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As a new face on the SSM Solution Managment Team, I thought I’d share some of my thoughts about strategy management, and how some organizations approach it.

 

Something that used to perplex me when I talked to some organizations about strategy management was the comment “Strategy Management is a great concept, we can see the business benefits, but we’re not ready to do it yet.”

So it’s a good idea, it delivers business value,… but you don’t want to do it…?

Drilling into this comment, it often became clear that the organization did not feel ready to embark on the detailed analysis of their business, which was necessary for building a meaningful strategy map, with all the supporting KPIs. (Sometimes a big part of the challenge was simply that it was too difficult to gain consensus amongst all the stakeholders on the strategy detail.) 

So these organizations preferred to maintain the status quo and monitor the KPIs they had always monitored. This isn’t necessarily a bad thing – the KPI was probably originally selected by somebody who understood the business and decided that this was a useful KPI, even if it was selected without mapping it to corporate strategy. For example, it’s intuitively sensible to monitor KPIs like: Margin, Revenue, Customer Churn and Lost Production Hours. It’s certainly more sensible than not monitoring any KPIs at all.

So… is this kind of organization a lost cause from the strategy management perspective?

Perhaps not. What about an evolutionary approach to strategy management instead? Why not start by cherry-picking the parts of strategy management that deliver value, but with  minimum pain? Maybe you will get the whole way to full blown Strategy Management, or maybe just part-way. But even part-way can deliver value.

  
Here are some examples of the Strategy Managment concepts that can work in isolation:

 

Think about balancing driver KPIs, with outcome KPIs.  
“Customer Churn” is an example of an outcome (or lagging) KPI. Once a customer has churned, it’s too late to do anything about it. If poor performance in “On-time delivery” and “Average Problem Resolution Time” are driving customer churn, manage those KPIs as well. If you see on-time delivery slipping below target, or problem resolution time going above its target, you may still have a chance to do something about it before customers start disappearing.

If you’re feeling brave, you could even group these KPIs under an organizational objective like “Increase Customer Retention”.

This sounds fairly straightforward, but even this can be contentious. Different people may not agree on what’s causing Customer Churn – some might say the key drivers are  Product Quality or Competitor Pricing, and it’s nothing to do with On-time delivery rates. But maybe this will prompt some research into the real causes of Customer Churn. Researching one KPI at a time that everyone is familiar with, and gaining consensus on that one KPI, is more likely to be successful than trying to deal with a whole strategy map in one go.  

 

Encourage people to be forward looking as well as backward looking.
Encourage questions like “You’ve achieved your year-to-date sales goals – which is great, but how confident are you about achieving your end-of-year sales goals?”

 

Initiatives and Corrective Action Plans
If on-time delivery is not on target, investigate the reasons, and put action plans in place to address it.

You have identified a risk that may stop you achieving your end-of-year sales goals – so put initiatives in place to mitigate those risks.

Document the initiatives and action plans, so everyone knows what is happening. Explain the expected impact – how much and when. Look back with hindsight – did the initiatives and action plans work? Can others benefit from re-using the ideas?

     
At least now you have a performance focussed organization, which is moving towards being strategy focussed.

 

 

Next steps might include looking at the balance of your Objectives and KPIs. If you are moving towards the Balanced Scorecard methodology, you may want to review whether they are balanced across the four perspectives, and introduce new ones, if required.

Perhaps you also want to start focussing on cause and effect linkages between objectives, and making sure they are really carrying you towards your strategic vision. Maybe this will involve refining, adding or removing Objectives and KPIs – but it’s still a small piece at a time, so research and consensus gathering continues to be more achievable.

I guess a key question is… Do you end up with a better strategy through evolution or through revolution?  Who knows? In my opinion, if you’re not up for revolution, then evolution is much, much better than doing nothing at all.

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2 Comments

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  1. Anonymous
    Great post Robert…when reading the word incremental came to mind..all evoultion is icremental.  As you stated some organizations are just not ready to do a complete audit of the business strategy.  Taking an incremental approach given the current business conditions may assist organizations in overcoming the overwhelming feeling of needing to create/redo a formal business strategy.  
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  2. Karol Bliznak
    Robert,

    you might be a ‘new face’ on SAP’s Strategy Management product management team, but you’re definitely not new to the industry and to the strategy management/scorecarding topic itself – as we can clearly see in your well balanced and very informative blog post. Real food for thoughts… I’m looking forward to reading your future posts on the FPM topic!

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