It is common to confuse strategy with operational effectiveness. The strategy for Information Technology (IT) projects contains three major themes. These form the foundation of the IT Strategy as well as the tactical processes that will be deployed in support of these strategies.
- Business improvements are enabled by Information Technology that is integrated not disintegrated. This integration must be horizontal versus vertical. Horizontal systems remove islands of information and build bridges between the business units. In this integrated system, multiple data sources are made transparent to the end-users as well as the applications that utilize them.
- Information Technology requirements are always growing, changing, and being extended. Information Technology is no longer static, but dynamic, adapting to the changing business requirements.
- Information Technology is about abstractions. If hardware, software, and data were the only foundations of a system, then Information Technology would not be able to keep pace with the business requirements. Instead, business processes, objects, and services are the foundation of the system, which then drives the business process in their adaptation of the changing market forces.
What Is Strategy?
The strategy is creating fit among a company’s activities. The success of a strategy depends on doing many things well – not just a few. The things that are done well must operate within a close-knit system. If there is no fit among the activities, there is no distinctive strategy and little to sustain the strategic deployment process. Management then reverts to the simpler task of overseeing independent functions. When this occurs operational effectiveness determines the relative performance of the organization. [1]
Improving operational effectiveness is a necessary part of management, but it is not a strategy. In confusing the two, managers will be unintentionally backed into a way of thinking about the business environment that drives the business processes (IT) away from the strategic support and toward the tactical improvement of operational effectiveness.
Managers must be able to clearly distinguish operational effectiveness from the strategy. Both are essential, but the two agendas are different. The operational effectiveness agenda involves continual improvement business processes that have no trade-offs associated with them. The operational effectiveness agenda is the proper place for constant change, flexibility, and relentless efforts to achieve best practices. In contrast, the strategic agenda is the place for making clear tradeoffs and tightening the fit between the participating business components. The strategy involves the continual search for ways to reinforce and extend the company’s position in the market place.
The concept of fit among functional units is one of the oldest ideas in strategy. Gradually, however, it has been supplanted with new concepts of core competencies, critical resources, and key success factors. In fact, fit is far more critical to the success of the IT systems than realized. [3] Strategic fit among the various systems components and the business processes they support is fundamental not only to competitive advantage but also to the sustainability of that advantage.
Fit among a company’s activities creates pressures and incentives to improve operational effectiveness. Fit means that poor performance in one activity will degrade performance in others so that weaknesses are exposed drawing management’s attention. Conversely, with increasing fit, improvements of one activity will pay dividends in other areas.
The challenge now is to create fit among the IT components and their matching business components.
Building A Strategy
To define our Vision, Strategic Objectives, Performance Goals, Critical Success Factors in achieving those, and the measures of effectiveness and performance in pursuit of those strategic goals and objectives, we need a method that collects all of these in a single place.
If we are going to make tradeoffs in pursuit of strategy, we need to know what those tradeoffs are, how much will be the opportunity cost for each trade and how each trade impacts our strategic decision making.
To dive into the details, to make those opportunity cost tradeoffs about future outcomes in the presence of uncertainty we must of course ESTIMATE. There can be no execution of the strategy without make estimates of the benefits of the outcomes of the project that delivers the capabilities that implement the strategy.
The Balanced Scorecard presentation below shows how to build the strategy. Page 49 - 52 shows how to connect the dots between strategy and project execution, where the work is done, at or below the planned cost, on or before the needed time, and with the planned effectiveness and performance of the delivered capabilities. Showing up late, over budget, and with missing capabilities will not enable the strategy to fulfill its mission and vision. It's a closed-loop system - all parts must work in combination for success.
[1] “What is Strategy,” M. E. Porter, Harvard Business Review, Volume 74, Number 6, pp. 61–78.
Jack Welch Speaks: Wisdom from the World’s Greatest Business Leader, J. Welch and J. C. Lowe, John Wiley & Sons, 1998.
Control Your Destiny or Someone Else Will: Lessons in Mastering Change–From the Principles Jack Welch Used to Revolutionize GE, N. M. Tichy, and S. Sherman, Harpers Business, 1994.
