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Record oil prices, painful stops at gas stations, an unprecedented terror attack in Mumbai, and an unprecedented change in economic conditions are some of the things that 2008 might be remembered for. But hopefully, 2008 will also be remembered for a stronger resolve to move traditional ventures into more “green” territory, and for looking ahead to 2009 with a creative outlook as to how best to stay the course with respect to strategic initiatives – strategic initiatives that support innovation for that is the antidote to the effects of this downturn.

In the December 2008 issue of the Harvard Business Review (HBR) there is a special report titled, “Navigating A Downturn.” This features a collection of points made by numerous thinkers and practitioners. Perhaps the two most striking points are those that should make traditionalists sit up and take notice.

Robert S. Kaplan and David P. Norton (Protect Strategic Expenditures), caution against conventional wisdom which leads managers to “an indiscriminate slash-and-burn response.” They point out that such a reaction is a big mistake because it fails to distinguish between what a company needs in order to see the bad patch through, and what is likely a strategic imperative. They cite examples of companies that put aside funds during regular budgeting to exclusively address strategic initiatives. These funds are off-limits from the machete treatment most operational and capital expenditure budgets face in a typical reaction to a downturn. This enables a company to continue to pursue those activities that will help it succeed in the marketplace while simultaneously making hard decisions on the operational front. In my experience, such behavior sets apart the winners from the whiners! It might be recalled that in October I had put forth the argument (Café Innovation – Innovation is the mantra for competitiveness…even in tough economic times!) that companies that continue to innovate during the downturn are the ones that will emerge ahead once things get better.

When times are tough, professional development is a luxury.”  B. V. Krishnamurthy says (Use Downtime to Enhance Skills) that this is precisely the sort of conventional wisdom that needs to be shed.  According to him, a downturn “presents the perfect downtime to enhance the skills your people need to excel.”  Can we achieve process excellence or any other kind of excellence if our people are not equipped with the skills to excel? In my post last month (Café Innovation – Now is not the time to shrink back!),  I put forth the argument that important skills of the near future that will be essential for SAP practitioners should not be ignored in these tough times. Perhaps, we might dial back the enthusiasm, but significant progress – long-term – can still be made if corporations invest in their people now.

Finally, I do not believe it is much of a coincidence that these pieces appear in the same issue of the HBR as the leading strategy and competition piece co-authored by SAP co-CEO, Henning Kagermann. In the article, “Reinventing Your Business Model,” Mr. Kagermann and his co-authors Mark W. Johnson and Clayton M. Christensen answer the question why for many established companies it is “difficult to pull off the new growth that business model innovation can bring.”  According to them, these companies do not “understand their existing business model well enough,” and so “they don’t know when success requires a new business model;”  often, they are also not savvy about building a new model when they do realize they need it.  In this forum and elsewhere we have focused extensively on the necessary but very tactical issues of ERP 6.0 upgrades, of building composite applications, and such. The fundamental issue is that the long term success of these operational efforts are also very dependent on a robust strategic direction, which, it is increasingly clear, must be linked with understanding one’s business process and thus being better positioned to make the necessary changes to achieve process excellence.

Taking these points together, companies need to remember that their long-term success – beyond the current financially troubled times – is dependent on appropriate business model innovation which calls for process excellence; which, in turn, almost by definition can only be achieved by knowing one’s processes well. The question then is who in organizations are the ones that will lead the charge? More importantly, will the senior leadership demonstrate true leadership and recognize what is strategic and actively support that with a budget that provides for the furthering of strategic initiatives including the upgrading of skillsets? Or, will they be mere spreadsheet managers who bring a hatchet where a scalpel is needed? These are questions that must be answered by enterprise architects (BPXers) and by the stewards of the organization. If nothing else, looking keenly at furthering the strategic agenda with these considerations needs to be high on your company’s list of New Year resolutions for 2009!

 

P.S. I will be back in 2009! Happy Holidays and Season’s Greetings to all!

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