Business Transformation Requires Transformational Leaders

We think of agile methods as a family of approaches aimed at dealing with uncertainty. If there is a high level of uncertainty about what exactly you will end up building, then the agile approaches (all of which call for multiple short iterations with ongoing customer feedback) make enormous sense. With the agile methods, we incrementally steer our way to a useful system.

In the first Executive Update of this two-part series,1 we set out a financial model that companies can use to evaluate potential investments in virtualization technology. We worked through the first two steps of the model -- data collection and financial analysis -- for our example company, Big Host, which is based on composite data from our recent work.

Everyone has a perspective about return on investment (ROI). Lots of calculations, models, and algorithms allegedly precisely measure the impact of alternative technology investments. There is strategic ROI and tactical ROI; there is "soft" ROI and "hard" ROI. There are as many ROIs out there as there are RBIs in the major league. What do we make of the ROI smorgasbord?

A quick Google search tells the story. Value networks are "hot" -- hot enough for the term to generate 15.5 million hits. The same search two years ago yielded about 30,000 hits. Narrow it down to a discrete term, and it still pulls 250,000. Want a bigger number? Try "social networks," clocking in at 35 million. Or "business networks," at 15 million.

The advantages of collaboration in furthering product ideas, responding to challenges, and extending corporate or departmental capabilities are now well known. Much recent attention has been fostered by new technologies and new capabilities falling under the general heading of Web 2.0 or Enterprise 2.0.

Last month, I had the privilege of being one of four keynote speakers at the Better Software Conference in Las Vegas. I'm not a gambler, so I didn't partake at the card tables or roulette wheels, but I do watch software project managers gamble all the time, so it seemed to be a fitting place for a technology conference.

Ever since the private sector's recent discovery that meaningful technological innovations didn't necessarily include a price tag, we've had open source innovation. While "free" overstates and misstates the value of open source innovation (OSI), the characterization does not miss by much. So far.

As I write this Advisor in the spring of 2008, the need for enterprise agility is once again a topic on the minds of executives everywhere. Stock market gyrations push prices down 3% one day, up 4% the next. Firms that months before had record profits struggle to stay alive.