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DESIGNING PERFORMANCE-BASED STRATEGIC PLANNING SYSTEMS
A company’s technology strategy is often subordinate to its business strategy. Here, a management committee, or some other planning body meticulously plans the company’s long-range plan. The technology chiefs are called from their basement perches only to plan for one or another automated system as it meets a comparatively short-term goal from one or more of the business units. In some companies, this planning process is akin to weaving cloth. In weaving, thread after thread is woven so tightly that, when complete, the cloth’s individual threads are nearly impossible to distinguish from one another. The strength and resiliency of the completed cloth are the result of this careful weaving.
A company, too, is made up of many threads, each with its own strategy. Only when all of these unmatched threads, or strategies, are woven evenly together can a successful general business strategy be formulated. But first, those crafting the corporate (and information technology [IT]) strategy have to understand exactly what strategy is.
McKinsey research (Desmet et al. 2015) indicates that some organizations are recognizing that rigid, slow-moving strategic models are no longer sufficient. The goal is to adapt to a structure that is agile, flexible, and increasingly collaborative while keeping the rest of the business running smoothly.
One way to become agile is by simplifying. The focus should be to allow structure to follow strategy and align the organization around its customer objectives with a focus on fast, project-based structures owned by working groups comprising different sets of expertise, from research to IT.
The important thing is to focus on processes and capabilities. Having a clear view of what McKinsey calls a company’s Digital Quotient™ (DQ) is a critical first step to pinpoint digital strengths and weaknesses. A proprietary model, DQ is a comprehensive measurement of a company’s digital maturity. The assessment allows organizations to identify their digital strengths and weaknesses across different parts of the organization and compare them against hundreds of organizations around the world. It also helps companies realize their digital aspirations by providing a clear view of what actions to take to deliver rapid results and sustain long-term performance.
DQ assesses four major outcomes that have been proved to drive digital performance:
- Strategy: The vision, goals, and strategic tenets that are in place to meet short-term, mid-term, and long-term digital–business aspirations
- Culture: The mind-sets and behaviors critical to capture digital opportunities
- Organization: The structure, processes, and talent supporting the execution of the digital strategy
- Capabilities: The systems, tools, digital skills, and technology in place to achieve strategic digital goals
Some companies have set up incubators or centers of excellence, each integrated into the main business, during the early stages of a digital transformation to cultivate capabilities. AT&T opened three AT&T Foundry innovation centers to serve as mobile app and software incubators. Today, projects at these centers are completed three times faster than elsewhere within the company. After testing the innovation model externally through its incubator, AT&T established a technology innovation council and a crowdsourcing engine to infuse best practices and innovation across the rest of the organization. Of course, everything done is carefully measured.
IT Roadmap
A technology roadmap assists the chief information officer (CIO) to act more in line with the strategy of the organization as a whole, for example, it is a plan that matches the short-term and long-term goals with specific technology solutions to meet those goals. A roadmap is the governing document that dictates specifically how IT will support the business strategy over a window of time, usually 3–5 years. Most road-maps contain a strategy statement, with a list of strategic priorities for the business; a prioritized list of improvement opportunities; high-level justifications for each project; costs and schedule for each project; and a list of owners and stakeholders for each project.
A technology roadmap has several major uses. It helps reach a consensus about a set of needs and the technologies required to satisfy those needs; it provides a process to help forecast technology developments; and it provides a framework to help plan and coordinate technology developments. The technology roadmapping process usually consists of three phases, as shown in Table 1.1.
Strategic Planning
It is said that, “failing to plan is planning to fail.” Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives. Put simply, strategic management is planning for an organization’s future. The plan becomes a roadmap to achieve the goals of the organization, with IT as a centerpiece of this plan. Much like the map a person uses when taking a trip to another city, the roadmap serves as a guide for management to reach the desired destination. Without such a map, an organization can easily flounder.
Table 1.1 Steps for Creating a Technology Roadmap
| SATISFY ESSENTIAL CONDITIONS | IDENTIFY AND CLARIFY CONDITIONS AND TAKE STEPS TO MEET UNMET CONDITIONS | |
| Phase 1: Preliminary | Provide leadership/sponsorship | Committed leadership is needed. Leadership must come from one of the participants—that is, the line organization must drive the process and use the roadmap to make resource allocation decisions. |
| Define scope and boundaries | The roadmap must support the company’s vision. The planning horizon and level of details should be set during this step. | |
| Phase 2: Development | Identify the focus | Common product needs are identified and accepted by the participants of the planning process. |
| Identify the critical system requirements and targets | Examples of targets are reliability and costs. | |
| Specify major technology areas | Example technology areas are market assessment, system development, and component development. | |
| Specify technology drivers and their targets | The critical system requirements are transformed into technology drivers with targets. These drivers will determine which technology alternatives are selected. | |
| Identify technology alternatives and their time lines | Time durations or scale and intervals can be used for time line. | |
| Recommend the technology alternatives that should be pursued | Keep in mind that alternatives will differ in costs, time line, and so on. Thus, a lot of trade-off has to be made between different alternatives for different targets, performance over costs, and even target over target. | |
| Create technology roadmap report | The roadmap report consists of five parts: identification and description of each technology area; critical factors in the roadmap; unaddressed areas; implementation recommendations; and technical recommendations. | |
| Phase 3: Follow-up | Roadmap is critiqued, validated, edited, and then accepted by the group. A plan needs to be developed using the technology roadmap. Periodical reviews must be planned for. |
The value of strategic planning for any business is to be proactive in taking advantage of opportunities while minimizing threats posed in the external environment. The planning process itself can be useful to “rally the troops” toward common goals and create “buy in” to the final action plan. The important thing to consider in thinking about planning is that it is a process, not a one-shot deal. The strategy formulation process, which is shown in Figure 1.1, includes the following steps:
- Strategic planning to plan (assigning tasks, time, etc.)
- Environmental scanning (identifying strengths and weaknesses in the internal environment and opportunities and threats in the external environment)
- Strategy formulation (identifying alternatives and selecting appropriate alternatives)
- Strategy implementation (determining roles, responsibilities, and a time frame)
- Strategy evaluation (establishing specific benchmarks and control procedures, revisiting the strategy at regular intervals to update plans, etc.)
Figure 1.1
Strategy formulation.
Figure 1.2
Basic competitive strategies.
Business tactics must be consistent with a company’s competitive strategy. A company’s ability to successfully pursue a competitive strategy depends on its capabilities (internal analysis) and how these capabilities are translated into sources of competitive advantage (matched with external environment analysis). The basic generic strategies that a company can pursue are shown in Figure 1.2.
In all strategy formulation, it is vital for the company to align the strategy tactics with its overall source of competitive advantage. For example, many small companies make the mistake of thinking that product giveaways are the best way to promote their business or add sales. In fact, the opposite effect may happen if there is a mis-alignment between price (lowest cost) and value (focus).
Michael Porter’s (1980) Five Forces model gives another perspective on an industry’s profitability. This model helps strategists develop an understanding of the external market opportunities and threats facing an industry generally, which gives context to specific strategy options.
Specific strategies that a company can pursue should align with the overall generic strategy selected. Alternative strategies include forward integration, backward integration, horizontal integration, market penetration, market development, product development, concentric diversification, conglomerate diversification, horizontal diversification, joint venture, retrenchment, divestiture, liquidation, and a combined strategy. Each alternative strategy has many variations. For example, product development could include research and development pursuits, product improvement, and so on. Strategy selection will depend on management’s assessment of the company’s strengths, weaknesses, opportunities, and threats (SWOT) with consideration of strategic “fit.” This refers to how well the selected strategy helps the company achieve its vision and mission.
Strategy Implementation
According to several surveys of top executives, only 19% of strategic plans actually meet their objectives. Strategies frequently fail because the market conditions they were intended to exploit change before the strategy takes effect. An example of this is the failure of many telecom companies that were born based on projected pent-up demand for fiber-optic capacity fueled by the growth of the Internet. Before much of the fiber-optic cable could even be laid, new technologies were introduced that permitted a dramatic increase of capacity on the existing infrastructure. Virtually overnight, the market for fiber-optic collapsed.
Strategic execution obstacles are of two varieties: problems generated by forces external to the company, as our telecom example demonstrates, and problems internal to the company. Internal issues test the flexibility of companies to launch initiatives that represent significant departures from long-standing assumptions about who they are and what they do. Can they integrate new software into their infrastructure? Can they align their human resources?
What could these companies have done to ensure that their programs and initiatives were implemented successfully? Did they follow best practices? Were they aware of the initiative’s critical success factors? Was there sufficient senior-level involvement? Was planning thorough and all-encompassing? Were their strategic goals aligned throughout the organization? And most importantly, were their implementation plans able to react to continual change?
Although planning is an essential ingredient for success, implementing a strategy requires more than just careful initiative planning. Allocating resources, scheduling, and monitoring are indeed important, but it is often the intangible or unknown that gets in the way of ultimate success. The ability of the organization to adapt to the dynamics of fast-paced change as well as the desire of executive management to support this challenge is what really separates the successes from the failures.
TiVo was presented with a challenge when it opted to, as its CEO puts it, “forever change the way the world watches TV.” The company pioneered the digital video recorder (DVR), which enables viewers to pause live TV and watch it on their own schedules. There are millions of self-described “rabid” users of the TiVo service. In a company survey, over 40% said they would sooner disconnect their cell service than unplug their TiVo.
TiVo is considered disruptive technology because it forever changes the way the public does something. According to Forbes.com’s Sam Whitmore (2004), no other $141 million company has come even close to transforming government policy, audience measurement, direct response and TV advertising, content distribution, and society itself.
But TiVo started off on shaky footing and continues to face challenges that it must address to survive. Therefore, TiVo is an excellent example of continual adaptive strategic implementation, and is worth studying.
Back in the late 1990s, Michael Ramsey and James Barton, two forward thinkers, came up with the idea that would ultimately turn into TiVo. They quickly assembled a team of marketers and engineers to bring their product to market and unveiled their product at the National Consumer Electronics show in 1999. TiVo hit the shelves a short 4 months later. Ramsey and Barton, founders and C-level executives, were actively involved every step of the way—a key for successful strategic implementations.
Hailed as the “latest, greatest, must-have product,” TiVo was still facing considerable problems. The first was consumer adoption rates. It takes years before any new technology is widely adopted by the public-at-large. To stay in business, TiVo needed a way to jump-start its customer base. On top of that, the firm was bleeding money, so it had to find a way to staunch the flow of funds out of the company.
Their original implementation plan did not include solutions to these problems. But the firm reacted quickly to their situation by jumping into a series of joint ventures and partnerships that would help them penetrate the market and increase their profit-ability. An early partnership with Philips Electronics provided them with funding to complete their product development. Deals with DirectTV, Comcast Interactive, and other satellite and cable companies gave TiVo the market penetration it needed to be successful. The force behind this adaptive implementation strategy was Ramsey and Barton, TiVo’s executive management team. Since implementations often engender a high degree of risk, the executive team must be at the ready should there be a need to go to “Plan B.” Ramsey and Barton’s willingness to jump into the fray to find suitable partnerships enabled TiVo to stay the course—and stay in business.
But success is often fleeting, which is why performance monitoring and a continual modification of both the strategic plan and resulting implementation plan is so very important. Here again, the presence of executive oversight must loom large. Executive management must review progress on an almost daily basis for important strategic implementations. While many executives might be content just to speak to his or her direct reports, an actively engaged leader will always involve others lower down the chain of command. This approach has many benefits including reinforcing the importance of the initiative throughout the ranks and making subordinate staff feel like they are an important part of the process. The importance of employee buy-in to strategic initiatives cannot be underestimated in terms of ramifications for the success of the ultimate implementation. Involved, excited, and engaged employees lead to success. Unhappy, fearful, disengaged employees do not.
TiVo competes in the immense and highly competitive consumer electronics industry where being a first mover is not always a competitive advantage. Competition comes in fast and hard. Cable and satellite providers are direct competitors. It is the indirect competitors, however, that TiVo needs to watch out for. Although Microsoft phased out its UltimateTV product, the company still looms large by integrating some extensions into its Windows operating system that provide similar DVR functionality. TiVo’s main indirect competitor, however, is digital cable’s pay-per-view and video-on-demand services, as well as services such as Hulu and Netflix. The question becomes—will DVRs be relegated to the technological trash heap of history where it can keep company with the likes of Betamax and eight-track tapes? Again, this is where executive leadership is a must if implementation is to be successful. Leaders must continually assess the environment and make adjustments to the organization’s strategic plan and resulting implementation plans, particularly where technology is concerned. They must provide their staff with the flexibility and resources to quickly adapt to changes that might result from this reassessment.
TiVo continues to seek partnerships with content providers, consumer electronics manufacturers, and technology providers to focus on the development of interactive video services. One of its more controversial ideas was the promotion of “advertainment.” These are special-format commercials that TiVo downloads onto its customers’ devices to help advertisers establish what TiVo calls “far deeper communications” with consumers. TiVo continues to try to dominate the technology side of the DVR market by constant research and development. They have numerous patents and patents pending. Even if TiVo—the product—goes under, TiVo’s intellectual property will provide a continuing strategic asset.
Heraclitus, a Greek philosopher living in the sixth century BC said, “Nothing endures but change.” That TiVo has survived up to this point is a testament to their willingness to adapt to continual change. That they managed to do this when so many others have failed demonstrates a wide variety of strategic planning and implementation skill-sets. They have an organizational structure that is able to quickly adapt to whatever change is necessary. Although a small company, their goals are carefully aligned throughout the organization, at the organizational, divisional, as well as employee level. Everyone at TiVo has bought into the plan and is willing to do what it takes to be successful. They have active support from the management team, a critical success factor for all strategic initiatives. Most importantly, they are skillful at performance management. They are acutely aware of all environmental variables (i.e., competition, global economies, consumer trends, employee desires, industry trends, etc.) that might affect their outcomes and show incredible resourcefulness and resiliency in their ability to reinvent themselves.
It is a truism that the strategy and the firm must become one. In doing so, the firm’s managers must direct and control actions and outcomes and, most critically, adjust to change. Executive leadership can do this not only by being actively engaged themselves but also by making sure all employees involved in the implementation are on the same page. How is this done? There are several techniques, including the ones already mentioned. Executive leadership should frequently review the progress of the implementation and jump into the fray when required. This might translate to finding partnerships, as was the case with TiVo, or simply quickly signing off on additional resources or funding. More importantly, executive leadership must be an advocate—cheerleader—for the implementation with an eye toward rallying the troops behind the program. Savvy leaders can accomplish this through frequent communications with subordinate employees. Inviting lower-level managers to meetings, such that they become advocates within their own departments, is a wonderful method for cascading strategic goals throughout the organization. E-mail communications, speeches, newsletters, webinars, and social media also provide a pulpit for getting the message across.
Executive leadership should also be mindful that the structure of the organization can have a dramatic impact on the success of the implementation. The twenty-first-century organizational structure includes the following characteristics: bottom-up, inspirational, employees and free agents, flexible, change, and “no compromise” to name a few. Merge all of this with a fair rewards system and compensation plan and you have all the ingredients for a successful implementation. As you can see, organizational structure, leadership, and culture are the key drivers for success.
Implementation Problems
Microsoft was successful at gaining control of people’s living rooms through the Trojan horse strategy of deploying the now ubiquitous Xbox. Hewlett-Packard (HP) was not so successful in raising its profile and cash flow by acquiring rival computer maker Compaq—to the detriment of its CEO, who was ultimately ousted. Segway, the gyroscope-powered human transport brainchild of the brilliant Dean Kamen, received a lukewarm reception from the public. Touted as “the next great thing” by the technology press, the company had to reengineer its implementation plan to reorient its target customer base from the general consumer to specific categories of consumers, such as golfers, cross-country bikers, as well as businesses.
Successful implementation is essentially a framework that relies on the relationship between the following variables: strategy development, environmental uncertainty, organizational structure, organizational culture, leadership, operational planning, resource allocation, communication, people, control, and outcome. One major reason why so many implementations fail is that there are no practical, yet theoretically sound, models to guide the implementation process. Without an adequate model, organizations try to implement strategies without a good understanding of the multiple variables that must be simultaneously addressed to make implementation work.
In HP’s case, one could say that the company failed in its efforts at integrating Compaq because it did not clearly identify the various problems that surfaced as a result of the merger, and then use a rigorous problem-solving methodology to find solutions to the problems. Segway, on the other hand, framed the right problem (i.e., “the general consumer is disinterested in our novel transport system”) and ultimately identified alternatives such that they could realize their goals.
The key is to first recognize that there is a problem. This is not always easy as there will be differences of opinions among the various managerial groups as to whether a problem exists and as to what it actually is. In HP’s case, the problems started early on when the strategy to acquire Compaq was first announced. According to one fund manager who did not like the company before the merger, the acquisition just doubled the size of its worst business (De Aenlle 2005). We should also ask about the role of executive leadership in either assisting in the problem determination process or verifying that the right problem has indeed been selected. While HP’s then CEO Carly Fiorina did a magnificent job of implementing her strategy using three key levers (i.e., organizational structure, leadership, and culture), she most certainly dropped the ball by disengaging from the process and either not recognizing that there was a problem within HP or just ignoring the problem for other priorities. The management team needs to pull together to solve problems. The goal is to help position the company for the future. You are not just dealing with the issues of the day; you are always looking for the set of issues that are over the next hill. A management team that is working well sees the next hill, and the next hill. This is problem-solving at its highest degree.
There are many questions that should be asked when an implementation plan appears to go off track. Is it a people problem? Was the strategy flawed in the first place? Is it an infrastructural problem? An environmental problem? Is it a combination of problems? Asking these questions will enable you to gather data that will assist in defining the right problem to be solved. Of course, responding “yes” to any one or more of these questions is only the start of the problem definition phase of problem-solving. You must also drill down into each of these areas to find root causes of the problem. For example, if you determined that there is a people problem, you then have to identify the specifics of this particular problem. For example, in a company that has just initiated an off-shoring program, employees may feel many emotions: betrayed, bereft, angry, scared, and overwhelmed. Unless management deals with these emotions at the outset of the off-shoring program, employee productivity and efficiency will undoubtedly be negatively impacted.
Radical change to the work environment may also provoke more negatively aggressive behavior. When the U.S. Post Office first automated its postal clerk functions, management shared little about what was being automated. The rumor mill took over and somehow employees got the idea that massive layoffs were in the works. Feeling that they needed to fight back, some postal employees actually sabotaged the new automated equipment. Had management just taken a proactive approach by providing adequate and continuing communications to the employees prior to the automation effort, none of this would have happened. Sussman (Lynch 2003) neatly sums up management’s role in avoiding people problems through the use of what he calls “the new metrics”—return on intellect (ROI), return on attitude (ROA), and return on excitement (ROE). As the title of the Lynch article suggests, it is important that leaders challenge the process, inspire a shared vision, enable others to act, model the way, and encourage the heart.
It is also quite possible to confuse symptoms of a problem with the problem itself. For example, when working with overseas vendors, it is sometimes hard to reach these people due to the difference in time zones. This is particularly true when working with Asian firms, as they are halfway across the globe. Employees working with these external companies might complain about lack of responsiveness when the real problem is that “real time” communications with these companies are difficult due to time zone problems. The problem, then, is not “lack of responsiveness” by these foreign vendors, but lack of an adequate set of technologies that enable employees and vendors to more easily communicate across different time zones, vast distances, and in different languages (i.e., video conferencing tools, instant messaging tools are all being used for these purposes).
Once the problem has been clearly framed, the desired end state and goals need to be identified and some measures created so that it can be determined whether the end state has actually been achieved. Throughout the problem-solving process, relevant data must be collected and the right people involved. Nowhere are these two seemingly simple caveats more important than in identifying the end state and the metrics that will be used to determine whether your goals have been achieved.
Strategy implementation usually involves a wide variety of people in many departments. Therefore, there will be many stakeholders that will have an interest in seeing the implementation succeed (or fail). To ensure success, the implementation manager needs to make sure that these stakeholders are aligned, have bought into the strategy, and will do whatever it takes to identify problems and fix them. The definition of the end state and associated metrics are best determined in cooperation with these stakeholders, but must be overseen and approved by management. Once drafted, these must become part of the operational control system.
A scorecard technique aims to provide managers with the key success factors of a business and to facilitate the alignment of business operations with the overall strategy. If the implementation was properly planned, and performance planning and measurement well integrated into the implementation plan, a variety of metrics and triggers will already be visually available for review and possible adaptation to the current problem-solving task.
A variety of alternatives will probably be identified by the manager. Again, the quality and quantity of these alternatives will be dependent on the stakeholders involved in the process. Each alternative will need to be assessed to determine: (a) viability; (b) completeness of the solution (i.e., does it solve 100% of the problem, 90%, 50%, etc.); (c) costs of the solution; (d) resources required by the solution; and (e) any risk factors involved in implementing the alternative. In a failed implementation situation that resulted from a variety of problems, there might be an overwhelming number of possible alternatives. None of these might be a perfect fit. For example, replacing an overseas vendor gone out of business only solves a piece of the problem and, by itself, is not a complete solution. In certain situations, it is quite possible that a complete solution might not be available. It might also be possible that no solution is workable. In this case, a host of negative alternatives such a shutting down the effort or selling the product/service/division might need to be evaluated.
Once a decision is made on the appropriate direction to take, based on the alternative or a combination of alternatives selected, a plan must be developed to implement the solution. We can either develop an entirely new implementation plan or fix the one we already have. There are risks and rewards for either approach, and the choice you make will depend on the extent of the problems you identified in the original plan.
In Conclusion
Strategic planning is not a one-time event. It is rather a process involving a continuum of ideas, assessment, planning, implementation, evaluation, readjustment, revision and, most of all, good management. IT managers need to make sure that their strategies are carefully aligned with corporate and departmental strategic plans—and consistent with the organizational business plan, as shown in Figure 1.3.
Figure 1.3
The relationship between the business plan, strategic plan, and IT plans.
References
De Aenlle, C. (2005). See you, Carly. Goodbye, Harry. Hello investors. The New York Times. March 13.
Desmet, D., Duncan, E., Scanlan, J., and Singer, M. (2015). Six building blocks for creating a high-performing digital enterprise. McKinsey & Company Insights & Publications. September. Retrieved from http://www.mckinsey.com/insights/organization/six_building_blocks_for_creating_a_high_performing_digital_enterprise?cid=other-eml-nslmip-mck-oth-1509.
Lynch, K. (2003). Leaders challenge the process, inspire a shared vision, enable others to act, model the way, encourage the heart. The Kansas Banker, 93(4) 15–17.
Porter, M. E. (1980). Competitive Strategy. New York: Free Press.
Whitmore, S. (2004). What TiVo teaches us. Forbes. July 7.