How To Listen And Learn As A Leader

In John Baldoni's book, The Leader's Guide to Speaking with Presence, he provides these tips for listening as a leader and learning as a leader:

When Listening As A Leader:

• Look at people when they are speaking to you. Make eye contact.
• Ask open-ended questions, such as "Tell me about..." or "Could you explain this?"
• Consider the "what if" question:  "What if we looked at the situation like this?"
• Leverage the "why" question:  "Why do we do it this way?"
• Employ the "how" question:  "How can you do this?"

When Learning As A Leader:

• Reflect on what people have told you.
• Think about what you have not observed.  Are people holding back?  If so, why?
• Consider how you can implement what you have observed.
• Get back to people who have suggested ideas to you and thank them.
• Look for opportunities to collaborate with others.

For nearly 20 years, Baldoni has coached and consulted for a number of leading companies in a variety of different businesses, ranging from automotive and banking to computers, high technology, fast food, and packaged goods. 

Ten Questions To Help Drive Engagement

"The challenge for the organizational architect is to systematically create the blueprint for an organization that consciously connects everything to purpose," explains author  Clive Wilson, in his new book, Designing the Purposeful Organization. "The product of doing this are measurable results and, importantly, a felt sense of success.

Wilson's book is packed with case studies and activities that help you put to practice in your organization the learnings from the book.

Clive Wilson

My favorite part of the book is the "10 Questions on Engagement," that all start out with, To what extent...

1. ...does your organization facilitate opportunities for engagement within and between all stakeholder groups, so that they may share perspectives, learn and grow together in support of the organization's purpose?
2. ...do people come together to examine the way things are done, criticize processes and behaviors with a view to evolving a shared best practice?
3. ...is attention paid to establishing a positive culture for engagement, so that criticism is welcomed in a spirit of openness and shared learning without blaming or diminishing individuals?
4. ...has the organization established the key skills for the engagement of those involved in its work and formed this into a curriculum of learning that is effectively tuned to its purpose?
5. ...are there opportunities for people to come together at critical times, such as strategic changes, team forming and development, project alignment and problem solving?
6. ...are learning programs and critical events systematically timetabled and well facilitated so that engagement is translated into commitments to action?
7. ...when people make commitments to action do they then receive managerial support and coaching to ensure action is taken?
8. ...is there systematic follow-up of commitments arising from group engagement to celebrate the gains made and to share associated learning?
9. ...does the organization have suitable systems in place to store knowledge airings from engagement that also facilitates ongoing engagement with and evolution of the knowledge to keep it alive and effective?
10. ...does the organization have a communications strategy that facilitates and supports engagement in alignment with the organization's purpose?

How To Be A Good Coach

Former Verizon Wireless CEO, Denny F. Strigl offers these tips for how to be a good coach to an employee. He explains that good coaches help performers by:

• Keeping them focused.
• Giving them objective, helpful feedback.
• Acting as a sounding board for new approaches.
• Identifying blind spots that may be holding the performer back.
• Reinforcing key values, principles, and behaviors that improve performance.
• Recognizing positive behavior and performance.
• Providing encouragement after setbacks and failures
• Setting "stretch" goals.
• Acting as an accountability partner.

Strigl believes that some managers fail in their coaching roles because they:

• View coaching as babysitting.
• See coaching as only correcting performance.
• Don't spend enough time with their employees.
• Are reluctant to criticize.
• Have social relationships with their employees.
• Have a "sink-or-swim" philosophy.
• Believe coaching is not helpful or meaningful.

"Coaching may actually save time by preventing extensive retraining or intervention to get a failing employee back on track or keep the person from falling off course in the first place," explains Strigl in his book, Managers, Can You Hear Me Now?

Every conversation you have with an employee has the potential to be a coaching conversation!

How To Infuse Your Organization With Entrepreneurial Energy

This month brought the release of the new book, Achieving Longevity: How Great Firms Prosper Through Entrepreneurial Thinking, by Jim Dewald.

"I wrote this book because I am concerned that businesses in general, and business leaders in particular, have lost touch with the all-important entrepreneurial spirit that drove growth and prosperity in the past," says Dewald.

Jim Dewald

Dewald also believes that today's business leaders put too much emphasis on efficiency and commoditization rather than innovation.

"The long-term survival of a firm depends on its ability to engage corporate entrepreneurship to adapt to changing markets, technologies, and/or social-cultural factors," adds Dewald.

In his book, Dewald explores for the reader three distinct questions:

1. What is driving the renewed interest in entrepreneurship -- specifically, corporate entrepreneurship? Are we entering a new era in which corporate entrepreneurship will become essential, even for short-term success?
2. How can existing business firms best prepare themselves to be entrepreneurial?
3. What are the pitfalls or barriers, and how can firms and managers best prepare for these unexpected concerns?

You'll also learn about:

• the changing (or not so much changing) economic environment and the role of strategy and entrepreneurship in understanding firm longevity and firm failure.
• true strategic entrepreneurship and entrepreneurial thinking and how to apply both to  your decision making.
• the framework, tools and culture necessary to foster entrepreneurial thinking.

Dewald shares this quote from Donald Kuratko and David Audretsch:

"A strategy at its essence, attempts to capture where the firm wants to go and how it plans to get there. When entrepreneurship is introduced to strategy, the possibilities regarding where the firm can go, how fast, and how it gets there are greatly enhanced."

Dewald is Dean of the Haskayne School of Business at the University of Calgary.

Thank you to the book's publisher for sending me an advance copy of the book.

Business And Life Lessons My Father Taught Me

My father passed away 15 years ago this month. What he taught me has served me well in business and in life. Even lessons I learned when I didn't at the time necessarily realize I was learning from him.

So, I thank my dad for teaching me the following business and life lessons:

Listen - Growing up, I thought my Dad was perhaps shy or quiet. Really, he was just a great listener. I believe that's what made him so wise. He would listen to anyone. Young or old.  New acquaintance or friend.

Provide - My Dad provided for me. Music lessons. Vacations. Summer camp. Boy Scouts.  He gave. He put others' needs first. Today, I find in volunteering likely the same satisfaction he felt when he provided.

Educate - My Dad's passion was education. He loved to learn. He loved even more to teach. He lived to help other people learn. In the workplace, providing learning opportunities is one of the most powerful things you can do for an employee. Mentoring is equally powerful.

Train and Prepare - All those years of hearing, "Have you done your homework?" and "practice your trombone," served me well.  I fully understand the need to prepare for presentations, meetings, interviews, etc.

Dress The Part - I admit. When I was younger, I sometimes didn't understand why my Dad dressed the way he did. Now I understand the value of dressing appropriately for the situation and circumstance.

Respect And Accept - My Dad showed respect to and acceptance of people different from himself.

Inject Humor - I would consider my Dad to have been a serious kind of guy. More serious than many other fathers in the neighborhood where I grew up. So, when he told a funny story, sang a silly song, or acted goofy, it was particularly memorable. At work, I inject humor to diffuse stressful situations. And, to build stronger bonds with my colleagues.

Thank you, Dad, for teaching me these valuable lessons by setting such a good example. I miss you.

The Courage Solution

The Courage Solution, a new book by Mindy Mackenzie, is all about the simple truth that the only thing you can reliably change or control is yourself. So, that is why Mackenzie wrote her book -- to teach you how to take actions that ultimately will improve your impact on the job and increase your happiness and fulfillment in your career.

Mackenzie's quick-read strategies focus on these four key areas:

• Part 1: You First offers techniques to take ownership and accountability for creating a career and life you love.
• Part 2: Lead Your Boss describes proven techniques to transform your relationship with your boss.
• Part 3: Lead Your Peers provides methods for accelerating positive peer relationships to improve business results.
• Part 4: Lead Your Team gives approaches for generating and creating the most effective teams and having more fun while doing it.

Mindy Mackenzie

A preview of Mackenzie's advice on  Leading Your Boss includes:

• Intensely study your boss to get to know the human being behind the mask.
• Understand the company you work for, the business you are in, how the company makes money, who the end customer is, and how what you do every day fits into the strategy of the company.
• Get the boss-employee relationship basics right.
• Make a concerted effort to elevate your thinking to an enterprise-wide perspective.
• Get in tune with your boss by knowing exactly what they are wrestling with on a weekly basis.
• Provide, honest, positive praise and affirmation to your boss--to them directly, and to their superiors and others.
• Be smart preparing your boss for your pushback, challenges, and disagreements.

Mackenzie emphasizes that this advice is not about giving your boss a pass. Rather, by leading your boss in the manner outlined above, you will have the best chance of creating a positive engagement with your boss. And, when that happens, everything around you at work will also change for the better.

Thank you to the book publisher for sending me an advance copy of the book.

How To Be A Category King

"The most exciting companies create. They give us new ways of living, thinking, or doing business, many times solving a problem we didn't know we had -- or a problem we didn't pay attention to because we never thought there was another way," explain the four authors of the dynamic new book, Play Bigger.

They add that, "the most exciting companies sell us different. They introduce the world to a new category of product or service." And, they become category kings. Examples of category kings are Amazon, Salesforce, Uber and IKEA.

Play Bigger is all about the strategy that builds category kings. And, to be a category king you need to be good at category design:

• Category design is the discipline of creating and developing a new market category, and conditioning the market so it will demand your solution and crown your company as its king.
• Category design is the opposite of "build it and they will come."

Key traits of category design, explain the authors, are:

• A strategy that starts with your CEO and his/her leadership team identifying the right category to create.
• A combination of both product and ecosystem design. A product that provides the solution to an urgent and giant problem. And an environment around that product that wins loyalty and gratitude for that product and your company.
• Being sure your category design is part of your company culture.
• Creating a powerful and provocative story that causes customers or users to make a choice. A story that evokes something different from what came before, not just better.
• A combination of marketing, public relations, and advertising all focused on conditioning the market to desire and need whatever you're giving it.
• Ensuring all of the above components work together, in lockstep, feeding off each other.

"Category design is a process. One thing leads to another and it builds on itself," explain the authors.

Play Bigger provides you the playbook you need to learn how to become a category king. It's essential for entrepreneurs wanting to change the landscape. And, a must-read for CEO's who want to reimagine their businesses.

As you read the playbook, you'll learn:

• Why it takes courage to build a category.
• What makes category king companies enduring and attractive to investors.
• How category kings have changed the way Venture Capitalists invest in new companies.

And, you'll learn the answers to these questions:

• In what way does Apple work like the 165-year-old glass company, Corning?
• Why was Elvis not just the King, but a category king?

The authors of the book are: Al Ramadan, Dave Peterson, Christopher Lochhead and Kevin Maney.

Thank you to the book publisher for sending me an advance copy of the book.

How To Project A Professional Image

From Jay Miletsky's book, 101 Ways to Successfully Market Yourself, here 10 tips for projecting an effective professional image:

1. Discipline yourself to be positive and enthusiastic.
2. In tense situations choose positive responses by maintaining perspective and getting along well with others.
3. Acknowledge mistakes and shortcomings and learn how to correct them.
4. Develop a reputation for being a resourceful problems solver.
5. Leverage your strengths and expertise to have maximum impact on the decisions you make.
6. Be organized, efficient, flexible, and self-motivated.
7. Master your tasks and fully expand your area of expertise so that you can boost your output.
8. Keep up with the latest developments in your company and in your field.
9. Cultivate unique talents that give you a definite edge.
10. Gain visibility by taking the kind of action that will propel you into the right sights of management personnel.

The Difference Between A Mission And A Vision

Here's a good definition of the difference between a mission and a vision by leadership book authors George Bradt, Jayme A. Check and Jorge Pedraza:

• Mission - A mission guides what people do every day. It informs what roles need to exist in the organization.
• Vision - A vision is the picture of future success. It helps define areas where the organization needs to be best in class and helps keep everyone aware of the essence of the company.

Sixteen Trust-Building Tips

You can't lead if your employees, team or followers don't trust you.

Building trust takes energy, effort and constant attention to how you act.

To help build trust, follow these 16 tips, recommended by author Susan H. Shearouse:

1. Be honest
2. Keep commitments and keep your word
3. Avoid surprises
4. Be consistent with your mood
5. Be your best
6. Demonstrate respect
7. Listen
8. Communicate
9. Speak with a positive intent
10. Admit mistakes
11. Be willing to hear feedback
12. Maintain confidences
13. Get to know others
14. Practice empathy
15. Seek input from others
16. Say "thank you"

The Three Elements Of A Great Apology

The following great advice about how to apologize is from the new book, The Courage Solution, by Mindy Mackenzie. I'll be posting a full review of the book in a few days. In the meantime, Mackenzie recommends you include these three elements when you apologize:

1. Actually say "I'm sorry" out loud, while making eye contact, if possible.
2. Acknowledging your error by adding the phrase "I was wrong...but more importantly, you were right."
3. Asking humbly, "How can I fix this?" Keep in mind that an effective apology requires you to have actually begun working on a solution by the time you get to this step.

How To Reduce Employee Turnover

Knowing why an employee leaves your company can help you to reduce your employee turnover rate.

That's because you can use the reasons a departing employee provides to gather information about processes, people and departments that might need some redirection to correct situations that may have contributed to the employee's reasons for leaving.

So, do an exit interview whenever possible with each departing employee. Ask each person:

• Why they are leaving
• What they liked about their job
• What they would have changed about their job
• How they felt about the cooperation level among co-workers
• How they felt about communication and interaction with co-workers
• Whether they received the necessary training to do their job
• Whether they received frequent coaching and balanced feedback from their supervisor
• Would they recommend a friend apply for work at your company
• How they felt about their pay
• How they would describe the morale in the company and in their department
• What they would change about their department and the company
• Whether they received the necessary information to perform their job effectively

You can find other great advice about exit interviews in the book, The Essential HR Handbook, written by Sharon Armstrong and Barbara Mitchell. The book is a quick and handy resource for any leader, manager or Human Resource professional.

Brian Tracy On Motivation And The Friendship Factor

All you need is one hour to read Brian Tracy's pocket-sized guide for managers, Motivation.

"You cannot motivate other people," explains Tracy, "but you can remove the obstacles that stop them from motivating themselves.  All motivation is self-motivation.  As a manager, you can create an environment where this potential for self-motivation is released naturally and spontaneously."

In the book, Tracy presents chapter-by-chapter his 21 most reliable and powerful methods for increasing the effectiveness of any individual or group.

Each chapter includes a couple different action exercises.

Toward the end of the book, Tracy explains the importance of the Friendship Factor in motivating employees. "Every manager can tap into the power of friendship in everyday employee interactions by remembering the three Cs: Consideration, Caring and Courtesy.

• Practice consideration by expressing an interest in your employees as individuals.
• Express caring for your staff members by listening attentively and with compassion.
• Express courtesy toward employees by showing personal regard and respect for each person -- especially under stress, when a situation goes wrong, or when a worker makes a mistake.

"Your job as a manager is to make sure that you are getting along well with all of your employees and they are all getting along well with you," stresses Tracy.

Ten Reasons To Embrace Storytelling As A Business Tool

From Paul Smith's book, Lead With A Story, here are the 10 reasons for embracing storytelling as a business tool:

1. Storytelling is simple
2. Storytelling is timeless
3. Stories are demographic-proof
4. Stories are contagious
5. Stories are easier to remember
6. Stories inspire
7. Stories appeal to all types of learners
8. Stories fit better where most of the learning happens in the workplace
9. Stories put the listener in a mental learning mode
10. Telling stories shows respect for the audience

Smith goes on to say that:

• you don't need a degree in English to tell a story
• stories can spread like wildfire
• lessons from a story are remembered more accurately, and for far longer, than learning derived from facts
• stories spark curiosity and interest rather than the urge to evaluate or criticize
• stories get your message across, without arrogantly telling listeners what to think or do

Leadership And Life Quotes From Leading With Grit

In addition to Laurie Sudbrink's, Leading With GRIT, being a great book for leaders, it's packed with powerful leadership and life quotes. Here are some of my favorites:

• Wanting to be someone else is a waste of the person you are - Kurt Cobain
• The respect you show to others (or lack thereof) is an immediate reflection on your self respect - Alex Elle
• You never really understand a person until you consider things from his point of view - Harper Lee
• People only see what they are prepared to see - Ralph Waldo Emerson
• We make a living by what we get, we make a life by what we give - Winston Churchill
• If it doesn't challenge you, it won't change you - Fred Devito
• The secret of change is to focus all your energy, not on fighting the old but on building the new - Socrates
• The biggest communication problem is we do not listen to understand. We listen to rely - Anonymous
• Attention is the rarest and purest form of generosity - Simon Weil
• Good leaders inspire people to have confidence in their leader. Great leaders inspire people to have confidence in themselves - Eleanor Roosevelt
• The only thing worse than training employees and losing them is to not train them and keep them - Zig Ziglar
• You can't change what you refuse to confront - Gina Senarighi

How To Create A Heart Culture With Your Employees

If you want to create a heart culture and a people-first culture at your workplace, read the book, Advisory Leadership, by Greg Friedman. 

Although the book is authored by an award-winning financial advisor and primarily written for professionals in the financial services industry, this book is a must read for any leader who wants to create a nurturing heart culture that hinges on the human-centric values the next generation of employees hold in high regard.

And, what exactly is heart culture? Friedman says, "At its core, heart culture symbolizes how a company values more than just an employee's output. It's not about the work, but rather, the people who do the work."

He further explains that leaders can no longer afford to ignore the shift toward a people-first culture and its direct influence on a healthy, effective work environment.

Friedman teaches that there are seven steps, based on human virtues we all strive to achieve, that are key to unlocking the power of a people-first culture:

1. Patience. Slowing down the hiring process to help you better choose the right candidate for any role, every time.
2. Honesty and Integrity. Leading by example and encouraging open and honest communication.
3. Compassion. Acknowledging people for their individual contributions and getting to know them beyond their roles.
4. Respect. Empowering employees to make decisions and guiding them in their personal goals for professional achievement.
5. Persistence and Consistency. Aligning your management team with your company's goals and reiterating your values through various communication channels.
6. Encouragement. Promoting and rewarding team collaboration instead of competition.
7. Courage. Looking inward before taking those crucial first steps toward change.

Greg Friedman, Ms, CFP

You'll also learn from the book the most common culture killers, which are:

• Focusing too much on a hierarchical organization.
• Complacency.
• Not guiding the troops.
• Holding on to toxic employees.

I really like this book, because it:

• Provides "real-world" and practical everyday steps you can take.
• Gives you specific techniques and tactics.
• Capsulizes "Tips to Remember" for you at the end of each chapter.
• Is incredibly easy to read and absorb.

Friedman is founder and president of Junxure, a practice improvement firm, and Private Ocean, a West Coast wealth management firm.

Five Tips For Writing Company Policies

Keep these five tips in mind when you craft your next company policy:

1. Keep the policy short and simple.
2. Get rid of two old policies for every new policy you implement.
3. Make sure that your organization's policy and procedures are written to serve your employees and customers--not just your organization.
4. Don't write a policy in reaction to a single incident. The problem may never arise again.
5. Don't write a policy longer than one-page, no matter how large your organization may be.

Thanks to author Bob Nelson for these great tips from his book, 1001 Ways To Energize Employees.

Integration Does. Not. Scale.

In times past, there was a difference between the front office of a business – designed to make a good impression – and the back office – a utilitarian place where most of the routine work got done. The first (and for a long time the predominant) use of computers in business centered around automating back office processes, so of course, IT was relegated to the back office. 

As businesses grew, various back office functions developed their own computer systems – one for purchasing, one for payroll, one for manufacturing, and so on. The manufacturing system in vogue when I was in a factory was called MRP – Material Requirements Planning. As time went on, MRP systems were expanded to the supply chain, and then to the rest of the business, where they acquired the name ERP – Enterprise Resource Planning.

Over time it became obvious that the disparate systems for each function were handling the same data in different ways, making it difficult to coordinate across functions. So IT departments worked to create a single data repository, which quite often resided in the ERP system. The ERP suite of tools expanded to include most back office processes, including customer relationship management, order processing, human resources, and financial management. 

The good news was that now all the enterprise data could be found in the single database managed by the ERP system. The bad news was that the ERP system became complex and slow. Even worse, enterprise processes had to either conform to “best practices” supported by the ERP suite or the ERP system had to be customized to support unique processes. In either case, these changes took a long time.

ERP Systems Meet Digital Organizations  

As enterprise IT focused on implementing ERP suites and developing an authoritative system of record, the Internet became a platform for a whole new category of software, spawning new business models that did not fit into the traditional processes managed by ERP systems. Here are a few examples:

1. Many software offerings that used to be sold as products are now being sold “as a service”. However, ERP systems were designed to manage the manufacture and distribution of physical products; they don’t generally manage subscription services.
2. Some companies (Google for example) give away their services and sell advertising. Other companies (such as EBay and Airbnb) create platforms that unite consumers with suppliers, often disrupting traditional industries. In a platform business, the most critical processes focus on driving network effects by facilitating interactions between buyers and sellers. Although ERP systems can manage both suppliers and customers, they usually do not focus on the interactions between them.
3. The Internet of Things (IoT) brings real time data into many processes, changing the way they are best executed. For example, predictive maintenance of heavy equipment can be scheduled based on sensor data, resulting in better outcomes for customers and thus for the enterprise. ERP suites are intended to support standard practices; they struggle to support processes that change dynamically in response to digital input.
4. Capitalizing on the availability of data generated by products, companies are moving to selling business outcomes rather than individual products (GE is an example). When you are selling engine thrust or lighting costs, rather than engines or lightbulbs, processes need to be focused on the customer context. ERP systems generally focus on internal processes.
5. ERP systems are supposed to provide a single, integrated record of important enterprise data, but that data rarely includes dynamic product performance data, information about consumer characteristics and preferences, or other information that has come to be called “Big Data”. This kind of information is becoming an extremely valuable resource, but there isn’t room in ERP databases to store and manage the massive amount of interesting data that is available.

In summary, digitization is bringing the back office much closer to the front office, providing the data for dynamic decision-making, and substituting short feedback loops and data-driven interactions for “best practices.” Since enterprise ERP suites were not built for speed or rapidly changing processes, they are increasingly being supplemented with other systems that manage critical enterprise processes.

Postmodern ERP

In the last few years, in the wake of the success of Salesforce.com, many cloud-based software services have become available. Some target the entire enterprise (NetSuite for example), but many are focused on particular areas (e.g. human resources) or particular industries (e.g. construction). These services are finding an eager audience – even in companies that have existing ERP systems. Today, about 30% of the spend for IT systems is coming from business units outside of IT [1]. If they cannot get the software they need from their IT departments, business leaders are likely to purchase cloud-based services instead.

The cloud reduces dependence on a company’s IT department, so it has become quite easy for various areas of the enterprise to independently adopt “best-of-breed” solutions specifically targeted at their needs, rather than use a single ERP suite across the enterprise. These best-of-breed systems are usually selected by line business leaders and hosted in the cloud. They tend to be faster to implement and more responsive to changing business situations than the enterprise ERP suite – partly because they are decoupled from the rest of the enterprise. Gartner calls the movement from a single ERP suite to a collection of ERP modules from multiple vendors “Postmodern ERP”[2]. 

Gartner warns that a multi-vendor ERP approach can lead to significant integration problems, and recommends that multiple vendors should not be used until the integration issues are sorted out. Of course, business leaders want to know why integration is important. IT departments typically respond that the ERP’s central database is the enterprise system-of-record; other ERP modules – financial reporting, for example – depend on this database for critical data. Without an integrated database, how will the rest of the enterprise be able to operate? How will the accounting department produce its required financial reports? 

Integration Does. Not. Scale

But hold on. There are plenty of very large companies that work remarkably well – and produce financial reports on time – without an integrated system-of-record. In fact, internet-scale companies have discovered that integration does not scale. If we go back to the year 2000, we find that Amazon.com had a traditional architecture – a big front end and a big back end – which got slower and slower as volume grew.  Eventually Amazon abandoned its integrated backend database in the early 2000’s, in favor of independent services that manage their own data and communicate with each other exclusively through clearly defined interfaces. 

If we have learned one thing from internet-scale players, it’s that true scale is not about integration, it is about federation. Amazon runs a massive order fulfillment business on a platform built out of small, independently deployable, horizontally scalable services. Each service is owned by a responsible team that decides what data the service will maintain and how that data will be exposed to other services. Netflix operates with the same architecture, as do many other internet-scale companies. In fact, adopting federated services is a proven approach for organizations that wish to scale to beyond their current limitations. 

Let’s revisit the enterprise where business units prefer to run best-of-breed ERP modules to handle the specific needs of their business. This enterprise has two choices: 

1. Integrate the various ERP modules and store their data in a single ERP database.
2. Coordinate independently-maintained enterprise data through API contracts. 

The problem with the first option is that integration creates dependencies across the enterprise. Each time a data definition in the central database is added or changed, every software module that uses the database must be updated to match the new schema. This makes the integrated database a massive dependency generator; the result is a monolithic code base where changes are slow and painful. 

Enterprises that want to move fast will select the second option. They will move to a federated architecture in which each module owns and maintains its own data, with data moving between modules via very well defined and stable interfaces. As radical as this approach may seem, internet-scale businesses have been living with services and local data stores for quite a while now, and they have found that managing interface contracts is no more difficult than managing a single, integrated database.

What Scales

Assume that every team responsible for a process can choose its own best-of-breed software module and is responsible for maintaining its own data in appropriately secure data stores. Then maintaining an authoritative source of data becomes an API problem, not a database problem. When the system-of-record for each process is contained within its own modules, new modules can be added for handling software-as-a-service, two-sided platforms, data from IoT sensors, customer outcomes or other new business model that may evolve. These modules will exchange a limited amount of data through well-defined API’s with the credit, order fulfillment, human resources, and financial modules. Internally, the new modules will collect, store, and act upon as much unstructured data and real time information as may be useful. More importantly, these modules can be updated at any time, independent of other modules in the system. In addition, they can be replicated horizontally as scale demands. 

It is the API contract, not the central database, that assures each part of the company looks at the same data in the same way. Make no mistake, these API contracts are extremely important and must be carefully vetted by each data provider with all of its consumers. API contracts take the place of database schema, and data providers must ensure that their data meets the standards of a valid system-of-record. However, changes to an API contract are handled differently than most database schema changes. Each change creates a new version of the API; both old and new versions remain valid while other software modules are gradually updated to use the new version. A wise API versioning strategy eliminates the tight coupling that makes database changes so slow and cumbersome. The reason why federation scales – while a central database approach does not scale – is because with a well-defined API’s strategy, individual modules are not dependent on other modules, so each module can be deployed independently and (usually) scaled horizontally. 

When you think of Enterprise ERP as a federation of independent modules communicating via API’s (rather than a database), the problems with multi-vendor ERP systems fade because the system-of-record is no longer a massive dependency-generator that requires lockstep deployments. With a federated approach, business leaders can move fast and experiment with different systems as they become available, and still synchronize critical enterprise data with the rest of the company. In addition, similar processes in different parts of the enterprise can use different applications to meet their unique needs without the significant tailoring expense encountered when a single ERP suite is imposed on the entire enterprise.

What about Standardization?

Won’t separate ERP modules lead to different processes in different parts of the enterprise? Yes, certainly. But the question is – under what circumstances are standard processes important? In the days of manual back office processes, there was lot of labor-intensive work: drafting, accounting, phone calls, people moving paperwork from one desk to another. Standardization in this kind of operating environment made sense and could lead to significant efficiencies. But in a digitized world, the important thing is not uniformity; it is rapid and continuous improvement in each business area. Different processes for different problems in different contexts can be a very good thing.

Jeff Bezos agrees; he believes that the only path to serious scale is to have a lot of independent agents making their own decisions about the best way to do things. This belief was a key factor in the birth of Amazon Web Services, a $10 billion business that keeps on growing. Amazon began its journey away from a big back end by creating small, cross-functional teams with end-to-end responsibility for a service. These teams designed their own processes to fit their particular environment. Amazon then developed a software architecture and data center infrastructure that allowed these teams to operate and deploy independently. The rest is history.

In Conclusion

It is time for enterprise processes become federated instead of integrated. This is not a new path – embedded software has used a similar architecture for decades. Today, almost every successful internet-scale business has adopted some type of federated approach because it is the only way to scale beyond the limitations of the enterprise. 

As digitization brings back-office teams closer to consumers and providers, they must join with their front-office colleagues and form teams that are fully capable of designing and improving a process or a line of business. These “full stack” teams should be responsible for managing their own practices, technology and data, meeting industry standards for their particular areas. They should communicate with other areas of the enterprise on demand through well-defined interfaces. 

The good news is that you can gradually migrate to a federation from almost any starting point, including an enterprise-wide ERP system. Even better, as IT moves from enforcing compliance with the company’s ERP system to brokering interface contracts and ensuring data security, it becomes a business enabler rather than a bottleneck. And best of all, responsible full stack teams that solve their own problems will create attractive jobs for talented engineers and give business units control over their own digital destiny.