Beyond Budgeting
In the forward to the book This Is Beyond Budgeting: A Guide to More Adaptive and Human Organizations, Gary Hamel paints a picture of bureaucratic organizations that is all too familiar for industry professionals particularly focused on cloud adoption and enablement. The forward deserves to be quoted in full (honestly) as every line in it beautifully captures the current state of the problem and the challenges that lie ahead with bringing real change to organizations.
Bureaucracy, with its authoritarian power structures and rule-choked processes is a 19th-century technology and no longer fit for purpose. It was built at a time when most employees were illiterate, when information was expensive to gather and share, and when the pace of change was comparatively glacial. Bureaucracy was built to maximize compliance for the sake of efficiency. But in the 21st century, efficiency is but one advantage among many. Organizations need to be cost-effective, yes, but they must also be adaptable, creative, and purpose-driven.
I’ve been part of several IT transformation projects in my career. Some were small/limited in scope, being driven from a particular business unit or designed to achieve/enable a particular outcome. Others have been more widespread, and part of efforts to “modernize IT” and make it “more agile”. In recent years, most of my experience has been with startups, who have morphed from small/agile/nimble companies to large/bureaucratic organizations as soon as investor money rolled in.
Across all of those experiences, I began to notice a common outcome. While we technically delivered on the expectations of the client, it seems like the client would never fully lean-in to the outcomes being delivered.
Eventually, the values of adaptability and agility would soon be abandoned for traditional management processes and “strong cost controls”. Doing things right would turn into do things fast, in the pursuit of cost optimizations. The question I’d be thinking at the end is, the company stated they wanted to be secure, agile, adaptable, so why do they always revert back to the same operating model as before cloud? What organizational changes are we missing here so that the company can realize the full benefits of their investment? What measurements are we missing to help describe the overall benefit of the solution in more than dollars/sense terms? Why do organizations have a hard time attaching cloud “cost” to expected revenue/profit rather than treating it as a cost center? Why is cloud not considered a cost of doing business, but rather, an independent cost that needs to be managed separately?
The answer to the above questions is, ultimately, that the traditional budgeting process that controls most organizations limits their ability to see and adapt to new ways of working, delivering value, and measuring success. A potential solution to this is the concept of beyond budgeting. Before we dive into what is beyond budgeting, I want to leave you with one last quote from the forward by Gary Hamel.
Leaders need to be open to the possibility that tomorrow’s most successful organizations will be as different from today’s stratified, rule-chocked leviathans as YouTube is different from broadcast television or PayPal is different from a checkbook. Leaders must be willing to venture beyond the safe precincts of conventional wisdom and experiment with bold new approaches to planning, target-setting, and control
What is Beyond Budgeting?
At its core, Beyond Budgeting is a management philosophy that emphasizes continuous improvement, customer focus, and decentralized decision-making. The Beyond Budgeting Round Table (BBRT) defines Beyond Budgeting as “a management model that is designed to help organizations navigate the complexities of the 21st century business environment”.
The Beyond Budgeting ethos is based on a set of principles that guide decision-making and management practices. These principles include:
- Adaptive Management: The ability to quickly adapt to changing business environments and customer needs.
- Customer Focus: A focus on understanding and meeting the needs of customers, rather than just meeting budget targets.
- Decentralized Decision-Making: Empowering employees and teams to make decisions and take action based on their understanding of customer needs.
- Transparency: Ensuring that information is shared openly and transparently throughout the organization, so that everyone has access to the information they need to make decisions.
- Continuous Improvement: The commitment to constantly improving processes and practices, based on feedback and data.
- Flexible Targets and Rewards: Setting flexible targets and rewards, based on customer needs and business goals, rather than rigid budget targets.
These principles are designed to create a culture of continuous improvement and innovation, where employees are empowered to make decisions and take action based on customer needs. This is in contrast to traditional budgeting processes, which can be slow, bureaucratic, and focused on meeting rigid budget targets rather than the needs of customers.
One of the key benefits of Beyond Budgeting is that it allows companies to be more agile and responsive to changing business needs. By empowering employees to make decisions based on customer needs, companies can quickly adapt to changes in the market and stay ahead of the competition.
Another benefit of Beyond Budgeting is that it promotes a culture of continuous improvement and innovation. By focusing on improving processes and practices, companies can become more efficient and effective, which can lead to increased customer satisfaction and profitability.
Ultimately, its principles are designed to create a culture of agility, innovation, and customer-centricity, which is essential in the cloud era. By adopting a Beyond Budgeting approach, companies can better manage cloud costs, navigate the complexities of cloud computing, and ensure a smooth transition to the cloud.
Beyond Budgeting and FinOps
Beyond Budgeting and FinOps are two complementary approaches that can help organizations optimize their cloud investments. FinOps is the practice of optimizing cloud costs, and it involves a holistic approach to managing cloud spend across the organization. Beyond Budgeting, on the other hand, is a management philosophy that emphasizes continuous improvement, customer focus, and decentralized decision-making.
The Azure FinOps Guide by Microsoft highlights the importance of collaboration between finance and operations teams to optimize cloud costs. This is where Beyond Budgeting comes in. By adopting a Beyond Budgeting approach, organizations can create a culture of collaboration and continuous improvement that can enable FinOps within their cloud ops teams.
One of the key principles of Beyond Budgeting is decentralized decision-making. By empowering teams to make decisions based on customer needs, organizations can create a culture of ownership and accountability. This is important in the context of FinOps because it allows teams to take ownership of their cloud spend and make decisions that optimize costs based on their understanding of customer needs.
Another key principle of Beyond Budgeting is transparency. By sharing information openly and transparently, organizations can create a culture of collaboration and trust. This is important in the context of FinOps because it allows finance and operations teams to work together to optimize cloud costs. For example, finance teams can provide operations teams with insights into cloud spend trends, while operations teams can provide finance teams with insights into the impact of cloud spend on customer needs.
The Azure Well Architected framework highlights the importance of setting flexible targets and rewards to optimize cloud costs. This is another key principle of Beyond Budgeting. By setting flexible targets and rewards based on customer needs and business goals, organizations can create a culture of continuous improvement and innovation. This can help teams identify opportunities to optimize cloud costs and improve customer satisfaction.
Beyond Budgeting and FinOps are two complementary approaches that can help organizations optimize their cloud investments. By adopting a Beyond Budgeting approach, organizations can create a culture of collaboration, ownership, and continuous improvement that can enable FinOps within their cloud ops teams. This can help organizations optimize cloud costs, improve customer satisfaction, and stay ahead of the competition.
Conclusion
In conclusion, the success of any cloud adoption program depends on the organization’s ability to optimize its cloud investments. Beyond Budgeting is a management philosophy that can help organizations achieve this goal by creating a culture of agility, customer focus, and continuous improvement. By adopting a Beyond Budgeting approach, organizations can empower their employees to make decisions based on customer needs and optimize their cloud investments accordingly.
In the cloud era, it is not enough to simply adopt new technologies. Organizations must also embrace new management approaches that enable them to fully realize the benefits of the cloud. Beyond Budgeting is one such approach that can help organizations achieve their cloud goals and stay ahead of the competition. By creating a culture of transparency, decentralized decision-making, and continuous improvement, organizations can optimize their cloud investments and achieve greater agility, efficiency, and customer satisfaction.
Therefore, it is important for organizations to embrace the benefits of Beyond Budgeting at the organization level during their cloud journey. By doing so, they can create a culture of collaboration and ownership that can enable FinOps within their cloud ops teams and optimize their cloud investments. Ultimately, this can help organizations stay ahead of the competition and achieve their business goals in the cloud era.
About Shamir Charania
Shamir Charania, a seasoned cloud expert, possesses in-depth expertise in Amazon Web Services (AWS) and Microsoft Azure, complemented by his six-year tenure as a Microsoft MVP in Azure. At Keep Secure, Shamir provides strategic cloud guidance, with senior architecture-level decision-making to having the technical chops to back it all up. With a strong emphasis on cybersecurity, he develops robust global cloud strategies prioritizing data protection and resilience. Leveraging complexity theory, Shamir delivers innovative and elegant solutions to address complex requirements while driving business growth, positioning himself as a driving force in cloud transformation for organizations in the digital age.