New processes and systems are in place. But it is still difficult to get a key business report! The Chief Customer Officer is waiting for one and is becoming impatient. It looks like the whole business operations department has been marshalled to deliver it. He heard they needed to validate and reconcile masses of data!
A new strategic alliance with a global partner needs to be operationalized. The companies plan to share professional services across key markets, complementing each other’s strengths. The negotiating team is celebrating. The CIO is with his team to figure out how to support this fast at minimal cost. But they have just spent a few million dollars on a new system that can’t handle such commercial arrangements. It may be awhile before the new custom capabilities and interfaces can be designed and implemented.
An irate customer on the phone: “This is the third time I have called this number! I still don’t have the answer why my bill says I used that service when I didn’t order it. Doesn’t anybody have an answer for me?” The Customer Service Officer inwardly flinched. “If only you know how difficult it is to trace the process and find the problematic transaction. I have to call three departments and they all gave me different answers!” she thought to herself.
Do any of these scenarios sound familiar?
- How can we make the complex simple?
- How do we manage the scale, speed and effectiveness of change when a new strategy demands it?
- How do we build capabilities that make the business agile, able to adjust to future changes in a nimble and highly efficient way?
- How can a business execute strategy at the speed of business?
It is not getting easier for business to thrive
The world is changing fast. We know it. We experience it, both personally and at work.
There are a number of well-known companies who do not exist anymore or who have been toppled from their dominant perch. (Remember Kodak, Compaq, DEC, MCI WorldCom, Wang? What about MySpace, Sun Microsystems and Border Books?)
Competition. They have been overtaken by new upstarts, gobbled up or made irrelevant by stronger competitors.
New Technology. Some were swept away by new technologies that made theirs obsolete.
Changing Customers. Or sidelined by new customers, whose behaviors they did not anticipate or understand.
New Employees. Some are baffled by how a new generation of employees define and approach work.
It’s about thriving on change
The pace and nature of change is vastly different now than what we experienced a decade ago.
How to cope with change is just the minimum hurdle for businesses.
Businesses need to thrive on change: able to implement strategies quickly and seamlessly, using their core strengths, and exploiting capabilities for differentiation and advantage.
For large, diverse and complex businesses they need to do this in spite of the complexity and scale of implementing the change.
The traditional approach
The usual approach is to set Strategy then form Strategic Initiatives to get results.
The Strategic Initiatives are assigned C-level sponsors (either heads of business units or functions), who then form cross-functional project teams to design and implement.
This is where the first fragmentation of strategy occurs
The teams have visibility and accountability over the goals, objectives and levers of their project, not about how the capabilities they develop can be utilized across the company or impact other Strategic Initiatives.
For example, Initiative A is building the capability for a customer to ‘engineer’ and order their equipment online. Meanwhile Initiative B is revamping the supply chain capability to manage cross-border deliveries, addressing country-specific regulatory requirements. Both initiatives require or impact the order fulfilment capability, yet when run separately, will most likely build their own to provide the complete solution.
The majority of Strategic Initiatives require technology-enablers, so each one gets assigned an IT team to design and deliver IT solutions.
Then comes the second layer of fragmentation
The IT solution often addresses only the specific initiative goals and objectives, rather than for the benefit of or to be an asset (a business capability) to the whole Enterprise.
Data fragmentation occurs when the teams use different systems without a common understanding and agreement on how data is used across all other processes and the systems that automate them.
For example, Initiatives C and D are formed to introduce new products. Both require a Customer Address Management capability but end up building their own without regard to common data usage and standards that could have been shared across the two initiatives. What happens when the business wants to know the rate of service adoption for both products in one location? The data fragmentation produces reporting errors that impact business plans around customer loyalty.
In this traditional approach, systems are often built as silos, building capability for a function rather than for the whole Enterprise. Many interfaces are developed to support how business activities are done in real life (process integration).
The systems & interface maps start to look like a bowl of spaghetti.
What happens when business strategy shifts? To execute the change requires change in capabilities. The path from strategy to implementation can be tortuous, convoluted and risky.
With the above traditional approach, change is not only unnecessarily complex but also difficult to implement fast.
When technology solutions are designed initiative by initiative, rather than at an Enterprise level, it’s bound to create duplications, multiple systems integrations that are point-solutions and fragmentation of data, leading to unreliable business information.
A new approach that builds agility and stability
The crucial link between strategy and implementation is the operating model of the company.
There are five areas where the company’s choices determine the way it operates: Structure, Accountabilities, Governance, Behaviors and Capabilities (process, people, technology). Check out this article by Bain on operating models.
Within the operating model is the foundation for execution of your strategy: Business Capabilities (process, people, technology).
Business Architecture provides the approach and structure that translates strategy to coherent projects portfolio and value prioritization, effective implementations and alignment of goals and objectives. Through a Business Capability model derived from Business Architecture, you can see how Strategic Initiatives are driving changes to Business Capabilities.
The reader’s digest of steps to link Strategy to Implementation
It is a lot of work at first, but once in place, it is easy to maintain.
This approach makes the complex simple, provides excellent insights for decision making purposes, and helps leaders find the levers and dependencies to achieve results when changes keep on coming.
A. Start with the ‘Big Picture’
- Identify the components of your Business Model: Customers, Channels, Suppliers, Partners, Products & Services, External Stakeholders
- Search company documents for Vision and Mission statements, whether they are expressed as such or alluded to
- List all Strategic Initiatives (programs and projects that the company is investing in significantly, including the time of the leaders). Note their stated goals.
- Observe & think: what are the drivers to the Strategic Initiatives? What leversdo they use to achieve their goals and objectives?
B. What is the Value to Customers & Stakeholders
- What are the business activities that produce that item of value to the Customer or the External Stakeholder? (The end-to-end process that link these business activities is called a Value Stream)
- What Business Capabilities are used to support these cross-functional processes?
(Ask your Enterprise Architect for the Business Capability model for your company. If you don’t have one, then it’s time to develop this. There are industry reference models to use as a start, or just hire an EA who knows what this is all about. There are not many who can so make sure they have had the experience and training on Business Capability modelling.)
- Map the required Business Capabilities to each segment of the Value Stream.(It would be great if you know how those Business Capabilities perform today; i.e. are they meeting your business needs or do they need to be replaced, enhanced or extended?)
Take for example the swimmer who aspires to go to the Olympics. She has the specialist capability to swim and hones this capability to its highest. But she also has other capabilities for living life – eating, walking, perhaps singing or playing the piano. She does not spend too much time enhancing these other capabilities as much as she does for swimming, at least during the time she is preparing for the Olympics! Her core differentiating capability is swimming and that’s where she invests more of her time.
C. Check Initiatives Alignment to Importance and Value
- Are different Initiatives competing for resources and funding for the same important Business Capability
- Are different initiatives building a similar Business Capability independent of each other?
- Are other projects building other less-important Business Capabilities? Why?
- Is there a business unit proposing to build a new process and system, even if there is a similar Business Capability being used in another business unit?
- These questions and their answers will help leaders adjust the Strategic Initiatives to achieve greater alignment, minimise duplication, prioritise those of greater strategic importance and value.
- Common Business Capabilities, with highly repeatable processes, can also be identified so they are automated to the max to deliver cost effectiveness and a stable core.
D. Map Strategic Initiatives to Business Capability Roadmap
- Agree which Business Capabilities are of Strategic Importance and Value, and the sequencing of the work to replace, enhance or extend them; aligned to the Strategic Initiatives
- What Business Capabilities support different parts of the same Value Stream or even other Value Streams? How are the business activities automated and integrated across departments?
- What about the unique ones? What differentiates the company from competitors and drive advantage? How can technology accelerate the differentiation and deepen the advantage?
- Agree which Business Capabilities are like ‘utilities’ that form the stable core, shared and used across the company.
- Are there opportunities to drive more automation to achieve greater efficiencies, reduce errors and improve reliability?
- Decide what to do with in-flight projects that neither align to Strategic Initiatives nor the need to build a stable core.
E. Measure, Track, Adjust
- Link objectives at the Business Capability level to goals of Strategic Initiatives. Build the Strategic Initiative Implementation dashboard so you are measuring objectives at the operational level that link to strategic goals.
- Measure, track and adjust your design to minimize risk and assure business outcomes
This post was first published on LinkedIn.
I specialise in helping business leaders implement the transformational kind of change.
If you want to shift current practices to this new way, it helps if you also have someone with this experience and the skill to influence others. Contact me via firstname.lastname@example.org if you want to discuss ways that you can make this happen.
Best wishes on your business transformation journey!
p.s. Business Architecture is just one component of leading business transformations.
For a broader piece on Business Transformation, read my post on ‘Hardware and Software of Business Transformation’