• Home
• About

Gartner’s Pattern-Based Strategies: The Emperor has no Clothes! Part I

For the last week I have been trying very hard to understand Gartner’s much-touted Pattern-Based Strategies. I have read their pitches, listened to their analysts trying to explain it (see video and audios at http://www.gartner.com/technology/research/reports/pattern-based-strategy.jsp ), and read many documents in search for the pearls of wisdom, insight and logic about PBS that I expect form one of the most reputable analyst firms. I was interested in finding out how BPM can support PBS since Gartner has claimed that BPM will play an important role in the execution of the latter (see How BPM will deal with Pattern Based Strategies?  ). However after much reading, listening, and thinking I am left with a lot of meaningless descriptions laced with buzzwords, financial crisis-driven scare tactics (If you don’t adopt to PBS you will not see the next crisis! Your competitors will outpace you!), simplistic examples that supposedly demonstrate the benefits of PBS and no clear sense of what the fuss is all about. Where is the beef?

Sorry, but with all due respect to Gartner, I have concluded that the emperor has no clothes.

At the basic level, Gartner defines PBS as the practice of “seeking, modeling and adapting to” the leading indicators of change. Gartner says that these leading indicators are weak signal, and one of their analyst even called them “gut feelings”. The weak signals could either be inside the organization or outside. A Pattern-Based Strategy, according to Gartner, is the practice of identifying the leading indicators, modeling their impact on the business, and then adapting the business based on the results of this exercise. Gartner believes that PBS as they define it is relevant to all organizations in the public as well as private sector. Indeed they claim that the success of your business depends on it (see the Gartner audios referenced above) and if you do not adopt PBS your competitors who do adopt it will leave you behind.

This is all hunky dory in the world of analysts. In the real world there are numerous practical problems with it.

First, businesses generally cannot be managed on weak signals. Yes, leaders sometimes make strategic choices based on gut feelings but these feelings are based on a deep understanding of the situation surrounding their business which is rife with strong signals. It is easy to see signals in the proximity of the business. It is not easy to see weak signals that are outside the domain of the business. Gartner uses the example of the current financial crisis and posits that if businesses had sensed the weak signals of the sub-prime driven financial crisis, they would have been better prepared to handle the financial crisis. That is true in hindsight, but the fact of the matter is that the financial instruments were so complex that even the financial geniuses running large financial institutions did not see the crisis coming. Then how can one expect the leaders of other non-financial organizations  –which are most of the businesses! — to sense the weak signals and model their behavior accordingly?

Secondly, if one starts seeking weak signals and gut feelings, one can literally find tens or perhaps hundreds of them. The question then will be which one of these are the real signals and which are simply noise and how does one go about making the distinction. OK, we could use technology such as BI to help filter the real signals from the noise. However someone has to make an a priori decision about which trends to measure. When you make an a priori decision you have already made a decision and see only those things that you have decided to look at. The next crisis is likely to blindside you even more just when you are feeling comfortable that you have all the bases covered.

Third, it is difficult enough to identify and instrument trends and leading indicators that are inside the business. It is well neigh impossible to identify, instrument and capture trends that are outside one’s own business. These outside trends are the one likely to impact the future of the business in a profound way. Which business, other than a few large financial institutions, could instrument the number of sub-prime mortgages that were being written worldwide to create weak signals for the financial crisis? And even that would not have been enough because without understanding the trends in the real estate value, and without grasping how the complex credit default swap instruments worked, knowing only the number of sub-prime mortgages would have been meaningless.

Fourth, in 20/20 hindsight it is easy to identify leading indicators and weak signals that cause problems or create opportunities. However, crisis like the financial crisis of 2008/2009 occur through a conflagration of events that no one anticipates. Since no one is anticipating no one is looking for these trends, and the result is that no one bothers to instrument these unique indicators. Even if an organization has great collective foresight, it would take months to properly instrument, measure and make sense of the trends especially if IT is involved. By that time it is too late to be of practical value in all likelihood.

Finally, while Gartner talks about PBS as an overarching strategy that is vital to the success of all businesses, the examples of PBS that they use are simplistic. One example they point to is the Amazon Recommendation Engine and the other is the Fraud Detection System used by credit card companies. Both these systems are based on past buying activities of users, and in both cases the purpose is to identify what types of transaction the user is likely to make in light of the previous activities. What is being instrumented is known, i.e the buying activity. Based on this information one can create a reasonable model and make probabilistic decisions. If an incorrect decision is made it does not have a major consequence, even though I personally was so ticked off by the Fraud detection system of one major credit company that I refuse to use the card again. However even in my case the credit card company lost one good customer out of millions, and perhaps that is not as significant. Leading indicators that impact businesses are far more complex and unpredictable than the previous buying pattern of individuals, and they are not known a priori in many cases. If the wrong decisions are made on the observation of wrong leading indicators the consequence for a business could be far worse than the loss of one customer or a buyer not buying a recommended item!

This is a long and controversial topic and I do not expect to do justice to all of it in one post. In my next post I will discuss the components of PBS according to Gartner, and share my thoughts about why these also are hollow.

However, if you think that this emperor does indeed have clothes which I cannot see, I would like to hear from you.

Did you enjoy this post? Why not leave a comment below and continue the conversation, or subscribe to my feed and get articles like this delivered automatically to your feed reader.

Copyright Leadership BPM | Theme by DailyBlogTips