strategic planning, or not

Few words in the business lexicon are applied more inconsistently than "strategy." This thought comes to mind once again from reading former Symantec CIO Mark Egan's excellent summary of what activities the new CIO should perform in his first 90 days.

In this chapter, Mark assets that in your first ninety days you needed to accomplish some high visibility tactical objectives, get some critical, time-sensitive issues addressed. Makes sense -- I'm being brought in because the organization has some problems, and I'm expected to hit the ground running and fix them, while not getting dragged down to only operating at a tactical level. He then recommends a full organization review, to clarify roles and responsibilities, ensure alignment with business needs, etc. Also, a fantastic idea, and now is the time to do it.

Then Mark argues that the last thing to be accomplished in the first ninety days is a strategic plan. Wow, that got me excited. You're going to get all this AND a strategic plan executed within your first quarter?

The reason for my confusion is a variance in definitions. Wikipedia says that strategic planning consists of the process of developing strategies to reach a defined objective." Mark's focus in his chapter is aligned with this definition. Mark encourages the new CIO to examine the current state, imagine a potential future state, and perform a gap analysis to determine what needs to be done to achieve this future state. As a consultant, I perform these activities regularly, which I have always considered to be "assessment, recommendation and implementation." I should acknowledge that I agree entirely with Mark's assertion that such a gap analysis should be performed as soon as possible, although 90 days is pretty aggressive for a full assessment of the application, organization, network and infrastructure.

However, I don't see these activities as strategy. Let me tell you why.

The classic definition of strategy consists of several factors. I need to establish a competitive position that is different from my rivals, so that I can create and preserve a competitive advantage. Strategy is by definition a differentiator. Method and Apple create a stylish product in a commodity market, which allows them to charge a premium price. Operational efficiency, on the other hand, is doing the same thing your competitors are doing, just doing it better. So productivity, change management, continuous improvement -- all great things, but ultimately they are easily copied by your competitors.

But, you say, what about Wal*Mart or Southwest Airlines? Their strategy is focused on low prices for consumers. So isn't reducing costs a strategy? Only if they are so committed to cost leadership that they're willing to do everything differently. Southwest doesn't go to the airports that anyone else does, refusing to play the hub game that all other airlines play. Strategy implies trade-offs -- determining that you can't be everything to everyone, so you define one segment as your own and run with it. If I want to fly to O'Hare inexpensively, I can't take Southwest, because it doesn't go to O'Hare. But if I am price-conscious enough to play by entirely different rules, Southwest is my airline.

So the definition that Mark Egan uses here doesn't match the classic definition of strategy. This review he recommends is not so deep as to examine, "How can we make operations a competitive advantage?" To be fair, that's a conversation which has only just begun. In an interview recently, Eric Schmidt, CEO of Google, stated:

At Google, operations are not just an afterthought: they are critical to the company's success, and we want to have just as much effort and creativity in this domain as in new product development.

Google has built a distributed parallel computer system, using commodity hardware. When it comes to adding more servers, Google plugs them in. New resources are recognized and used almost without human intervention. Google modified the Linux kernel to make this happen, and the knowledge of what's been modified and why remains proprietary. Is this going to work in the long term? Who knows? Strategy is a hypothesis, a theory, a way of guessing which innovation will allow competitive advantage.

So strategy is beginning to be applied within technology departments. Adoption will be slow, since so much money is committed to "keeping the lights on," which makes the lure of continually refining existing processes very appealing. And how many companies are willing to look at the IT spend, and say, "Huh, this is good, but if we invested a lot more, it's possible we could realize considerable upside."

The most difficult barrier with implementing strategy within a technology department is alignment with overall business strategy. Too many organizations still confuse operational effectiveness with strategy. If a company's defined strategy consists of elements which are not true strategy, how far can the organization move forward? Many corporations go through the exercise of defining a mission, vision and strategy, but at the end of the process, if your strategy is, "Reduce costs, increase conversion to sale, and expand globally," how can a technology organization align with those goals and do anything beyond operational efficiency?

At that point, you're stuck with the dilemma I've heard many times from consultants, "How can I tell the CEO that the strategy she's proudly rolled out isn't really strategy, and isn't going to get us a sustainable competitive advantage?"

Good luck with that.

bad management advice

Neal Whitten gave a keynote at PMI's inaugural NorCal Symposium in Sacramento, proposing his thoughts on leadership, many of which left me aghast. For example, he contests that the "benevolent dictator" model is the only true model for leadership, as consensus-based solutions lead to a watered-down solution at best. While I can see his point of view in reference to accountability -- one person is responsible, rather than a team -- it's clear that it's been years since he's been in a workplace.

In Managing the Non-Profit Organization, Peter Drucker notes that dissent within an organization about a decision rarely come from that decision itself, but from implications and assumptions behind that decision. If a leader adopts the "benevolent dictator" style that Whitten proposes, those root concerns will not come out, and a decision will be much less informed. I love what Drucker says about making difficult decisions:

All the first-rate decision makers I've observed, beginning with Franklin D. Roosevelt, had a very simple rule: If you have consensus on an important matter, don't make the decision. Adjourn, so that everybody has a little time to think. Important decisions are risky. They should be controversial. Acclamation means that nobody has done the homework.

Whitten's whole argument about team accountability is a red herring. The accountability issue is resolved if a decision is made, and I make the commitment to carry it out.

Plus, the most critical element of an effective team is not the fact that this one decision was made swiftly or well -- we need to ensure that everyone has been heard in order to build a strong team, so that in the future, members don't keep crucial information to themselves, because "no one listens anyway." Why would we not want to engage all participants and obtain buy in to a decision in process, rather than boldly make a decision, try to sell it to the team and the organization, and then be surprised by issues I had not taken the time to explore and understand?
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But more dangerous than promoting leadership by dictatorship was Whitten's statement that as an employee, I should not look out for the company. I should only look at my own domain of responsibility, and treat that domain as if it was my own company. If we do that, the company will improve. I call bullshit.

In 1998, I worked for RCA, which was the largest television manufacturer in the United States. We had the number one market share in almost all of our product categories, a fantastic distribution channel and great retailers who supported our brand. Then, one day, something happened.

The internet.

Omigosh, we have to sell online before Sony does! What do we do? Let's throw together a $6 million budget, throw fifty guys into cubes in a hallway, and get an online store done from the ground up in less than six months! We'll have to figure out tax issues, because we've never sold directly to consumers before, and we don't actually know how to sell to consumers, but never mind that, and logistics, because we've never shipped less than a truckload at a time, and wow, won't customers call us about their orders, so we'll have to outsource that, and legal issues, and....

And you know what? We got it all done. It was amazing. What a fantastic project. We did the impossible. Great job, team.

Except, hmm... now Best Buy and Circuit City are mad at us, and say they are going to drop our product line. We can't sell competitively, or we will anger even more of our retailers. So we'll have to mark our prices way up, and we have to charge tax and shipping, and shipping on a 52" television is quite a lot, so maybe we throw in shipping for free, and where did our profitability go? And how come we can't sell anything?

We did a fantastic job, did everything right, but we were working directly against our corporate strategy. Our strategy prevented the project from realizing success -- we either support the project or drop the strategy. Why didn't anyone think of this?

Thinking of the company, looking out for corporate strategy, is in every employee (and consultant)'s best interest. The days of blindly mandating decisions, and blindly following orders, are long over. You only have to download this episode of Frontline to see what happened to RCA. It's a tragic story, sad mostly because it was entirely preventable. A company who departs from the strategy that made it successful in order to drive growth at any cost is a company destined for a colossal flameout.

If you only look at your own domain of responsibility, and don't look to see how that domain fits within the overall organization, you will fail yourself as well as your organization. You will fail to do great work, if you don't work on problems that are important for the organization's future.

Balanced Scorecard Presentation at PMI NorCal Symposium

Slides (in PDF format) from my talk are available here