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“On-line, On-time, On-budget” Titanic Lessons for the e-business Executive:  Strictly Proprietary & Confidential Copyright 2004 IBM Press New IBM Press publication authored by Mark Kozak-Holland, Senior Certified Consultant, June 30th, 2004 Presentation for PMIOVOC Chapter www.lessons-from-history.com “On-line, On-time, On-budget” Titanic Lessons for the e-business Executive Objectives: At the end of this presentation you will better understand:  Objectives: At the end of this presentation you will better understand The role the business executive needs to take in today’s IT (Internet) projects. How to prepare a team for the project, and ensure it is proactive and diligent. How to create a conducive communication environment for business and IT. What to look for in an IT project. How to be successful. Internet growth has surpassed early predictions and dominates the business world, and yet it still has its challenges.:  Internet growth has surpassed early predictions and dominates the business world, and yet it still has its challenges. B2B (World) Prediction in 1999: $1.3 trillion by 2003 Actual: $2.4 trillion (50% U.S.) 2004: online B2B 10% of World Economic Product B2C (U.S) Prediction in 1999: $108 billion by 2003 Actual: $95 billion (including 9/11, recession/ war) Productivity Prediction in 2000: $250 billion/yr by 2005 Actual pace: $450 billion/yr Avg saving $4,500/household, triple tax cut Last year how many times have you experienced this with an on-line service? Find alternative e-commerce site Lose/restart a transaction, Control-Alt-Delete Sep 2003: research from e-tailing group, inc. finds retailers are ill-equipped to handle online purchase /in-store return combination. 44% of stores offering the "shop online/return in-store" required a manager to override the system to complete the process. Some challenges like these horror stories incur significant costs are regardless of industry. But why do these problems still occur considering the sophistication of IT and PM? :  Some challenges like these horror stories incur significant costs are regardless of industry. But why do these problems still occur considering the sophistication of IT and PM? • In June 2004 RBC fell behind processing salary deposits as millions of transactions were knocked off course. • In June 2004 air traffic control computer failure saw planes grounded across the UK at Gatwick, Heathrow, Manchester and Inverness. • In July 2003 Orbitz LLC, airline-owned travel site, suffered 24 hours outage with database problem. • In March 2003 4,700 Kaiser Permanente patients received wrong medications because computer glitch that caused labeling errors. • In February 2003, many BlackBerry users experienced service outages amid interruption on company's network. • In February 2003, glitch knocked Microsoft's bCentral services, leaving 15,000 small-business Web sites inaccessible for 8 hours. • In January 2003 MSN Messenger outage lasted five hours and affected 75 million customers. • December 2002, slowdown prevented access to Dell's Web site, costing sales during holidays. • In October 2001, 12-hour outage put out Toronto-Dominion Bank’s electronic banking channels. Millions of customers could not access accounts. • In September 2001, program glitch at Rogers opened back door into 423,000 email accounts for 12 hours, allowing anyone to hijack them. • In September 2001, customers using Citibank’s 2,000 ATMs in New York and other parts of the country where thwarted by system problems. As companies weave IT through every aspect of their business all channel access to company services has an electronic dependency:  As companies weave IT through every aspect of their business all channel access to company services has an electronic dependency A business solution 10 years ago was destined for a department/business unit today economies of scale push solutions across the whole enterprise, more accessible to employees, partners, and customers. Service Delivery Environment P O R T A L Primary Access Channel Secondary Access Channel Electronic Electronic Electronic Indirect through Branch/ Office Call Centre Interactive Voice Response (IVR) PC, handheld Electronic Voice/Electronic Voice/Electronic Physical Access Scenario Access Broker Kiosk/ ATM Electronic As IT solutions become more complex in scope & implementation IT projects become more difficult to manage, longer, and with a less clear end point. Not only is IT more pervasive but the infrastructure is more complex and dynamic than before. The internet brings challenges to the business world and exasperates the availability of on-line services:  Not only is IT more pervasive but the infrastructure is more complex and dynamic than before. The internet brings challenges to the business world and exasperates the availability of on-line services The sheer complexity of Service Delivery Environment in terms of applications, databases, servers and communities. A highly dynamic environment changing every minute/day not only in web content but the environment itself. Keeping track of all elements (versions) in the environment. Managing multi-channels and keeping them all in lock-step. The Internet: Puts backend operation on-line, exposes integration flaws to world. Carries high expectations of 24x7 service delivery and on-line access. Enables fickle, savvy customers to click over to competitive services. Increases speed that on-line services acquire mission critical status. Expands B2B services to global 24x7, e.g., suppliers, resellers, partners. Did you know that the success rate of IT projects is stubbornly low as first shown by the “Chaos” reports from Standish Group:  Did you know that the success rate of IT projects is stubbornly low as first shown by the “Chaos” reports from Standish Group Only 26% of all IT projects finish on-time, on-budget, and with all the features and functions originally specified. Approximately 28% of all IT projects are canceled at some point during the development cycle. About 46% of all IT projects are challenged where the project is completed and operational but over budget, over time, and fewer function/features. (Source: “Chaos, a recipe for success,” Standish Group, 1998. Part of a series 1994, 1996, 1998) Hypothesis: IT projects can set the seeds for future operational failures that take months to come to light. Most problems in an on-line operation can be attributed back to poor decision making in the IT project. Bad IT service performance, IT project success rates, & IT investments are no longer just a CIO problem but for the whole c-level executive who need to deliver better e-business projects and on-line operations:  Bad IT service performance, IT project success rates, & IT investments are no longer just a CIO problem but for the whole c-level executive who need to deliver better e-business projects and on-line operations IT is so tightly woven into the fabric of the organization that IT projects, successful or otherwise, reflect on the entire senior management team. “Global companies are spending 20-40% of revenues on IT”. Source: Thornton A. May, chief awareness officer/corporate futurist Guardent. The CIO and entire c-level executive need to understand: The relationship between IT projects & on-line operations What can go wrong in a complex on-line operation? the cost and impact? How it can be prevented? The return on investment for creating a strong online operation They need to hear it in clear, non-jargon language “Business communication is worse when IT is involved, simply because it's so hard for a layman to truly grasp the lingo.” Source: Margo Visitacion, senior industry analyst, Giga, 2001 To better understand the relationship between IT projects and on-line operations imagine yourself back in 1912 in one of Titanic’s lifeboat being rescued by Carpathia. You ask yourself: :  To better understand the relationship between IT projects and on-line operations imagine yourself back in 1912 in one of Titanic’s lifeboat being rescued by Carpathia. You ask yourself: How could such a disaster happen? Why did the ship collide with ice? Why did the ship sink it was supposed to invincible? Why didn’t the ship slowdown through the ice field? Was the ship carrying lookouts? Who was in control of the ship? Why were there so few lifeboat places? Where there no other ships in the vicinity? Why did it take so long for rescue? Are these just the symptoms and not the causes? We need to go back to 1909 and look at the project itself. In 1909 White Star was facing stiff businesses pressures no different to corporations today executives responded with a new business strategy and took advantage of emerging technology:  In 1909 White Star was facing stiff businesses pressures no different to corporations today executives responded with a new business strategy and took advantage of emerging technology Increase in competition and new entrants. Aging technology infrastructure, ailing and inferior business services, leading to loss of market share and customers. Invested in a technology infrastructure with 3 new super liners to sweep Atlantic. Pushed emerging technology to limits. Addressed all three passage classes, priority on first-class. Improved services by quality of crossing and customer experience. Ships built for space and comfort (capacity) and not speed. The strategy required major new technology investments and the business case was really solid. The business requirements specified a lavish ship with space that addressed 3 classes.:  The strategy required major new technology investments and the business case was really solid. The business requirements specified a lavish ship with space that addressed 3 classes. Project “profitability analysis” showed a breakeven in 2 years. The construction project would take 6 years. A staggering 75% of revenue driven by first-class passengers. The price of: 1st class suite - $4,350, 2nd class suite - $1,750, 3rd class ticket - $30. Titanic’s class segregation no different to how today’s organizations cater to customer segments. By other ship standards third equivalent to second, and second to first. Space allocated: 60% for 905 first-class passengers. 7% for 1134 third-class passengers. In comparison for an IT project today the business executive should expect that in the requirements stage the project team will::  In comparison for an IT project today the business executive should expect that in the requirements stage the project team will: Ensure due diligence in examining the business problem, articulating competitive services, defining potential costs, and assessing risk. Determine by segments customer/target audience, value propositions, create profiles and scenarios for these. Determine existing services that will be integrated into the on-line operation, or data dependencies. Establish desirable service level targets to guide the architect in the next stages. Carefully assess solutions driven by new emerging technology. And build a business case for the IT project that::  And build a business case for the IT project that: Determines the cost of unavailability, based on affected users. Identifies and calculates hidden availability costs, especially people costs. Revenue > fixed costs + variable costs + solution investment + total unavailability costs. Considers branding, image and prestige. Highlights the exposure and risk, (potential for “bankruptcy”). Ensure investments required to move on-line out-weigh costs Revenue generating on-line operation Cost saving on-line operation In Titanic’s architecture stage like in any IT project Architects faced many investment options:  In Titanic’s architecture stage like in any IT project Architects faced many investment options They created a luxury liner with priority to first-class service and accommodation with the focus on functional requirements. Harland and Wolff were the most expensive craftsmen in Europe Lavish attention and investments to passenger comfort implied an equivalency in safety and operations features or non functional requirements. The designers had investment choices in safety features, from lifeboats to the new technologies like bulkheads, a double-skin hull, and electric doors. Thomas Andrews White Star made a large investment in a ship-builder’s model the modern equivalent of an IT pilot:  White Star made a large investment in a ship-builder’s model the modern equivalent of an IT pilot White Star used early modeling techniques to test the designs and identify vulnerabilities. Shipbuilders relied heavily on flow analysis or “static testing” to review ship characteristics. This was a sound strategy considering the limited testing options available, and it identified problems prior to construction. For an IT project the business executive should expect that in the architecture stage the project team will::  For an IT project the business executive should expect that in the architecture stage the project team will: Walkthrough the design, to catch problems early. Define end-to-end availability along all critical transaction paths. Complete “component impact analysis” across the infrastructure. Architect on-line operation to remove single failure points that avoid idle components and build security zones for access. Avoid under-investing in non-functional requirements. A mistake in these is far more costly than in functionals. Avoid one technology, lack of diversity increases susceptibility. In designing on-line operations avoid complexity, strive for simplicity, design for manageability, operability, scalability, performance, and ease of use. Titanic’s construction stage required the integration of many complex technologies and selection of safety features:  Titanic’s construction stage required the integration of many complex technologies and selection of safety features Many disparate technologies integrated and controlled from a single point, the bridge. In selecting the “availability level” and “safety features” assumptions were made about non-functional requirements. This led to over confidence in ship safety as construction progressed. Investment dollars were put into expensive safety features based on new technologies in preference to lifeboats. A perception developed that Titanic was unsinkable. Decisions were made that compromised individual safety features and the desired availability level:  Decisions were made that compromised individual safety features and the desired availability level No Titanic construction dollars were diverted from basic safety requirements to enhance the luxurious first-class. BUT esthetic factors like spacious public areas compromised the bulkhead wall height, built 10 feet above the waterline. The double skin was only 7 feet deep and below the waterline. 16 lifeboats were fitted rather than the recommended 48 (triple stacked) to provide an uninterrupted view for first-class promenade decks By the end of construction Titanic’s safety systems were severely compromised. But officers and crew believed they had the safest ship ever built:  By the end of construction Titanic’s safety systems were severely compromised. But officers and crew believed they had the safest ship ever built Safety regulations, for lifeboats, were hopelessly outdated by advances in ship-building technology. Titanic was presented and sold at the highest safety level, but in terms of passenger safety, it was at the low to medium level. The expensive construction effort was very misdirected incorporating the earlier mistakes, of the requirements and architecture stages. For an IT project the business executive should expect that in the construction stage the project team will::  For an IT project the business executive should expect that in the construction stage the project team will: Identify building blocks (components vs prefab) and solution alternatives (build versus buy). Identify availability alternatives (safety features) for the solutions. Build in cycles. Start small (prototypes), and scale up. Tier the environment, scale independently for backups and fail-overs. Create redundant sites (for cross-site failover), and sideways scalability. Construct robust, mission-critical on-line operations that use generic components with minimal exceptions. Review Government regulations that may impact, and plan accordingly. Ensure business executives and sponsors are involved throughout the construction, through steering committees. The business pressures for Titanic to go live were enormous with the large investments tied up in its four-year construction.:  The business pressures for Titanic to go live were enormous with the large investments tied up in its four-year construction. Olympic was in dry dock for repair because of the collision with HMS Hawke, one sixth of original cost. This delayed Titanic’s maiden voyage by a month. Extensive sea trials and testing were not considered critical partly because Olympic was established in service. Olympic was a test bed or yardstick for Titanic. It is debatable how well the experiences from Olympic were transferred. Formalized change-management/control theory had not been established. Much faith in Olympic’s track record. For an IT project the business executive should expect that in the planning stage the project team will: :  For an IT project the business executive should expect that in the planning stage the project team will: Review existing/previous projects with the PMO for commonality. Follow a change-management process, use risk assessments. Plan level of testing, and select right tests, and acceptance criteria. Assign operations services ownership and control of process. Use release-mgmt process (version control) for correct sourcing. Define alternatives to launch (withdrawal), and back-out plans. Create a test environment that mirrors the live environment. Put bug-fixes through extensive integration and regression testing. Prepare for increase in frequency of changes with the Internet. Use computer models to reduce test time, complexity, and cost. Deploy in test environment first, run parallel to live environment. Ensure testing is broad not just on functions. Avoid “in-house” change-management processes that are lacking. The business pressures and pressing economic needs pushed Titanic into service and resulted in limited testing completed:  The business pressures and pressing economic needs pushed Titanic into service and resulted in limited testing completed In reality Titanic’s testing consisted of the maiden voyage across the Atlantic fully loaded with passengers. On leaving port, Titanic nearly collided with the steamer New York coming within four feet indicating the challenges in operating a very large ship. Only one lifeboat drill was performed. The crew was unprepared to handle a disaster and the launch of all lifeboats. No time was spent in preparing the crew for the maiden voyage. The crew of 900 had 83 mariners. At this point in the project it is common to implement Service Level Agreements. Bruce Ismay went further and compromised these.:  At this point in the project it is common to implement Service Level Agreements. Bruce Ismay went further and compromised these. Bruce Ismay published a shipping announcement in the New York Times that Titanic would arrive a day early to published schedule. This was a new service level that proved to be fateful in pushing the ship to its operational limits. The passenger list was a “who’s who” of public life, with 300 very famous people, collectively worth of over $500 million. This underlined public confidence in the ship. For an IT project the business executive should expect that in the testing stage the project team will: :  For an IT project the business executive should expect that in the testing stage the project team will: Undertake business and technical risk assessments. Ensure separate, independent test teams with strong incentives to test objectively. Ensure users/customers are involved in testing changes to the live environment, to oversee objectives are met. Establish the ability to stop an implementation into the live environment if the testing fails or is badly flawed. Ensure that major testing, once under way, can be halted when there are serious misgivings. Ensure the change-management process has various strategies for rapid promotion and implementation. In the testing stage throwing a “Berlin wall” around the environment to control all changes is impractical::  In the testing stage throwing a “Berlin wall” around the environment to control all changes is impractical: Avoid bringing in operations services too late in, where changes are introduced “blindly” into the live environment. Avoid a change-management process that lacks political support at senior levels and the “teeth” to be effective. Avoid giving developers any testing or deployment access rights to the live environment. Avoid testing in a development environment, as only the simplest configurations can be simulated. The testing completed is basic application function testing. Refine your service level objectives and agreements. The operating stage required the deployment of the ship into production and her maiden voyage:  The operating stage required the deployment of the ship into production and her maiden voyage Titanic had a number of built-in feedback mechanisms that were discounted, fudged (ice bucket test), or just ignored. Operators overloaded by commercial traffic (noise) did not pass the ice warnings (signal) along in a timely fashion. Ice-warning information eventually communicated through the hierarchy to Captain Smith wasn’t adequately acted on. The captain very resistant to technology relied on “gut” feel and experience. He undermined the significance of Marconigram information. The officers kept their binoculars and did not share them with the lookouts, limiting operations to provide any early warning. During the operating stage Bruce Ismay was determined to prove Titanic was a superior ship to Olympic and meet his new SLO:  During the operating stage Bruce Ismay was determined to prove Titanic was a superior ship to Olympic and meet his new SLO The chain of command on board was usurped as Bruce Ismay overrode Captain Smith and pushed the ship and crew continuously to its limits by urging maximum speed. The captain succumbed to the director’s pressure to sail at full speed through the danger area. The business pressure overrode the operations services mandate. Stringent guidelines were broken putting everything in jeopardy. The collision was inevitable and the ship grounded itself on the ice shelf in an effort to avoid a head on collision. :  The collision was inevitable and the ship grounded itself on the ice shelf in an effort to avoid a head on collision. All the feedback systems were compromised. The ship reached its peak speed as three additional boilers were lit, more than at any other time in the journey,. California’s last radio message was ignored. The lookouts warning came 37 seconds before the collision. Officer Murdoch tried to dodge the iceberg and decelerate the ship through a “port-around” or “S turn.” Two assessment groups surveyed the ship for damage. Bruce Ismay made a fateful decision to prove Titanic could save herself.:  Two assessment groups surveyed the ship for damage. Bruce Ismay made a fateful decision to prove Titanic could save herself. The first group returned quickly with an inaccurate report of no major damage. They had descended only a few decks. There were several options available for recovery. Remain static and put out a distress call. Impact White Star’s credibility. Restart the engines and limp back to Halifax. Before the second group returned with the architect and carpenter the director took the decision to sail off the ice-shelf. The pumps could not keep up with the increased flooding. The architect predicted the ship had 2 hours. For an IT project the business executive should expect that in the operating stage the project team will::  For an IT project the business executive should expect that in the operating stage the project team will: Ensure the business/operations services refine SLAs, and adhere these. Create a four-tier organizational support structure for problem management with centralized help desk. Structure support for one holistic customer view of the service-delivery environment, avoid technology silos, assign operations services sole responsibility. Build problem-management processes based on the speed of recovery, & a four quadrant recovery clock. Base proactive problem-avoidance around an early warning system. Synthesize and route information from feedback mechanisms to decision-makers in a timely fashion. And take a comprehensive approach to organization, processes, and tools, a basis for continuous availability::  And take a comprehensive approach to organization, processes, and tools, a basis for continuous availability: Monitor strategic components critical to environment availability. Configure the service-delivery environment for fast startups. Avoid claiming a project success too soon. Monitor broadly across the whole environment after an implementation. Investigate environmental anomalies quickly using cause-and-effect, delays may be costly. Identify meaningful metrics in “User outage minutes” rather than percentages of availability. Re-evaluate the initial business case based on returns and metrics. The officers and crew operated in a state of disbelief unable to perform an effective recovery. Panic ensued amongst passengers.:  The officers and crew operated in a state of disbelief unable to perform an effective recovery. Panic ensued amongst passengers. The disaster assessment took 20 minutes, and 65 minutes before the captain ordered lifeboats filled. Poor communication impeded passengers & crew from reacting, possibly deliberate to avoid wide spread panic. The hierarchical organizational structure and physical class segregation on ship controlled information flow. Many passengers got up and went back to bed. The first life-boat left half full reluctance to get in. The crew skeptical that anything was serious. Any disaster recovery plan would have been poorly executed. Launching 16 lifeboats took over 90 minutes. The last 2 Englehardts were floated off upside down. Had more lifeboats had been in place it is unlikely they could have been launched. For an IT project the business executive should expect that in the operating stage the project team will prepare for disaster recovery and business continuity::  For an IT project the business executive should expect that in the operating stage the project team will prepare for disaster recovery and business continuity: Ensure once disaster is declared it is enacted according to the plan and followed without hesitation. Ensure disaster recovery plans are easily accessible in the organization. Nominate one group “guardian” (operations services) of the disaster recovery plan. Ensure that adequate training is available to staff to follow disaster recovery plans. Practice and rehearse disaster recovery plans regularly at least annually. Following Titanic’s disaster, both the U.S. and British authorities conducted post-mortems. The U.S inquiry came close to uncovering the cover up. :  Following Titanic’s disaster, both the U.S. and British authorities conducted post-mortems. The U.S inquiry came close to uncovering the cover up. US inquiry called 82 witnesses including specialists and technical experts. Determined the ship had reached top speed through the ice-field with no attempt to slow down. Forced Bruce Ismay to remain in U.S. & grilled him over role as director, and relationship with captain, officers and crew. Recommended lifeboat space for every person on all ships from U.S. ports; lifeboat drills for passengers and crew; adequate manning of boats; and 24-hour operation of radiotelegraph equipment. British inquiry saved White Star from bankruptcy to stop German competition. Saw European war looming, needed large ships for troops and materials. Condemned Captain Lord for not responding to Titanic’s flares. Criticized British Board of Trade for failing to update lifeboat regulations. Today private lawsuits would have brought White Star. Titanic unnerved western society’s faith in technology progress. Olympic, served distinguished 24 year career before being scraped. In summary the business executive needs to fully participate as a stakeholder in the IT project through all the stages, and understand: :  In summary the business executive needs to fully participate as a stakeholder in the IT project through all the stages, and understand: Best practices related to on-line operations and mission critical concepts, and be aware of critical decisions in: Project life cycle, deliverables and iteration Business case for an online operation Mission critical application dependencies Architectural models and frameworks Enterprise application integration and interdependency of data Organizational and process elements Change and problem management Use of metrics and service levels objectives and agreements Use of automation and Early Warning Systems Disaster recovery and business continuity plans Lessons learned - what can the business executive take from all this. Your IT project is little different to any construction project.:  Lessons learned - what can the business executive take from all this. Your IT project is little different to any construction project. Looking at historical projects can be incisive as it cuts away the layers of IT jargon and complexity that shroud today’s projects. The roots of Titanic’s disaster were in the project itself. Specifically the compromises made to safety features and the elevation of expectations. The elevated expectations allowed business pressures to override operational procedures. This lead to numerous violations of the “rules of good seamanship”. Interested in buying the book, signed copies available today, special offer $35. :  Interested in buying the book, signed copies available today, special offer $35. BOOK’S VALUE PROPOSITION IS THAT IT CARRIES OVER 100 BEST PRACTICES Implementation of one could save thousands of dollars Copies of “On-line, On-time, On-budget” ISBN 1931182345 can be obtained at http://mc-store.com/ononon.html Serialization: www.gantthead.com Also: www.lessons-from-history.com Credits and Sources :  Credits and Sources 1998 MERIT Project. Best Practices in Enterprise Management. Bonsall, Thomas E. Great Shipwrecks of the 20th Century. New York: Gallery Books. Bristow, Diana. Titanic: Sinking the Myths. Brown, David. The Last Log of the Titanic. McGraw-Hill. Davie, Michael. The Titanic: The Full Story of a Tragedy. The Bodleyhead Ltd. Hyslop, Donald, Alastair Forsyth, and Sheila Jemima. Titanic Voices. New York: St. Martin’s Press, 1998. Lord, Walter. A Night to Remember. New York: Holt, Rinehart, & Winston, 1955. Lord, Walter. The Night Lives On. New York: Holt, Rinehart, & Winston, 1985. Spignesi, Stephen. The Complete Titanic. Birch Lane Press Group, 1998. Thompson, Harvey. Customer Value Management. McGraw-Hill, 2000. Wade, Wyn Craig. The Titanic: End of a Dream. New York: Rawson, Wade, 1979. Wels, Susan. Titanic: Legacy of the World’s Greatest Ocean Liner. Alexandria, VA: Time-Life Books, 2000. Illustrations were used courtesy of the Ulster Folk & Transport Museum

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