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9. Warren McFarlan, “IT Changes the Way You Compete,” Harvard Business Re-
view, May“June, 1984, pp. 98 “103.
10. The specific analysis shown here is tailored to the specific company. The exam-
ple is included to show the kind of analysis possible, not to limit or define the
only possible analysis.
11. The examples shown here are based on specific company situations. They are
included to illustrate the point made in the text, not to limit the kind of analy-
sis that can be done. Each company situation and, consequently, the applica-
tion of the NIE practice, is different and tailored to the specific needs of the
company.
5
CHAPTER

Focus on the Right Things



I n Chapter 2, we introduced seven basic questions that management teams
should answer. Four questions are about the alignment of IT activities to what
is important to the company. Three
questions are about the affordability Control Spending and Maximize
of IT expenses to the company. The Impact on the Bottom Line
questions: 1 Define the Goals

2 Ask the Right Questions
Impact Questions
3 Connect to the Bottom Line
1. Are we investing IT resources in 4 Understand Costs and Resources
the right places?
¤ 5 Focus on the Right Things
2. Do our business strategies drive our
6 Adopt Effective Process to Produce Action
IT actions and produce bottom-
7 Tackle the Practical Problems
line impact?
8 Make the Right Decisions
3. Are we getting bottom-line impact
9 Plan for the Right Results
from our lights-on resources?
10 Keep Score
4. Are we balancing our strategic and
tactical investments? 11 Deal with Culture

12 Char t the Path to Implementation
Affordability Questions 13 Define What™s Next
1. What can we afford to spend on 14 Answer the “So What?” Question
IT?
2. Can we reduce unnecessary IT costs?
3. Can we redeploy expenses to support needed projects?

We also introduced basic concepts of portfolio management (Chapter 4) and
shareholder value (Chapter 3) as foundations for answering the seven questions.
Our intent now is to introduce and formalize the detailed description of the
Strategy-to-Bottom-Line Value Chain and the five management practices that
enable the management team to answer the seven basic questions, and thereby
control IT spending and improve IT™s impact on the bottom line.


73
74 FOCUS ON THE RIGHT THINGS


We do so in four steps:

Step 1: The goals and principles that best characterize what the Strategy-
to-Bottom-Line Value Chain and the five practices require (Chapter 5).
Step 2: The Strategy-to-Bottom-Line Value Chain (Chapter 6).
Step 3: The practical issues that must be solved (Chapter 7).
Step 4: The five New Information Economics practices (Chapters 8 “10).

We conclude with chapters on management culture and the Business Value
Maturity Model , both intended to help management teams introduce the goals,
principles, and practices described here.


THE GOALS AND PRINCIPLES FOR
RIGHT DECISIONS/RIGHT RESULTS
We recommend that management teams adopt five Right Decisions/Right Results
goals for taking business strategy and IT action to the bottom line.

Translate enterprise mission and strategy into actionable, commonly under-
stood strategic intentions.
Get the right bottom-line results from all current and future IT spending by
evaluating the impact on strategic intentions.
Manage the culture and define management roles regarding the use of IT to
achieve business strategic intentions.
Manage IT as a set of resource and process portfolios.
Produce the right actions and bottom-line results and use budgets, projects,
and performance measurement to achieve them.

Each goal is described with several basic principles. Together, the goals and
principles underscore the fundamentals and philosophies of Right Decisions/
Right Results. By focusing on these goals and their related principles, manage-
ment teams will control IT spending and improve IT™s bottom-line impact.


GOAL 1: ACTIONABLE, COMMONLY UNDERSTOOD
STRATEGIC INTENTIONS 1
Translate enterprise mission and strategy into actionable, commonly understood
strategic intentions.
We introduced “strategic intentions” in Chapter 3, where we said,“Manage-
ment™s strategies and plans to improve strategic and operational effectiveness are
its strategic intentions.”2
75
Goal 1: Actionable, Commonly Understood Strategic Intentions


We believe company leaders need to translate their mission, goal, and strat-
egy statements into statements of strategic intentions: statements that tell every-
one in the organization how the company will make progress in its business. IT,
as well as other parts of the company, needs high-level direction on how an
enterprise intends to achieve its objectives, as well as clear direction on what
the objectives are. The litmus test is simple: If a manager in an enterprise looks
at the strategic intentions, the manager should be able to describe in specific
terms what will be done differently tomorrow to help achieve the objectives and
how the functional area can contribute to moving the enterprise forward.
Unfortunately, high-level statements of strategy and intention (if made or
documented at all) are open to interpretation and will invariably be understood
differently across the company. Any process that intends to translate strategy
into effective actions must ensure that there is common understanding, across
the organization and at all levels of management, of what the strategic inten-
tions really mean.3 The process must explicitly include methods to refine and
communicate strategic intentions such that a common understanding emerges
at all levels across the company. This is not just a static process but an ongoing
and dynamic process. Jack Welch makes the point that every chance he had, he
would preach the current GE strategy to any employee that would listen. Strate-
gic Intentions are not set in concrete; they change with the business, and their
relative importance one to another changes as markets and society change. But
they need to be known and acted on.4 As opposed to being merely the designers
of strategy, managers take on the role of establishing a sense of purpose within
the company.5


The result: An actionable set of strategic intentions, commonly understood across
the enterprise, is the foundation for producing action and the improved bottom-
line impact from IT.


Principle 1.1: Actionable Strategic Intentions
Enterprise planning and management processes should produce explicit and action-
able strategic intentions that will lead to the business and IT initiatives that will
achieve them.
Managers find it difficult to know what to do to support a company™s strat-
egy when the leadership team does not provide effective strategic direction.
“Our strategy is to be the low-cost producer” is less helpful than “our strategy
is to drive cost out of our supply chain,” because (among other things) the first
statement gives no sense of how. Regardless of how the leadership team does its
planning and management, a good starting point is to establish strategic objec-
tives and strategic intentions. The result is a clear strategic direction for the rest
of the company and, in broad terms, how the company intends to get there. By
76 FOCUS ON THE RIGHT THINGS


extension, managers can then determine the role they may play in supporting
the strategy.
Some companies already have clear expressions of actionable strategic inten-
tions in place, which can be used without change throughout the planning and
management processes that lead to IT action. For other companies, strategic
intentions can be found in, and developed from, company mission, vision, high-
level strategies, and the operationalizing statements used in annual planning. In
these cases, the strategic intentions need to be clearly stated and then validated
against what the management team believes is important. For example, one way
is to compare the strategic intentions to the actual priorities of the management
team as expressed by how its members devote their own time and attention.
Companies that do not have clear strategic intentions need to develop and val-
idate them.
However, even with clearly stated strategic intentions, managers probably
will not pay attention to them when the management culture is otherwise. For
example, a culture that focuses exclusively on achieving operational or tactical
goals rather than strategic intentions probably prevents the company from
achieving its strategies, because managers will devote their full attention to those
tactical goals. Cultures that focus solely on financial performance especially
highlight this problem of culture leading to organization and planning discon-
nects. Companies that lack clear strategies, in addition to establishing them, face
the additional difficulty of dealing with the cultural impediments.
For example, if the business strategic plan states, “Our strategy is to achieve
world-class performance by attaining a strong competitive position in target mar-
kets,” it is quite difficult for the IT organization (or any business unit) to estab-
lish specific initiatives connected to the statement. The reason is that the strategy
does not say anything about how the company plans to attain that strong com-
petitive position. Is it based on lowest cost? Product capabilities? Customer serv-
ices? Customer relationships? Supply chain innovations? The point is that the
strategy statement offers no guidance as to the underlying actions or initiatives
to be taken. Consequently, it has little power to guide either business manage-
ment or IT management in the development of IT strategies or actions.
Now, consider a business strategy that states, “Our strategy is to attain a
strong competitive position by improving customer service by placing up-to-date
customer and product information in the hands of every account executive.”
This statement provides guidance to everyone as to exactly what the company
means and what needs to be done. Although many strategy statements are
somewhere in the middle of the two examples, our experience is that most com-
panies err on the side of generality, thus producing strategy statements that are
not actionable.6
Process and culture go hand in hand. A process that produces and applies
actionable strategic intentions runs up against culture but, at the same time, has
a role in changing that culture. Doing both process and culture change demands
clear management support and a consistent approach reflected in all related
management processes.
77
Goal 1: Actionable, Commonly Understood Strategic Intentions


The result of actionable strategic intentions is the clear expression of how
management intends to drive the business forward. This clear expression estab-
lishes the starting point for business unit planning and activities directed towards
the achievement of the intentions. Applied to IT, the clear expression of strategic
intention is used to establish business priorities, to prioritize initiatives and proj-
ects, allocate IT resources, assess the alignment of all IT activities and resources,
establish the bases of performance measurement, and provide the context for
innovation.
This sounds mechanical. “Just change culture and then implement processes,
based on our practices of planning, prioritization, and so forth.” Or alternatively,
“Just implement the processes, and this will change the culture.” But what about
details like politics, company history, industry practices, and so forth? It cannot
be mechanical. We have to deal with politics and existing practices in achieving
necessary changes.


Principle 1.2: Actions Tied to Strategy
All IT actions and spending should be driven by business strategic intentions.
Business and IT planning activities often occur separately, with disconnected
results that do not let managers connect their actions to the other side. In some
companies, strategic planning often is ineffective, producing strategy statements
that do not easily translate into actions that people can take.
An organization needs integrated business and IT planning, and effective
planning that lets managers know what they should be doing tomorrow. In Chap-
ter 9, we explain and expand on two related concepts. The first is a framework
that can be used to clearly express business strategies, objectives, and initiatives
in ways that let everyone understand exactly what the business intends. The sec-
ond is a straightforward process that provides for integrated planning results
that combine consensus, clarity, and clear direction. An extra bonus is the ease
of connecting performance measurement and management to this framework.
A special challenge is infrastructure, both technical and business. We run
into this problem with administrative systems, with back-office systems, with
utility systems, and with run-the-business systems. Their connection to business
strategic intentions can seem to be less direct than systems that face the cus-
tomer. As we discuss in the next section and then in Chapter 8, this challenge
is addressed through appropriate statements of strategic intentions and through
portfolio presentations of alignment and prioritization.


Principle 1.3: Common Understanding and Commitment
Managers across all functional areas should have a common understanding of,
and commitment to, enterprise strategic intentions. Each organizational unit,
including IT, should understand how current and future activities in all func-
tional areas support the enterprise strategic intentions.
78 FOCUS ON THE RIGHT THINGS


This principle focuses on a company™s ability to operationalize and com-
municate its actionable strategic intentions. It does no good to have strategic
intentions if no one knows what they are and what they mean. The key objec-
tive is establishing a common understanding across functional areas of the strate-
gic intentions and what needs to be done, or is being done, by other parts of
the business, to achieve them. This is a direct assault on the silos of a company,
which can be as simple as silos reflecting business vs. IT organizations, or as
complex as silos in multiple functional areas and business units.
Anything that prevents agreement on strategies across the silos of the com-
pany is a serious disconnect. We expect IT to be well connected to business strate-
gies and plans. We expect IT to connect its technical strategies and plans to the
business strategies and plans. But what, exactly, should IT connect to? The prob-
lem in many companies is there is little awareness of exactly what the company™s
strategies are. It is surprising how often we find that company leadership teams
do not agree on the details of the strategies they are pursuing. It is not that the
company has no mission or high-level strategy statement. It is that the individ-
ual members of the team do not have a common understanding of the strategies
they are using to reach the company mission and high-level strategies.
The cultural implications can be quite large. Many companies exhibit strong
functional organizations, with long-standing traditions of operational independ-
ence, particularly when it comes to management planning and internal strate-

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