Leadership Priorities and Practice in Organizational Management
The enterprise software industry is going through a series of disruptive innovations that are disrupting the economics of the industry while also shifting the balance of power away from the Chief Information Officer (CIO) to the line-of-business leaders including the Vice Presidents, General Managers and Directors of Business Units. As this balance of power shifts throughout enterprise software, many long-standing approaches to developing, delivering, monetizing, and supporting software are also changing. One of the most successful companies in the enterprise software industry, specifically in the Aerospace and Defense sector, is Cincom Systems. Cincom has been able to attain a highly profitable business model by creating very customized systems for customers' needs while at the same time creating maintenance agreements that ensuring highly profitable recurring revenue stream over the long-term. This strategy has been largely responsible for the company's ability to withstand the recurring recession globally that has occurred over the last five years. It has also given Cincom Systems, which is privately-held, a strong foundation for investing in new technologies and accelerating their Research & Development (R&D) spending as well. The one significant organizational challenge the company faces today is transitioning from its primarily on-premise platform to a Cloud-based one, specifically on the Software-as-a-Service (SaaS) architecture that the majority of its competitors are using today. The economics of Cloud Computing and SaaS specifically are completely reordering the competitive landscape of the enterprise software market and pose a very significant threat to Cincom over the long-term. There are many challenges that Cincom must overcome to deal with this shift in product strategy, and will also have a corresponding impact on their overall financials and profitability. The intent of this paper is to analyze and explain how Cincom can rely on leadership theories to overcome these challenges and capitalize on them over the long-term.
Description of Cincom Systems Including Vision and Mission Statement
Founded over 40 years ago, Cincom Systems is a leader in the enterprise software industry and has operations across five continents in 17 different cities, with over 800 people employed. The vision statement of the company is to nurture and enable the transformation of complex businesses into dynamic enterprises. The company's mission statement is predicated on the high value they deliver to clients, typically at a 30:1 ratio of investments to value generated. When there is a strong alignment of the vision and mission of an organization, it has a far greater potential chance of succeeding in significant change management initiatives (Price, Chahal, 2006).
The strategies Cincom relies on to compete and create value for their customers include the use of rapid prototyping and software development processes, intensive reliance on alliances with IBM, Microsoft and others; and a culture very focused on education and self-improvement. All of these elements taken together create a business model that delivers significant value to enterprise software customers over time, measurable through the internal metrics the company relies on. As the culture is highly oriented towards achievement and education, the senior management teams realize that significant change is required for the company to continue growing in profitability. Cloud Computing and SaaS economics are being such a force in enterprise software, significant change will be required throughout Cincom in order to capitalize on these changes while also mitigating them as a risk.
Ensuring the alignment of the five business units in conjunction with the continued investment in R&D, focus on alliances, and development of programs to increase enterprise sales all revolve around the transformational leadership skill set of the company. Founder and CEO Tom Nies is a former leading IBM sales and marketing executive, and has created a highly effective culture for melding together the many systems, processes, people and products necessary for the company to continually stay competitive. Synchronizing all aspects of management and coordinating them to the attainment of complex objectives is the sign of transformational leadership and the ability to integrate tasks and objectives at the process level (Reilly, Minnick, Baack, 2011). These factors contribute to and strengthen the attainment of the vision and mission statements of the company. They also show how difficult changing the underlying technology architecture of their core applications could be, moving from on-premise to SaaS-based development and deployment. The change in financial models requires a strong reliance on transformational leadership as well.
Confronting The Need To Change:
Cloud Computing Economics Are Re-Ordering The Enterprise Software Market
Clearly Cincom, with nearly 70% of its revenues directly attributable to on premise software and 30% due to recurring revenues from services, must change and become experts in the field of Cloud Computing. SaaS-based competitors including Salesforce.com and others are continually pushing to create a competitive advantage based on the pay-as-you-use model of software, and Cincom has seen this significantly impact their sales cycles as well. For Cincom the leadership challenge is breaking out of the mentality that all software must be produced in their own engineering teams. In fact Microsoft's Azure platform for Cloud Computing is providing to be a very effective catalyst for assisting Cincom in its migration of applications from on-premise to Cloud-based platforms.
From a leadership theory standpoint, this shift form on-premise to Cloud-based platform requires a high level of transformational leadership combined with Emotional Intelligence (EI). As the teams most likely impacted by the shift in platforms are filled with fear, uncertainty and doubt yet see the inevitability of Cloud Computing as necessary, Cincom leadership needs to infuse them with a strong sense of what their role is going forward. The engineering and services team especially see their roles as in jeopardy. Due to these change management challenges, Cincom has moved to a more transformationally-based leadership style that seeks to define individual training and development goals and objectives by employee. Aligning change management objects to ongoing projects is increasing the level of trust and transparency that employees have. The essence of effective transformational leadership is being able to determine the best possible series of initiatives, programs, goals and directions for a given employee and team to ensure they have a high degree of task and job ownership (Carroll, Gillen, 1987). As a result, the shift in technology platforms from licensed software to Cloud Computing is being driven on a project-by-product and application-by-application basis, giving each member of the engineering and services teams ample opportunity to learn new skills and improve over time. The ability of a transformational leader to infuse activity, enthusiasm and commitment on the part of employees, along with an urgency to fulfill a particularly challenging and difficult goal, is critical for change to occur (Cunningham, 1979).
Cincom's senior management approach to dealing with the product-by-product migration of applications from licensed to Cloud-based platforms also illustrates the four foundational elements of transformational leadership. These four include idealized influence, individualized consideration, inspirational motivation and intellectual stimulation (Moors, 2012). It takes leadership with a high degree of emotional intelligence (EI) to selectively rely on each of these skills over time, choosing the most appropriate response to the given situation (Gold, 1991). The role of individualized consideration, especially in the area of engineering and professional services, two areas that include personnel with hard-to-replace skills sets, has been effective in minimizing turnover and attrition. Individualized consideration in the form of the following strategies continues to be highly effective: offers of training and development courses; the offer by Cincom to pay for ongoing training and certification on the Microsoft Azure platform; and the willingness to allow key employees to visit Microsoft for ongoing training and personal development courses all show how the company leaders are adopting this specific transformational leadership value.
Another strategy that is proving to be very effective in managing this significant change from licensed to Cloud-based applications is a heavy reliance on intellectual stimulation. This is an attribute that is very important to the engineering, marketing, sales professional services and support teams as Cincom's leaders are positioning the alliance with Microsoft as one that opens up entirely new personal and professional growth opportunities as well. This is especially the case in the area of application and system integration, incouding the development of entirely new software applications for unifying the Cincom previous generation products to the Microsoft Azure platform. The level of technology required to ensure these applications will work on the Microsoft Cloud protocol stack and have real-time access to Azure Web Services is very significant. The Cincom leadership team chooses to view this as an opportunity to infuse engineering and professional services with a high degree of both individualized consideration and intellectual stimulation, as these core teams need to take ownership of the Cincom products on these platforms. The continual growth and development of the Cincom joint venture (JV) with Microsoft is predicated on having the engineering and professional services teams well up to speed on these techniques and technologies to ensure Cincom's applications will be able to operating on the Azure architecture. These technological advances will have an immediate effect on the profitability and revenue growth of…