Did Somebody Say Strategy?

Growth through Innovation on a tight budget

I enjoyed this article by Joann Lublin in the WS

Smart Balance Keeps Tight Focus on Creativity

It highlight's Smart Balance's approach to Lean Innovation through a virtual business model that encounters fewer roadblocks than traditional company innovation models.  Steve Hughes, CEO, recommends these actions:

• Establish a clear vision and long-range blueprint
• Outsource all activities someone else can do better 
• Relentlessly commit to continuous improvement 
• Develop a strong internal team and external business partnerships 
• Create a focused new-product process mixing creativity and practicality 
• Invest in building the brand, rather than physical assets

  With "most" of their revenue growth coming from new product sales, it looks like their model works.

  

Management Excellence: ROI for Enterprise Performance Management and Business Intelligence

Oracle's latest edition of the Journal of Management Excellence is now available on-line.

Have a look at our article: 

Building the Business Case For Return on Enterprise Performance Management Investment

There are also other good articles in there by:

- Oracle

- The Hackett Group

- Wayne Eckerson, TDWI

As always, we welcome your feedback.

The #1 job of every CIO

Reading these two surveys from CIOInsight got me thinking....

#1 - Top Ways the CIO Role is Changing

From CIOInsight at http://www.cioinsight.com/c/a/IT-Management/What-Tomorrows-CIO-Will-Have-to-Do-419113/?kc=CIOMINUTE05132009CIO1

(the survey lists 36 ways! here are the top 5) (“RC” refers to Role Changing)

1. Driving Strategic Use of Information
2. Reducing Business Costs
3. Leading Enterprise Change Initiatives
4. Driving Business Model Innovation
5. Expanding Current Customer Relationships

# 2 - Top CIO Business Priorities for 2009

From CIOInsight at http://www.cioinsight.com/c/a/IT-Management/Top-CIO-Priorities-for-2009/

(the survey lists 23 business, management, and technology priorities, here are the top 5 business) (“BP” refers to Business Priority)

1. Improving Business Processes
2. Delivering Better Customer Service
3. Cutting Costs
4. Generating More Business from new and Current Customers
5. Innovative New Products/Services

I have an inkling that there could be one grand-unified initiative that addresses all 10 items above.  Bear with me:

- BP1, BP3 and BP4 can lead to RC2

- BP1 and BP5 can drive RC1, RC3, and RC5

- RC5 is one way to get to BP2, BP4 and BP5

- RC3 and RC4, BP1, BP4, and BP5 are examples of RC1

...and so on.  The point is that these 10 items are interrelated.

So the grand-unified initiative ingredients would:

- Be Customer focused (expanding relationships, delivering better service, attracting & retaining, cross-selling)

- Include processes and technology to help Connect Marketing (capture) to Sales (close) to Development (Innovate) to Fulfillment (deliver), etc.

- Reduce transaction costs (lead-to-close, order-to-cash, procure-to-pay, and so on)

- Get everyone in the organization focused on the most important things (customer sat, revenue, and cost)

So it sounds like the # 1 job of every CIO is to enable the alignment and focus of the entire organization on the most important things.

Where do you start? Uncover and agree on what “the most important things” are from each business function perspective, and aligned with strategic objectives (start with the executive leadership team)  and document the agreement in a standard way (our clients use our Broadsheets to do that).  

Enterprise Portfolio Management - back to basics

We usually talk about Enterprise Performance Management, lately, we’ve been hearing from clients about the other EPM: Enterprise Portfolio Management and how a focus on the right enabling technologies can improve businesses’ competitive advantage.  CIO’s, and other business leaders, have been talking about getting back to basics with I.T. and delivering a solid foundation from which the enterprise can serve clients, deliver value, and beat the competition.

There are a number of approaches to EPM: ROI, TCO, Benefit Weighting, Strategic IT Portfolio Management, and they should all come back to maximizing the business benefit of Information Technology.

Look at this interview in the Wall St. Journal with Gerry Coady, CIO of Frontier Airlines Holdings where he talks about going from “a few hundred (I.T.) projects” to less than 30.  Mr. Coady says “we decided to focus on the few projects that really reflected the airline's priorities, and those were to fly safe, to generate revenue, to take cost out and customer service.”  So back to basics: using I.T. to support & enable business strategic objectives and to give the business a competitive advantage.

So how do you actually go about prioritizing your current I.T. portfolio of initiatives given the current economic climate?

Here is our foundational approach:

1. Assuming you’ve done a decent job of business analysis and requirements (from the bottom up, or from the middle), the first thing you have to do is engage the executive management team.  It’s the CEO and his or her direct reports who own the company strategy.  They’ve baked it, sold it to the board, and are responsible to see that it’s executed.  In too many of our clients we have seen a fundamental disconnect between what the C-suite thinks the strategy is and what the rest of the business thinks the strategy is.  We’ve also seen an alarming disconnect within the C-suite!  So get it down on paper, in a structured way (link to broadsheet), visible to all.
2. While you’re at it, take 2 hours with each senior executive and get them to tell you what drives value in the business from their perspective.  You’ll get the key value drivers from Marketing, Sales, R&D, Operations, HR, Finance and so on.  Collect those value drivers, their interrelationships and “geography” in the business (the intersection of what business function and what layer) in a methodical, structured way. Here's a link to our method.  Link each value driver (KPI, metric, process) back to its corresponding strategic objective (directly or indirectly)
3. Consolidate all the viewpoints and create an enterprise value driver map.  Very quickly you will see two things: the most important drivers of value (they have the most touch-points with other drivers, they will connect to strategy, and they will have high materiality to the business), and you will see the gaps.
4. Overlay this value driver map with your current I.T. portfolio and with the processes they enable.  And while it’s CEO’s job to execute strategy, it’s CIO’s job to deliver systems that support and enable the people and processes that execute strategy.
5. A giant lightbulb will go off that shows where I.T. is actually aligned with the business and where it is not.

Here’s an example of a “back to basics,” realigned I.T. Portfolio priority list.  

The company’s new strategy is to laser focus on customer retention while maintaining margins (and keeping the lights on in this economy).

Their current I.T. project portfolio looks like this (simplified):

1. ERP Upgrade
2. Sales Dashboard
3. Business Process Improvement (workflow automation)
4. SOA
5. VoIP
6. Vendor Management System
7. Product Life-cycle Management System
8. Server Virtualization
9. Inventory management system upgrade
10. Enterprise Data Warehouse, phase II

 They also had these additional EPM governance criteria:

• Cut the total number of projects
• Rebrand the projects to be business/outcome focused
• Model the potential material impact of even a small improvement in financial results
• Sponsored by one business executive
• I.T. and the business sponsor are one the hook for the results

After going through our foundational approach, their new project portfolio looks like this (simplified):

1. Sales Effectiveness System (a dashboard that shows actual v. forecast revenue, size & velocity of the pipeline, lead conversion ratio trends, customer sat scores, and SG&A trends).  Impact: revenue growth, customer retention, sales margin.
2. Vendor Effectiveness System (a business intelligence system that reports and analyzes cost of goods sold, materials delivery times, total vendor spend with corresponding discounts, and contract terms at risk).  Impact: COGS, Customer Sat, and cash flow.
3. Inventory Effectiveness System (better visibility into the current inventory system, not just more transactional features, showing days in inventory, production times, shipping & storage costs, and on-time-delivery rates).  Impact: cash flow, COGS, customer sat, asset utilization.
4. Information Effectiveness Initiative (phase II of the EDW making sure the right information is in the warehouse, refresh rates are relevant, and ETL is automated).  Impact: improved information quality and support of #’s 1 to 3 above.
5. I.T. Cost Reduction (any/all of the SOA, VoIP, or Virtualization projects that exceed a specific ROI and speed to ROI).  Impact: reduce SG&A costs.

So the new portfolio isn’t just business/IT alignment, it’s business/IT fusion.  Pretty basic, eh?

Top concerns of CFOs

From Duke University/CFO Magazine Global Business Outlook Survey

(with links to how we help CFOs visualize and address the issue)

1. Ability to forecast results

2. Working-capital management

3. Maintaining morale/productivity during economic downturn

4. Balance-sheet weakness

5. Cost of health care

6. Attracting and retaining qualified employees

7. Supply-chain risk

8. Managing IT systems

9. Pension obligations

10. Protection of intellectual property

Some of our top Business Intelligence tweets

Properly done BI or dashboard requirements interviews should leave person wanting to keep going, not looking at their watch.  @markmadsen Exactly! that's why we created the Periodic Table of Business: http://tinyurl.com/c459rw

@rondimon you have an interesting approach in yours Periodic Table of Business @marcusborba - Thanks! We use it for Business Intelligence requirements, metrics audits, and Business/IT alignment. http://tr.im/iEqZ

Creating the future: Royal Bank of Canada CEO:http://tr.im/inmX and 3 Laws of Performance:http://tr.im/innh - what's possible?

@marcusborba - Many thanks for the review of the article at http://tr.im/icGJ

From @LTucci - Gartner: IT budgets in 2009 are like a ‘ham and cheese sandwich’ - http://tr.im/i8Vp

RT @cfocoach: CFO's role in navigating the downturnhttp://tinyurl.com/dn2l6t #cfo reduce working capital by tightening up management.

RT @samuelchall ... lots of goodies in the First Oracle Enterprise Performance Management Index -http://tr.im/i22d

Wow - Rohm and Haas implements open source dashboard, saves at least $2M on SAP (BO) costs - http://tr.im/hZ78

Key Performance Indicators (KPIs) for Human Resources has been our most popular blog entry lately: http://tr.im/hSEM

RT @ericbryn: Excellent tips on setting Key Performance Indicators for your company http://bit.ly/FRqz - also seehttp://tr.im/hPI5 #KPI

What IT really needs is more business direction -http://tr.im/hPGS - this usually results in Business Intelligence initiatives #KPI

The future financial system

Today’s WSJ had an entire pull-out section dedicated to the Future of Finance

https://futurefinance.wsj.com/ .  These are the findings from last week’s Future of Finance Initiative meetings in DC.

Their top 20 principles for rebuilding the financial system:

(quoted verbatim, except for parenthesis)

1. Strengthen Underwriting Standards
2. Bolster FDIC
3. Regulatory Overhaul
4. Create a New Clearinghouse (for credit-default-swaps, overnight financing, and interest rate swaps)
5. Raise Capital Requirements (no mention of Basel II)
6. Enhance Collateral
7. Smarter Securitization
8. Rating Agency Reform
9. Consistent Regulatory System
10. Constrain Leverage
11. Let TARP Capital be Repaid
12. Executive Compensation (limit government involvement)
13. Transparency Before Regulation
14. Price and Volume Transparency
15. Fed Should be Systemic Risk Regulator
16. Ensure Success of Public-Private Partnerships
17. Accounting Rules (no mention of IFRS)
18. New Resolution Authority for Non-banks
19. Auditors Enforce Consistent Marks
20. Limit Foreclosures”

And the blog from the event is here: 

http://blogs.wsj.com/deals/2009/03/25/perspectives-from-the-future-of-finance-initiative/

What IT really needs is more business direction

We concur with the findings of the recent I.T. priorities poll conducted by InformationWeek Analytics and Intelligent Enterprise.com - it mirrors what’s true with our clients as well: 

305 business technology professionals ranked “better guidance from business leaders” as the number one thing that would improve their productivity.

(Here's the article by Doug Henschen)

The article goes on to say that I.T. is asking business leaders inside their companies to do a better job of communicating mission, strategy, and direction to help I.T. deliver enabling solutions with more business impact.

If you don’t already have a fast, repeatable methodology for truly aligning business and I.T., check out the Business Foundation method.  We literally get each functional business leader on the same sheet of paper with I.T. on what are the most important things to measure, monitor, plan-for, and analyze.  It shows senior management that I.T. “gets” what the business is up to and it helps I.T. prioritize the portfolio of initiatives to those that have the biggest impact on:

• Revenue Growth
• Cost Reduction
• Cash cycle velocity, and
• Asset Utilization

Then we put it all together and show what the impact is on strategy execution.  I.T. is left with the design and plan for the top initiatives that will deliver on what the business really needs along with an audit trail of specific business guidance and an ROI approach that the business can get behind.

The business executives who go through our method (along with I.T. every step of the way) see it as a valuable use of their time.  Comments have included:

“I’ve been waiting for this conversation for 2 years!” (CEO of $4B Chemical Manufacturer)

“We found 13 systems out there we had no idea about” (CIO of $6B Mining company)

“This is my accountability map!” (CEO of $3B Private Healthcare company)

“It was like being on the psychiatrists couch.” (CEO of $1B High Tech company)

“You’ve brought structure and insight to an unstructured and complex conversation.” (COO of private consulting company)

“This is our North Star for management system initiatives.” (VP of I.T, $6B Mining company)

“I really like your approach - we uncovered some new ways of looking at the business today.” (CEO of $2B Software company)

We even had one client who realized after the initial 2-hour discovery sessions that each executive on the leadership team had a different take on what the strategic objectives were and none of them were in synch.  Right after our workshop, they convened an off-site C-level meeting and quickly aligned on what the business strategy actually was.  So the CIO that brought us in got kudos for exposing that problem and having an impact on the business at the top level....without installing any new software!

The results included one CEO who said directly to the CIO at the conclusion of our read-back presentation: “That’s what I want!  I don’t care what it takes....$12M, $19M...we need THAT!  Let me know what you need and if anyone in the organization resists, have them call me.”

The CIO was stunned! 

Strategies to survive the downturn

Today’s WSJ has it’s ever-popular MIT Sloan Management School Business Insights section.

There’s an article by Dr. Martin Roth (prof. of int’l business & chief innovation & assessment officer at U of South Carolina) and Dr. Richard Ettenson (assoc. prof. & Thelma H. Kieckhefer fellow in global marketing and brand strategy at Thunderbird) called

“Surviving the Downturn: Lessons from Emerging Markets”

They say that now is the time to implement “bold, creative ideas, outflank rivals and boost (your) business.”  Here are some of the lessons they recommend you follow:

- When the economy is down, get customers to trade up by making price increases between product tiers smaller and more consistent (signaling better value to consumers) and give up the extra margin for “quick and decisive market leadership” and on-going brand loyalty.

- Implement or maintain an unwavering focus on retaining customers.  One way is to increase product and service visibility: reallocate marketing spend to customers you already have (since it’s less expensive to sell to them than to new ones) and another is to maintain sufficient sales and service staff levels.

- Look at new metrics: include a broader view of the market including macro-economic data (inflation, unemployment, exchange rates, GDP per capita, etc.) and use that data for better scenario planning (best-case, worst-case, likely-case, etc.).  Then craft a strategy for each scenario.

Each of these recommendations not only cause a change in policy, process and priorities (and maybe even org structure), but will also require a revision of your measures, your plans, and your analytics.  And, of course, we would say that the place to start is to get senior management literally on the same sheet of paper about exactly what are the right performance markers.

Dashboards and Scorecards, similarities and differences

My friend Toby Hatch of Oracle (formerly of Hyperion and Sapling) has been doing scorecards for a LONG time.  She came up with this a few years ago and I've found it useful as a way to look at the differences: