A strategy is by definition the starting point for corporate behaviour. It expresses an organisation's ambitions, sets out its chosen direction and describes the principal initiatives and projects necessary to achieve its mission. Business schools, management gurus and strategy boutiques regularly develop new approaches and methodologies for strategy formulation and all acknowledge its overwhelming importance in setting the tone for the organisation and its prospects for success. Yet it remains one of the most neglected areas of management practice. Gary Simon, managing editor FSN, reviews an exciting new product, Geac Strategy Management that that will help turn the tide.
A strategy is by definition the starting point for corporate behaviour. It expresses an organisation's ambitions, sets out its chosen direction and describes the principal initiatives and projects necessary to achieve its mission. Business schools, management gurus and strategy boutiques regularly develop new approaches and methodologies for strategy formulation and all acknowledge its overwhelming importance in setting the tone for the organisation and its prospects for success. Yet it remains one of the most neglected areas of management practice. For example, research has shown that 85% of executive teams spend less than 1 hour per month discussing strategy and only 5% of the workforce understands strategy.
Strategy development is a curious mixture of science and art, fact and insight, knowledge, experience and creativity. In addition, in today's complex multinationals it draws on the skills of management from across the enterprise and in all functional areas. After all, strategy has implications for the development of human capital, information technology, product development and financial management to name a few, as well as the use of all other assets and resources owned by a company. This in turn means that if strategy is to be delivered successfully by an organisation it must be clearly articulated and communicated throughout the business. In other words, the strategy must be widely understood at all management levels so that operational plans and day to day activities are aligned with corporate goals and objectives.
However, the importance of communications in the strategy process is no longer confined to management, employees and internal stakeholders. Changing attitudes to corporate governance and corporate social responsibility throughout the developed world coupled with demanding legislation to protect shareholders in many geographies means that management are now formally accountable to a wider set of external stakeholders as well. It is now incumbent on management to ensure that strategy development and communications follows a robust and auditable process so that resources deployed in the business are strategically aligned and management actions can be justified, if required, to an external audience.
The role of systems in strategy:
In recent years information systems have played an increasingly important role in enabling 'downstream' strategy activities, such as enterprise planning, budgeting and forecasting. The advent of web based systems has allowed organisations to implement these applications very cost effectively although they have tended to be deployed only at a divisional level rather than an enterprise-wide level. In isolation, these systems have fulfilled a useful local function but have not supported strategic alignment.
In parallel, centralised planning tools have allowed organisations to model different scenarios once the strategy has been set but often this activity has been conducted in a vacuum. The plans have neither been coupled with the strategy in one direction nor linked with operational budgets and plans in the other. It seems that systems have not allowed management to close the so called, 'strategy gap' i.e. the disconnect in communications between strategy development and operational plans.
Astonishingly, given its importance, there has been little technology support for the most vital of all management processes, i.e. the upstream process of strategy formulation. But what exactly would such software be required to do? What processes should it support and how can it be used to assist management to close the strategy gap?
These are the formidable challenges that Geac has confronted and tackled very competently and imaginatively in its "Strategy Management" product. In the following paragraphs we describe how this innovative and highly practical product supports the;
- creative process of strategy capture
- visualisation of an emerging strategy, mission and objectives
- development of management consensus around strategy and performance measures
- alignment of the organisation and its strategy
- learning organisation
The creative process of strategy capture:
Strategy development takes its inputs from a wide variety of information sources, for example, previous strategies, competitor information, current and past performance, and industry benchmarks. In addition to this 'hard' data, strategy formulation is also about management aspirations and ambitions - inevitably a mixture of 'business as usual' and new ventures. Often it's about balancing opportunities and risks. In other words there is considerable judgement involved in developing an organisation's strategy and assessing the merits of different business scenarios.
Capturing such fluid requirements can be challenging. Most management teams resort to flip charts, break-out groups and facilitated meetings to drive out the thinking and record key decisions. Methodologies such as The Balanced Scorecard, Six Sigma, EVA and others can provide a helpful framework but they are largely paper based in the development phase and can be difficult to change and communicate. So they do not readily keep pace with the iterative and creative nature of strategy development.
Diagram 1 -
Strategy, objectives and relationships are depicted diagrammatically
The diagram shows the relationship between the objectives and underlying strategies and high level tactics which can be very rapidly created, even by a novice using simple 'drag and drop' functionality to link objectives and strategies. Multiple strategies can be set up in this way and debated as required. Similarly, parameters within the system allow relationships to be added, removed or edited as desired so that the creative process can be supported 'on the fly' as new ideas are surfaced.
Visualisation of an emerging strategy, mission and objectives
Diagram 2- Complex relationships can be captured in the 'fish eye' viewer
Development of management consensus:
Strategy development is a challenging and often contentious process. Managers from different geographies, product lines and functional areas can have very different views on what makes an organisation 'tick' and the performance measures that should be employed, particularly where these affect remuneration policy. Often, an organisation has too many performance indicators and simply achieving functional and organisational alignment of KPIs (Key Performance Indicators) can seem like a Herculean task. Old KPIs can often go unchallenged whilst at the same time new KPIs reflecting, say, social and environmental reporting need to be developed.
In these circumstances, it is important that the management team can view the entire performance 'universe', assess the correct relationships, agree on the aspects of performance to measure and define the principal objectives and tactics necessary to deliver the strategy.
Geac Strategic Management enables this process by providing a unique view of the performance universe which is easy to display in its totality and allows management to grasp the complex interrelationships it contains. As such it provides an outstanding platform for communicating the strategy effectively and building management consensus at a senior level before the strategy is percolated through the rest of the organisation. By this stage, the strategy would also include the agreed performance measures by which progress in delivering the objectives can be measured.
Alignment of the organisation to the strategy
The visualisation underscores alignment in thinking by illustrating how the contribution of local management fits into the bigger picture. In the light of this understanding, they can build local tactics into the overall strategy and create budgets for the costs involved and make fair estimates of the resources to be deployed. If needed, local management can make assumptions about the relative importance (weighted contribution) of local initiatives to the delivery of specific objectives and individuals can be allocated responsibility for overseeing their completion. In other words, the organisation and its strategy is aligned from high level definitions of objectives right down to individual activities that support their delivery.
Supporting the learning organisation
A comprehensive suite of reports allows actual results to be reported against budgeted numbers and variances (which are colour coded to denote good or poor performance) to be reported in the usual way. However, the software also allows the amount of resources consumed in the process, or the extent of the activities completed, to be reported as well. (see diagram 3). The reporting of the variance side by side with consumption provides valuable insights into progress. For example it can show situations where an objective is delivered using only 70% of the planned resources. Conversely, it can highlight situations where the organisation is under-achieving but still consuming more resources than it intended. Comparative reporting with earlier periods automatically carried out by the system shows the trend of performance, e.g. whether an adverse variance is getting worse or improving.
Furthermore, the integrity of the linkages between strategy, objectives and tactics throughout the plan, allows management to quickly identify what strategic objectives are jeopardised by underperformance in an individual task much lower down the hierarchy.
Comprehensive activity and variance reporting
So Geac Strategy Management supports a learning organisation by providing deeper insights into its performance that allow resources to be re-allocated in the light of experience.
Finally, performance monitoring coupled with measurement of effort and consumption assists the organisation to learn what tactics work and what strategies need refinement. It thus provides the basis for a learning organisation to constantly improve performance.