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Copying Approaches from other Industries

Paul mentioned in his blog the different paths taken by different industries. Where some industries followed early the road of industrialization / standardization others (especially FS) took a different approach. The do-nothing approach towards value chain in FS is rather a consequence of th situation FS is currently stuck into.

I easily can do both – agree and disagree with Paul. Having an engineering background it is rather easy for me to agree that one should not reinvent the wheel. That means it is basically a good idea to copy:

  • an approach
  • a design
  • a methodology and the like

and adapt it to specific needs. If the application area of a practice is hardly comparable such an approach has obviously severe limitations – in very rough environments wheels might not be the right choice. A good example for me – though generic to IT – is the adaptation of the waterfall model to phased engineering approaches in manufacturing processes to IT development. A phased approach (waterfall model) fits nicely to the production of machines but somewhat limbers in the development of software. A major reason for this – at least partial – mismatch is the fact, that writing code is an inherent design process as well. A lot of new development methods and processes nowadays include “agile” or “iterative” in their name to emphasis on this, which by the way is not a new insight.

Think about a car manufacturing process where assembly is adapt to the most recent insights on a constant basis – it is rather hard to imagine.

After having spent some words on a failed copy approach I would like to come to the FS industry again. I agree that it is always more easy to state that a specific thing – in this case the FS industry – is different. I would like to start with the quote of a former CIO of a large bank: “The IT is the bank” – you can hardly say that about a manufacturing company, where IT is very often supporting the core process of production and assembly. Exactly that is happing in banks almost exclusively in and by IT. FS products mostly have one common characteristic – they are very virtual by nature. Which is true for the counterexample as well – Cash. In its most basic idea cash is a virtual product – if we leave out the tangible cash representatives (coins and paper money).

This fact implies positive and negative consequences – positive because one can generate a very strong business case for IT support in banking, with the negative aspect / consequences of immediately high dependencies of IT and business. It is hard to change production of a bank without an immense IT project. Banking also pays its dues for the early adoption of IT, which is true as of today. Back to the waterfall model – if we take the comparison with car manufacturing again (I know this is overstressed) banks would produce cars, that in principle would be continuously enhanced and changed over time. There would be no completely new model available. Maybe there is no single part in the banking IT left from day 1in today’s landscape (my assumption is however different and at least banks often run on technology stacks invented in the earl days of banking IT) but it is largely perceived as being the same enhanced and changed only. All improvements have been done on top of or within an existing landscape; even core banking replacements do not start on a green field – the dependencies are just too high.

And there is another slight difference with production of physical goods – it is not only the intermingled reality of process, function, organization and IT but also that the data (of eg: customers, contracts, transactions and the like) reside as first class citizens in this landscape. The consequence is that one needs to migrate these inhabitants in a way that business is not affected either. The following comparison is not really meant serious but helps to illustrate this mash up of business and IT. Renovating IT is like changing and rebuilding a car that is driving on the road with the least possible affect to the driver.

Thus I prefer to compare banking or FS – if necessary at all – to plant engineering and construction or a total different view to urban planning. Plant engineering applies e.g. a lot of standards assuming (just my gut feeling) that the majority of parts is a purchasable standard tool or technology or part (bandwidth ranges from a tube to move liquids to a pump or motor). These standard elements are combined in a specific fashion. It is very likely that two factories producing the same goods do not share the same blueprint and structure of the factory at all. And there is a very basic rule that can be derived from this – it is the fact that the more basic an assembly is the more standard parts can be used and in contrary the more specific the higher the likelihood that a unique machinery or part is used, which is partially true for the manufacturing street in the car industry as well.

The second one – urban planning – again emphasize the distinction of unique versus standard. A skyline is unique for a city; the infrastructure however is probably made out of the same technical components. An interesting side aspect is the distinction between an urban planner and an architect. The landscape or better the map of the town is made up by the big picture the map itself and what you get as individual components houses, bridges, sky scrapes and the like. It is rather rarely the case, that complete quarters are destroyed and rebuild – typically urban planning works on an emergent basis – with a few rather strictly controlled guidelines and a lot of indirect measures.

Coming back to the agreement with Paul – the “80:20 rule” to copy from other industries – I have the feeling that banks did one thing sub optimal. The picture of urban planning works again – the central management of the map was not strong enough – i.e urban planning just was not seen or overruled. It was to often sacrificed for the need of single quarters or buildings in the town. Maybe it is also a bit the fallacy of the banking industry to omit renovation and reinvention on the cost of the short term success – probably much more than in other industries. No one in car manufacturing industries would deny the constant need for renovation of production and products – otherwise we still would see some T-models on the street….

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