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“Only Hope was left within her unbreakable house, she remained under the lip of the jar, and did not fly away.”
-Freddy Brugmans and Edwin van Dis-
When we rethink the Sourcing Equation (people, organization, economics, and technology), it seems we are looking at a Pandora’s Box. For those less familiar with Greek mythology, Pandora's Box is an artefact taken from the myth of Pandora's creation in the poems of Hesiod. In the box, a decorated jar, there were evil things for mankind, from an angry Zeus. When Pandora, the first woman on earth, couldn't resist her curiosity and opened the jar, all of its contents were released into the world, except for ‘hope’. The authors are not trying to interpret the myth, but like Pandora, we are very curious. The outside of the Right Sourcing Box seduces us with interesting topics, such as lower costs, better performance and other marketing materials. Maybe you have some hesitation, but it’s tempting to explore. Are you ready to open the box? If you are reading this, you have opened the box. Just like us, you couldn’t resist the temptation of the unknown. In this article we would like to take you on a journey. Our destination is to find answers on how to solve the Sourcing Equation. We will start by telling you that the authors don’t have the wisdom, but we would also like to share some of our stories, thoughts, ideas, considerations and experiences. You might be confronted with some skepticism about the level of understanding about how business works, even about many interesting ideas being put forward in this book on sourcing. Our stories are inspired by many sources. Where appropriate we have added a reference to our source. We wish you a pleasant journey.
Guide to an Unplanned Journey
The human mind creates models of reality which are idealized views of the world. Plans and designs are based on the intellectual ability to learn from such views. The resulting systems (e.g. IT applications, devices) operate as logically as people can manage. According to Türing , in theory a machine has the ability to exhibit intelligent behavior indistinguishable from that of an actual human. In practice, it often contains inaccuracies or outdated functions, but further planning and design results in other, often better systems. It is understandable that many think that everything is designed, or at least that the behavior of people is planned. However, this is a major fallacy, which leads to many misunderstandings. The living world constantly adapts to changing circumstances. Biological evolution is not planned but uses random variations and selection of those variations that allow its owner to procreate more successfully than others. The guiding principle is simply ‘if it works, it works’ no matter how weird the result is. Human brains, and hence the human intellect, also arose in this way. Some random responses to the environment proved to be beneficial for the species, and remained: primary responses to environmental stimuli are anchored in genes. Human behavior, including making plans, stems from motivations and emotions that are, fundamentally, totally unplanned. Ariely  talks about ‘irrationality’. Brugmans  prefers to call it ‘unplanned behavior’. That human brains are able to learn to handle emotions within prevailing norms and values does not alter this conclusion. If concepts such as planning and engineering are applied to how people operate, the non-rational aspects of behavior are ignored: motivations and emotions. Of course, methodology and technology are rational if possible. But methods and techniques always support people, whose behavior is largely reactive and hence unplanned: such is the human condition. We disagree with the influential philosopher Descartes with regards to his mind-body dichotomy, which presumes a mind independent of the laws of nature, nowadays often translated into an incorrect distinction between ‘soft’ and ‘hard’ aspects of the world. According to Brugmans , human interactions are freely, i.e., a priori (quantum-mechanically) undetermined, but, a posteriori, relations and relationships are based on probabilities of physical correlations. In this respect the brain only differs gradually from the rest of nature in its level of structural complexity. We also disagree with regards to his famous statement “Cogito ergo sum” (I think, therefore I am) and the moral aspect of his opinion that virtue produces a spiritual pleasure that is better than bodily pleasure. Nevertheless, we are convinced that certain virtues are good for humankind in the sense that they help people to co-operate. Based on our experience, we will later present three essential virtues in this context: empathy, sincerity and curiosity. To presume that curbing our emotions results in ‘free will’ is nonsense; however, ‘will’ exists and – paradoxically – we strongly support personal freedom in combination with responsible behavior. Personal freedom isn’t a concept just for the individual, but always refers to behaving in an honest and respectful manner. We disagree with other authors of this book who see ‘spontaneous processes’ as synonymous with the working of free markets. The concept of a free market is a political statement, like the concept of communism. It seems reasonable to argue about the pros and cons of such concepts. However, such discussions are primarily motivated by the wish to get, or keep, power. We see all power structures as the result of physical and thus spontaneous processes. We have to learn from failures to understand how the world really works; communism and
capitalism have both have failed. People don’t behave according to a plan by their government or boss, but react ‘freely’ to such a plan. Many attempts to (re)design business processes, to introduce ERP (Enterprise Resource Planning) applications and to outsource (IT) departments have failed. There are many possible reasons for these failures, but in essence the underlying business philosophies fail: they are based on the misconception that people will behave according to a plan. It is realistic and rational to reason from biological motivations and responses to environmental stimuli rather than from the hypothesis of rational behavior. Perceived interests, hopes and fears determine the will of people, and how they respond to a schedule of activities. Mutual trust must grow so goals can truly be shared. Leadership must be accepted instinctively so people do not oppose the necessary changes. Organization and business models based purely on the concept of planned systems and controlled actions and influences (cf. the Scientific Management school of Taylor and the control paradigm) are far too simplistic. In addition, it’s not true that a small action always evokes a small reaction, and a big action a big reaction: human systems develop in a non-linear (chaotic) way because of sensitivity to initial conditions. A successful approach to change begins with creating the right conditions for motivation and emotion to be directed positively; conditioning the human condition. Only then does the human intellect get chance. The authors advocate a human-centric approach that factors in reality, ‘conditioning the human condition’ to work well together. Technology is quickly changing social structures, and has already broken down many barriers for freedom. Everyone can recall historical moments during revolutions in Libya, Egypt and nowadays in Syria. Communication is no longer dependent on being together at the same time and place. However, when operated by people with the wrong intentions, modern technology shows its dangerous side. For example, personal privacy is easily ruined by ill-intentioned individuals, pursuit of profit and bureaucracy. George Orwell  experienced society in many ways, from Eton College to East End. The combination of his view of the world (influenced by war, social injustice, and totalitarianism) and a science-fiction setting resulted in something special. It forced people to rethink their political and social views. Although written in the previous century, the novel still addresses today’s topics. What the writer imagined has become reality: we control technology, but technology also controls us.
A Foundation to Right Sourcing
In the previous paragraph we presented our guide to rethinking the sourcing equation with a critical view of prevailing views on human mind and behavior. Unlike Pandora, we know to expect the unexpected. The reality after opening the Right Sourcing Box shows challenging, unexpected elements. To neutralize these elements and turn them into something positive, we need to face and frame them. Amore formal foundation will support practitioners in taking action and making decisions on their journey. During this first part, three scientists will explain their opinion about some building blocks of the current foundation: system and value. At the same time they provide a vision plus a strategy to enhance the foundation. We will start at the basic cornerstone of their explanation, the knowledge gathering in our primary and secondary schools. During these years, kids are taught to look at the world from a prevailing perspective. Our first scientist, Sir Ken Robinson, challenges this perspective. In his ‘Changing Paradigms’ speech , he explains his findings. His observations of the education system, that had applied manufacturing assumptions, provide insight on the consequences of these choices. Robinson warns us of a second (parallel) global crisis in human resources (losing the capability of imagination and divergent thinking), which has a direct impact on our sourcing equation in the (near) future. The more people take current common practices for granted, the less revolutionary ideas and innovations will come forward. Simultaneously, the People factor shifts more and more to the ‘digital natives’ generation. It will become harder for organizations to attract new employees because of the current way of working. So a deadlock seems to appear. Fortunately Robinson’s message contains clues to solutions. If we can identify and change the assumptions that underlie our (educational and organization) system, we are able to source right (or at least better). The key concept in his and our journey is system. Although it is used in many different ways, the concept has almost never been rigorously defined in (Dutch) IT literature. Fortunately, two chapters of Jan Dietz’s book  are dedicated to system theory. Three additional System Thinking lectures from Russell Ackoff on YouTube  make the paradigm shift even clearer. To summarize it quickly: • System theory provides explanations and understanding (some answers to ‘why’ questions) • System theory provides a clear distinction between ‘what’ and ‘how’ questions
Before continuing with our view, we provide you a visualization of the usual system view of a hybrid “organization” and its environment (Figure 1).
Figure 1. The Sourcing System This view shows a close resemblance to the sourcing definition used in this book: “Sourcing is the process of organizing and procuring an optimal combination of people, components and services inside and outside an organization to produce and deliver products and services” If the term “components and services inside” is replaced by the term ‘assets’, both descriptions are almost equal. We will first explain the terms in Figure 1. The environment consists of several stakeholder categories such as client, shareholder and partner. The ovals represent the production of the ‘organization’ system, extended with some economic aspects (value, cost and price). The proper elements of our hybrid system are humans (people) and assets, tangible as well as intangible. The organization creates value, for each stakeholder in a different way. In the first place, the products and services of the organization are of value to the customers, according to their perception (‘customer value’). Familiarity in society with the names of the products and services also creates value (‘brand value’). The owners and shareholders of the organization benefit from the profits (sales prices minus production cost) from selling products and services (‘shareholder value’). This results in a certain level of shareholder value and continuity. Value is not only generated outside the organization, but also within the organization. Employees get chances to enhance their capabilities and to make careers (‘employee value’). Finally, another key concept is introduced: process (an ontological aspect). Process can be described as ‘the way and how it works’ of an organization. 5
Formally, a business process is a time dependent sequence of activities performed by an asset or a human in the organization’s system that leads to a change of state (transition) in the system. This transition should be in accordance with people's intentions as supported by the organizational structure (‘organization value’). However, real processes are seldom completely in accordance with these intentions. Crucial in systems theory is the proper definition of system boundaries and the context. However, this is not an easy task for an organization with real processes. People in the role of employees can be seen as part of the system, but the same people also can play relevant roles in society, and of course they can play roles as shareholders and customers. So the theoretical sharp boundaries are in reality vague perceptions of those involved. The boundaries only exist in the mind, so to say, and especially in the mind of the system designer. It is important to realize that people will always make assumptions about human behavior when applying system theory to organizations. Nevertheless, the ontological systems concept will help us to cope with the sourcing challenges. If we identify and understand what underlies our organizational system, we are able to source right, or at least better. Now we introduce some other concepts: business, management and leadership. Business can be described as every activity (of any asset or human) that produces something of value to any stakeholder of the organization. Management can be described as every activity (of any asset or human) that controls the quality and quantity of the planned output of the organization. In the footsteps of Buytendijk , we think it is important to separate leadership from management. Leadership can be described as an activity of a human with ‘vision’ that enables unplanned change of the organization. We don’t define ‘vision’ as a long term goal, but as a dot on the horizon that makes it possible to see alternative scenarios. Most managers only ask ‘why’ and ‘what’ questions (teleological view on function and behavior) to control the organization, while leaders always also ask ‘how’ and ‘which’ questions (ontological view on construction and operation). This is why the concept of process is crucial for leaders. It tells them how, and which people, assets, products and services really work together and how structures can be changed. Of course, a functional approach is very useful for defining fixed structures (such as technical assets, databases and applications), but the continuously changing world needs a process approach. Today, there is no exclusive answer to the Right Sourcing question because it is strongly influenced by the kind of view the stakeholder has, plus the level of observation (abstraction). Both the individual’s brain and the dominant culture have strong impacts on the way of abstraction. They filter away things that seem to be irrelevant for a ‘right’ perception of the world, dominated by the illusion of purposes. During the last decades, sourcing theory was, as part of the social sciences, mainly focused on the teleological view. As Dietz explains, this view has dangerous sides, because ‘function’ is subjective, and there exists the widespread and persistent misunderstanding that functional decomposition ultimately leads to knowing the construction.
Rethink the Concept of Right Sourcing
In the previous paragraph, the authors highlighted a new foundation that impacts the factors in the Sourcing Equation. Now we will explain our approach to Right Sourcing based on this foundation. According to the definition, sourcing is inextricably connected to an organizational system as a process. Until the end of 20th century, sourcing was a local activity for a business or company, due to geographical restrictions for employees. In the 1990’s, the growth of IT created apparent possibilities to automate the planning of assets and humans, also known as ERP. This enabled companies to function as one global company, i.e. with one sourcing process. Unfortunately, in practice this promise was not always met due to the complexity of the implementation. In addition, many geographical restrictions have been rapidly removed because of the rise of the Internet. During the on-going globalization, it has become easier for service personnel to work in other locations in the world. These trends have had an enormous impact on the Sourcing Equation. Expensive employees can now be swapped with people somewhere else who are able to do the same job at lower cost. Many organizations have taken this chance to explore the outsourcing of certain services (e.g. Human Resource and IT services). However, the exercise was carried out from a functional instead of a process perspective. This made the results unpredictable, because the necessary high-level process decisions were left to lower levels in the hierarchy. Many outsourcing contracts have thus caused a heavy burden on people. It’s not justified to pretend that these collaborations were successful. The bad experiences were input for many 'good practices' and led to new sourcing models, such as insourcing, multi-sourcing, cosourcing and online sourcing marketplaces; see Giarte . The key question is: are the new sourcing models able to curb all unleashed issues? Can we close our Right Sourcing Box? Our answer is clear: ‘No’. Reason: the fundamental problems are still there. We still have to find ways to: • Really understand how organizations work and what is that motivates people • Improve the sourcing strategy and decision making • Improve execution of the organizational transformation • Explore the parameters and circumstances in search of the factors of success • Explore dependencies with respect to people, organization, economics, and technology An important aspect of Right Sourcing is the ‘oil/glue’ concept to align the sources (people, organization and technology) when delivering products and services, and to add value to the customer. The gluing has economic implications (cost, added value, risk etc.) and the trade-off influences the Right Sourcing discussion. But should it be that way? Again, our answer is: ‘No’. The reason is that the analysis is not accompanied by a realistic synthesis, based on the human condition.
A Human-centric BPM Approach
Due to financial earthquakes, confidence and trust are challenged everywhere. The current crisis also brings the risk that companies and their customers will have less money to spend. To strengthen customer loyalty and grow margins in this new business context, we need an effective way to realize optimal processes in sourcing relationships. After the initial cost advantages, outsourcing clients increasingly expect innovation and improved performance. This acts as an incentive to implement the concept of Business Process Management (BPM). According to Vom Brocke and Rosemann  in their Handbook on BPM, attention should be paid to six core elements: • • • • ‘Strategic Alignment’, which is the tight linkage of organizational priorities and enterprise processes enabling continual and effective action to improve business performance. ‘Governance’, which establishes appropriate and transparent accountability in terms of roles and responsibilities for different levels (portfolio, program, project, and operations). ‘Culture’, which incorporates collective values and beliefs in regards to the process-centered organization, creating a facilitating environment. ‘People’, who are both individuals and groups who continually enhance and apply their process and process management skills and knowledge in order to improve business performance. ‘Methods’, which are the tools and techniques (e.g., Lean, Six Sigma) that support and enable activities along the process lifecycle and within enterprise-wide BPM initiatives, facilitating process modelling, process analysis and process improvement. ‘Information Technology solutions’, which not only focus on process analysis and process modelling support, but increasingly manifest themselves in the form of process-aware information systems.
A changing world needs realism. In our opinion, it is neither necessary nor possible to control all six BPM core elements. Process thinking is a social attitude of people, not a mechanical concept. Much like we need to crawl and walk before we can run, and again need to learn-by-doing before we can drive, companies often find out that it is necessary to improve their ‘basic stability’ prior to any larger step. Organizations need basic stability, prior to their ability to enhance customer centricity, responsible behavior and market adaptability. Mutual trust must grow so that goals can be shared. We talk about an attitude to collaborate positively, leading to a growing spiral of improvements that motivate to enhance processes continuously. Therefore, we start with creating a foundation, during which ‘motivation modelling’ and ‘process modelling’ can contribute to (inter)organization-wide acceptance. Our approach is to create the right conditions for people’s motivations and emotions to be directed in a positive way.
We think that empathy is an important virtue for listening to each other instead of meaningless debate. Egoism and self-glorification will impede communication. We also think that heartfelt sincerity is an important virtue for freedom based on good manners instead of outdated ideologies. Capitalism and communism have proved that they have in common trickery and deceit, which ultimately leads people to hide from other people. Responsibilities can only be truly felt by open and honest people. And last but not least, we think that a passionate curiosity is an important virtue for wisdom based on scientific reproducibility instead of blind belief. Blind belief in arbitrary tenets ultimately results in a flight from reality. To direct people’s motivations and emotions positively, we propose to create conditions favoring empathy, sincerity and curiosity. We think that social cohesion, process transparency and system flexibility will create these conditions and that they are right. As mentioned earlier by Brugmans and Heines , all sourcing parties will profit from mutual trust because of optimal cohesion, transparency and flexibility. Let’s look at an analogy. The presence of water is a biological condition. Water makes life possible because of three unique properties. The cohesion of water makes it possible for cells to function chemically. The transparency of water makes it physically possible for light to penetrate it. The flexibility of water makes it possible for organisms to live biologically. In line with this, we prefer to talk about ‘watering’ instead of using oil or glue between rationally perceived components: sourcing needs ‘watering’. In the sourcing context this means that we create the right conditions for appreciation of the virtues as mentioned. We think that the following three basic optimizations contribute to ‘conditioning the human condition’ to work well together: • Optimizing social cohesion is intended to enlarge people's ability to communicate empathically. A foundation creation for change will contribute to basic stability and to customer-centric end-to-end productivity not hindered by silos. o High employee involvement and team spirit o Defined ‘Voice of the Customer’ o Low lead times with good spread of work Optimizing process transparency is intended to enlarge people's ability to cooperate sincerely. Visibility and factual insight in process performance (instead of KPI’s for managers) will help people to behave responsibly. o Defined improvement plans combined with regular improvement sessions o Problems solved in a fact driven way o Tooling such as dashboards to support visual management Optimizing system flexibility is intended to enlarge people's ability to be curious towards new things. Fast feedback loops will contribute to adaptable operations and agile responses to new customer demand. o Capturing crucial knowledge enabling job rotation o Varying roles when necessary o Line balancing between resources for queued work and work in progress
We developed a quick scan to get insight into the current status of both the six BPM core elements (called BPM Capability) and the three above-mentioned conditions (called BPM Health); see figure 2. The results can be used to think about ‘how to change in a realistic way’.
Figure 2. BPM Capability and Health Process optimization is not a one-time improvement project. Implementation of continuous improvement is the critical factor in order to obtain sustainable results for all parties. Never try to manage all at once from above, but try to motivate and enable people to constantly improve processes within their own working field. To change sourcing parties in this direction requires leadership. Leadership must be accepted instinctively so that people don’t oppose the necessary changes. Then there is still hope for business companies to extend through 'cross enterprises processes' to get more value from Right Sourcing.
You opened our Pandora’s Box, and possibly you saw an evil thing for mankind: people without free will. However, this is not as bad as it appears. Although people have unplanned and fundamentally undetermined behavior, they do have the ability to learn from relevant correlations that they experience. Our approach is based on this realistic view of people. Based on our analysis of systems theory, we presented a new foundation for Right Sourcing. Crucial in systems theory is the correct definition of system boundaries and their context. The theoretically sharp boundaries are in reality vague perceptions of those involved. These perceptions need to be aligned with each other, on the basis of mutual understanding and trust. Mutual trust must grow. Therefore, it is crucial to start any change with a vision that really is shared. We advocate a human-centric approach that factors in reality, ‘conditioning the human condition’ to work well together. Organizations need basic stability, prior to their ability to improve customercentricity, responsible behavior and market adaptability. Based on our experience, we presented three virtues that have a positive influence on people’s motivations and emotions: empathy, sincerity and curiosity. We think that optimizing three basic conditions will result in activation of these virtues and a healthier organization: social cohesion, process transparency and system flexibility. And good health is essential for successful sourcing.
• • • • • • • • • • •  Türing, A., 1950, ‘Computing machinery and intelligence’, Mind, 59, 433-460.  Ariely, D., 2008, ‘Predictably Irrational: the hidden forces that shape our decisions’, HarperCollins.  Brugmans, F., 2012, ‘My Unplanned Journey’, http://freddybrugmans.blogspot.nl  Wikipedia, ‘George Orwell’, http://en.wikipedia.org/wiki/George_Orwell  Robinson, K., 2010, ‘Changing Paradigms’, http://www.youtube.com/watch?v=mCbdS4hSa0s&feature=related  Dietz, J., 2008, ‘Architecture -Building strategy into design’, Academic Service SDU, The Hague, The Netherlands.  Ackoff, R., ’Dr. Russell Ackoff on Systems Thinking -Pt 1’, http://www.youtube.com/watch?v=IJxWoZJAD8k Buytendijk, F., 2008, ‘Performance Leadership’, McGraw Hill.  Giarte, ‘Outsourcing Performance 2012’, http://outsourcingperformance.nl/  Vom Brocke, J. and Rosemann, M., ed., 2010, ‘Handbook on Business Process Management’, part 1 and 2, Springer, Heidelberg, Germany.  Brugmans, F. and Heines, R., 2009, ‘Samen creëren van vertrouwen’, Business Process Magazine, 1, 32-33, The Netherlands.
About the authors
Freddy Brugmans “I graduated in Physical Geography (1980, University of Amsterdam) and started my career as a researcher in geomorphology, taught geography and was an IT expert. I also completed Master’s degrees in Computer Science (1989) and Business Telecommunications (1998, Delft University of Technology). Since the start of this century, I have been working as a management consultant at the intersection of business and technology. I have taken leading roles in innovation and in the continuous improvement of business processes, focusing on the organization of social security, water supply, telecommunications and energy. I worked as Principal Management Consultant at Logica Business Consulting until mid-2012, but I said goodbye to the company when it was acquired by CGI.” Edwin van Dis “I am currently working as Solution Architect for Logica, now part of CGI. My primary focus is to support companies to enable change in their core business areas. I hold an MSc degree in Computer Science from Leiden University. Over the last decade, I have gained experience in several architecting roles across a range of market sectors. Business modelling, service orientation and business processes play a crucial part in my way of working. I am an international speaker, provide my opinion as a SOA topic expert and actively contribute to several (inter)national communities (e.g. Oracle SOA/BPM and IBM BPM) and innovation& research projects. “
Published May 8, 2013 as part of the book: Right Sourcing, Enabling Collaboration; edited by Dijkstra, Gotze & Van der Ploeg ISBN:9781481792813
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