success equation by industry leaders IBM, Oracle, InfoSys, and SAP.

Achieving “conclusivity” is also supported by a wide range of dashboard offerings (e.g., Visual Mining), analytical and industry specific KPI firms (e.g., Intelli-Mine, Inc.), and vertical benchmarking solutions (e.g., LPS).

Linked together, the six “C’s” are a powerful formula for the changing reality of a new and ambiguous decade. Also it should be noted that the conclusions desired within FMG will no longer be reached in domestic isolation. World governing bodies, global creditors, and wealth rebalancing all will bring a stark new set of consequences for success.

Did I forget to mention the seventh “C?”

* * * * * * * *

In conclusion, successes of tomorrow cannot be redressed on the methods of the past or the behaviors of a few. Continuous vigilance will be demanded to ensure any investment in infrastructure, the cloud, or business processes are exceeding expectations and measures. “Provision and forget” cannot be a path forward for lasting success.

As we move forward, one thing is very understandable – the methods used to measure results in a virtual, highly specialized FMG ecosystem will be distinctive and non-insular. The IT approach to provisioning, integration, and maintenance will also be different. Even the standards of interoperability and exchange will be uncommon – but likely converging.

S-U-C-C-E-S-S. No matter how it is defined, spelled, or framed, success must be generated from within. Are we really prepared across people, processes, technologies, and markets to orchestrate success in an uncertain decade?

In closing, as I get ready to attend my fifth MBA Annual show in San Diego next month, I sincerely wish everyone the best of success during this industry leading event. Make sure you say “howdy!” if you see me.

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Posted in Analytics, Architecture, Cloud Computing, Continuous Organizational Innovation, Dashboards, Data, Financial Services, Innovation, Markets, Orchestration, Outsourcing, Strategy | No Comments »

Using Analytics and Creating Intelligence in “The Cloud”

Wednesday, August 19th, 2009

Part three of a continuing series on the changing analytical ecosystems

By Mark P. Dangelo

www.Innovative-Relevance.com

With any new “miracle” idea or innovation, history and experience has taught us to approach it with a fair amount of skepticism. Foundationally, we often retort, “So what and who cares?” However, when highly respected media icons such as the Financial Times, start to consistently publish objective articles on a topic, skepticism for many turns into potentially creating competitive differentiation (see Cloud Computing Sidebar).

Our Heads are Firmly in “The Clouds”

The terminology and capabilities of cloud computing or “The Cloud,” has exploded in the last three years. For some, the expectations will far exceed reality. However, driven by continual technical advances innovatively supported by people and processes, “The Cloud” approaches have found harmonization with profit starved investors and forward thinking strategists.

Equally, the widespread euphoria has morphed into fragmented realities for corporate decision makers seeking robust operating functionality supported by rapid implementation cycles. That is, they have found quick successes, but their larger future is still unclear. In general, the principles of cloud computing are no longer buried in trade journals, presented in an obscure standards brief, or merely debated by technologists over beers.

As a matter of fact, cloud computing, underpinned by new measurements and data integration demands, is increasingly appearing in corporate agendas with an estimated annual spend in the billions and growing at an annual compounded rate of 25% and 40%.

At a time when organizations are questioning everything and dealing with iterative cost cutting programs, these articles and growing implementation successes are beginning to establish a foundation for lasting action.

Yet, we need to ask some very fundamental questions before we redefine the 2010 budgets and open the checkbook. For example, what is the roadmap, and more importantly what does “The Cloud” pragmatically offer? How can quality, “decision intelligence” be developed? What analytical measurements, driven by cloud technology, are now important?

You see, “The Cloud” is as important operationally as it is strategically if we adopt more than a “one-off” line of attack.

A Changing Reality for Decision Making

Analogous to the aftermath of the Great San Francisco Earthquake of 1906, we can foresee lasting corporate and social strife as a result of the prior supply chain practices and decisions encompassing origination, servicing, and securitization processes.

The permanent solutions and regulatory changes will be years in the making. Nonetheless, what is becoming apparent is the fundamental root causes. Our current public flaws architecturally resided with the flawed reasoning models used to confirm co-dependent mortgage decisions.

Yet, with finance and mortgage groups (FMG’s) spending over $14 billion (out of $80 billion globally) on decision driven business intelligence, dashboards, scorecards, planning, infrastructure, and applications, what will the new costs and benefits be when using cloud computing solutions? Sometimes, when dealing with highly complex challenges, historical references can teach us how to avoid a reoccurring fate of excessive spending.

In reviewing a 2007 report by the Economist Intelligence Unit (EIU, “In Search of Clarity, Unraveling the Complexities of Executive Decision Making”), we are able to witness a time capsule of priorities, methods, and challenges internalized prior to the most severe recession in nearly 80 years.

In hindsight, there are several understated findings, within the EIU assessment, which stand out:

1) “Poor data leads to poor decisions,”

2) “Challenges only increase as companies grow,”

3) “Too much art, not enough science?,” and

4) “Decision support tools need to be easier to use.”

Fast-forward two plus years, and we now see how the lack of relevant quantitative criteria fostered one of the greatest wealth destabilizations in three generations. The indicators were all “green,” but the decisioning results wound up to be very, very ”red.”

Layering and Leveraging KPI’s

It was a myopic focus on granular key performance indicators (KPI’s,) without a holistic examination of interrelationships and efficacy, which produced “false positives.” Or stated differently, the use of inelastic, static measurements and monitoring methods to predict future performance was just a disaster waiting to happen. Future decisioning cannot be defined merely by projecting forward historical indicators (i.e., backward focused gauges as a measure of future performance and consumer behaviors). It is akin to driving 65 mph while constantly being focused on the actions in the rearview mirror.

As we know, this was the preferred BAU for analytical predictions before the escalation of cloud computing, and the multi-faceted integration demands implied with the deployment of these new, virtual data sources. Moreover, we now are confronted with challenges of cascading economics and public policies that result in the demand for a series of risk adjusted analytics needed for decision making, compliance, and operational performance. So, what now?

“The Cloud” adoption, coupled with the crystal clear failures of the past, represents a waterfall opportunity to redefine and rebuild how decision making for the next decade should be done. The opportunity is with not just technology, but the integration and compartmentalization of multi-polar sources into intelligent and self correcting decision approaches.

The future of analytics begins to mirror a federated model of interconnected KPI’s that not only assesses past performance, but provides adaptability of forward-looking indicators that are properly vetted and cross-matched against multi-polar requirements. After all, analytics is more than data – it must deliver intelligence.

Sound impossible? Too Complex? Too futuristic? Think again. What I’m representing in this thumbnail began in earnest back in 2007-2008 with their seeds planted nearly a decade prior.

Analyzing and Anticipating Tomorrow

As the siloed technology discussions of SaaS, SOA, virtualization, and web services converge and confront fluid business pressures, standard operating processes and decision making breaks down and becomes dysfunctional. Business leaders struggle with innovation and consumer behaviors without sufficient analytics, intelligence, and predictability on “what’s next?”

Moreover, changing market conditions have created voids in reporting and compliance systems, internal skill sets needed for adaptation and the budgets needed to implement change. There is a need for clarity to avoid layers of cascading hazards, but uncertainty and risks have created institutionalized frustrations. In essence, we need to unwind the legacy, but be mindful of the disruptions and chaos that can be introduced.

In several of my prior 2009 articles, we examined the foundational strategies of analytics. In this article, we introduced the new variable of cloud computing and touched on the benefits and challenges it creates for severely strained IT departments and business personnel. However, what is the answer? What are others doing? What are the implications of adoption or redefinition?

To assess and begin anticipating viable solutions for the use of analytics, we invite you to participate in a brief survey. The survey can be found at www.Innovative-Relevance.com/analyticsurvey/. We anticipate releasing select findings of “Using Analytics and Creating Intelligence in ‘The Cloud’” industry report, starting in October 2009 in subsequent MBA articles.

* * * * * * * * *

In closing, there is a strange reader reaction that happens when a writer looks into the future and attempts to ascertain strategy – go figure, not everyone agrees on how to read the aggregated indictors for positive and profitable results. Earlier in 2009, when I holistically examined analytics and the likely impacts on operations and markets, there were many doubters. Now after another $5 plus billion in new M&A actions, perhaps those ideas don’t look so crazy after all?

But, whether you agree or disagree, we cannot deny our predicaments both domestically and globally. As printed in the Financial Times on August 13, 2009, “Foreclosure filings, which include default notices, scheduled auctions and bank repossessions, hit 360,149, an increase of 7 per cent from June and 32 per cent on the year. One in every 355 US homes received a foreclosure notice in July, according to the online marketplace for foreclosure properties.”

There is a need for change and how we responsibly and ethically define “success.” New and relevant analytics will help us determine our performance and models of operations – before others make those decisions for us.

Posted in Analytics, Architecture, Cloud Computing, Dashboards, Data, Financial Services, Measurements, Mortgage, Orchestration, Outsourcing, Strategy | No Comments »

Analytics – The Great Equalizer or Marketing Hype?

Monday, June 22nd, 2009

By Mark P. Dangelo

www.Innovative-Relevance.com

We seemingly measure everything. We define control limits. We assess correlations and assign statistical significance. We examine process cycle times, and we do it using robust methods (e.g., Six Sigma, scorecards, dashboards, EPM), investment frameworks and measurements (e.g., budgets, forecasting, IRR, NPV), and a host of internal and industry KPI’s (key performance indicators). We pay for third-party data sources that track mortgage products, consumers, securities, and other benchmarks similar to the sports announcers who flaunt encyclopedic baseball statistics.

Our pervasive technological platforms are able to create and track infinitesimal quantitative artifacts within broad categories including; borrower contact, document management, workflows, workouts, and default management demands. During this time of crisis, we are justifiably obsessing over performance, and our ability to do it better than our competitor. It also appears that our market providers never fail to remind us of this age-old competitive axiom at every event – all underpinned by a decade of very significant corporate spending on BI (business intelligence), reporting, and aggregation toolsets.

Most recently, objective analytical assessments have been brought to center stage by an angry public, opportunistic politicians, and “late-to-the-party” regulators (e.g., Stress Testing). Analytics represent a horizontal collection framework for understanding our vertical “As-Is” states and iterating ourselves to the “To-Be” operating and strategic goals – that is determining not just measurements for the sake of siloed measuring, but interconnected department causalities (e.g., EPM).

Yet, what call to action is provided within and across these hundreds of data points routinely gathered and aggregated? Who has primary or implication accountability? Who is directly and indirectly responsible for what is measured? What does it all mean within an industry or organization struggling to survive? Who within our operations are trained and educated to unlock the hidden “secrets,” while understanding the “checks and balances” within the frameworks?

In reality, the volume of disconnected atomic-level analytics gathered within some organizations exceeds 8,000 distinct metrics. With a new obsession for measurements not seen since Edward Deming’s statistical control disciplines were finally accepted in the 1990’s, analytics in all its emerging forms are fast becoming a “great reawakening” for FMG (finance and mortgage group) decision makers as they struggle to link outcomes, accountabilities, and responsibilities.

By Design, a Confusion of Subtleties?

The next decade of FMG leaders will be enthralled with the definition and usage of analytics. Why would they not? Every week, new press releases tout new-fangled features and acronyms all in an effort to gain “enterprise performance,” “top investment,” “better decision making,” and of course, “electronic, resilient, and reliable data sources.” All laudable goals on the surface albeit somewhat cliché and increasingly ubiquitous.

However, the extensive public relations for analytics has a potential to derail its lasting benefits, as vendors advertise solutions and product repositioning over the need of changing industry usefulness. A current Twitter search finds dozens of analytics, BI, data mining, and dashboard vendors all trying to gain 140 character “leadership” in a rapidly growing seller marketplace.

Whereas, tools and their visually predictive capabilities are wonderful additions to an arsenal of corporate software, there are some prerequisites which must be addressed before those first RFI’s hit the street. To properly frame the challenges and confusions within the markets, an informal outreach to decision makers produced the following snappish reactions:

  • How does the inclusion of analytical frameworks and measures improve the performance of high-value / high return processes and those personnel within these operations? What about delegated decision making and due diligence or discovery? Can it help with the hidden risks and changing credit skills that demand knowledge – not just tools?
  • If our organization utilizes innumerable spreadsheets for decision making, does the adoption and adaptation of an enterprise solution require a cultural shift (e.g., the prohibition of “dueling” spreadsheets and / or localized data marts)?
  • If we are already using scorecards, BI tools, dashboards, reporting, mining tools, databases, and content consultants, how does the adoption of a “new analytical framework” make this any simpler – or cost effective? Is this yet another net add to the base budget?
  • How can a strategy of programs and underlying project actions be really tied to results and profits driven by the aggregation of “new fangled” analytics? What is the measurable bottom line impact?
  • How can we permanently change the underlying processes using adaptable analytical solutions? Don’t we first have to reengineer our enterprise using PPT (people, process, and technology) in that order?
  • What keeps me awake are our disparate solutions, the ability to state with 100% confidence the integrity of the results, the STP of informational sources, various “systems of record,” regulatory confidence, and the auditability of ever changing analytical aggregating teams. How is that for a start? Will another layer really help me gain the confidence and overcome the internal political challenges?
  • Is there really anyone who has a better answer or real world centers of excellence that help deal with my problems today – loss mitigation, REO, foreclosures, workouts, government oversight, and more as I try to make a profit? Will analytics really help? How and when?

Indeed the aforementioned, paraphrased reservations may be daunting for those who are passionate about the future of analytics. Regarding the decision makers, they have historically heard business and technological boasts over the years, and for now, analytics merely represent a new chapter in a familiar book. Whereas, the on-going 26 month global financial crisis has left many of corporate competitors in declining decay, there are FMG visionaries who truly believe analytics may provide a conduit for rapid redefinition or elimination of antiquated SOP’s. They are thinking big – but starting small.

Iterate, While You Orchestrate

As a senior finance person recently stated, “I don’t have time to build an ’end-all’ analytical roadmap. We have operational actions that are far more important to our financial health and delivery performance. We can’t spend months building a comprehensive and detailed design or architecture that is supplanted within the next 45 days.”

It should be noted that the finance person was very positive on the use of analytics to help assess and improve their current priorities – customer retention, product satisfaction, M&A post-deal integration, BPO / KPO enterprise initiatives, and yes, financial reporting and soundness. It is just that the tolerance for another intellectually stimulating plan was beyond their ability to support its traditional academic creation (potentially resulting in large binders of expensive approaches), if it could offer no pragmatic and direct assistance for today’s complex realities.

As a result, an oxymoronic situation is created where you have to measure to improve, but you don’t have time to overtly determine what to measure. So frequently organizations measure everything and trust the answer will fall out from the atomic elements. Sound familiar? Will consistent organizational results be established with disjointed approaches and products?

The solution? The answer fundamentally resides with the repurposing of existing business planning methods, leveraging of predefined industry analytical profiles, and the detailed techniques contained within agile software frameworks – aka leverage what works and augment. The keystone of success is how all the segments are assembled to meet the needs of the organization, and the requirements dictated to any analytical roadmap developed. Like the conductor of an orchestra, it will be up to the organization to determine the “who, why, where, what, and how.”

This new leader, a Chief Analytics Officer (CAO), will have to balance theory and vendor promises with their organizations’ (i.e., orchestra) ability to produce measurement results. Simply stated, if the orchestra cannot do scales, then it will be unable to perform Beethoven’s Symphony No. 5 with any skill regardless of how new and shinny their instruments may be.

The CAO embodies a new role within the enterprise transcending the traditional IT functions, while representing an unwavering responsibility to meet tactical and strategic operational mandates. As a conductor, the CAO role involves strategy, financial understanding, market and competitive prowess, and technical abilities to manage the often competing internal groups and external vendors.

More will be written about the CAO in future articles. But rest assured that a new leadership role and “musical score” is being carved out of the traditional FMG corporate granite. It is a role that will have a lasting and rising impact on the industry for the next decade. The CAO is the only one that can bring trust to the enterprise and validation to a growing set of constituencies all seeking to influence business models and industry behaviors. The industry skepticism will be driven out with success and a cost-effective approach that meets the constantly changing enterprise needs.

Posted in Analytics, Dashboards, Data, Financial Services, Innovation, Mortgage, Orchestration, Process, Regulations | No Comments »

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