Craving Agility? Get Yourself a Good Model.
Strategy to Execution Blog Series – Part 1
Remember what it was like when your company was on the small side, or when you worked at a start-up? You had plans, and knew just where you wanted the company to go and how to get there. Maybe something popped up that you weren’t expecting – like a new competitor – but that didn’t faze you. You got your key people together and figured out what you needed to do to adapt, and then you rolled up your sleeves and did it – you just did it. But now that you are a multi-national corporation, from the moment that management leaves the boardroom with a new idea to the moment that the company is poised to execute can seem to take an eternity. That agility you once knew is long gone, and large business leaders all over the globe wish that H.G. Wells’ time machine wasn’t fiction, and a pull of a lever could take them back to a simpler, more manageable time.
So what method do you have at your disposal to help make quick, informed decisions, and have those decisions executed on throughout all levels of your company? It’s called Strategy to Execution, which can be boiled down to this: What your company wants to do is “Strategy”. What your company knows how to do is “Competency”. What your company does is “Process”. All of these things are connected, and the rapidity in which they react to each other is straight-up “Agility”.
Don’t know exactly how they are connected? Better get yourself a good operating model or you can kiss agility goodbye.
How to understand the real link between strategy, competency and process
The gap between strategy and execution is a struggle for many; in fact, linking process improvement with top level business strategy was the top challenge for process professionals in both 2014 and 2013 surveys conducted by the PEX Network*. Agility requires not just bridging the gap between strategy and execution at a single point in time, but dynamically maintaining it in order to make sure that as strategy changes, execution follows in lock step. Unless you are a mythical company where information flows openly and freely, there is no better way to communicate and manage the execution of strategy than by creating an operating model as a source of truth to refer to.
An operating model describes the various pieces of how and why an organization does what it does, and how those parts interact. You can think about the operating model like a mechanical blueprint of a machine. Each working part is identifiable as an individual piece as well as in relation to the other pieces that are connected to it. An operating model includes an organization’s strategic goals, operational business competencies, business functions, processes and tasks, as well as the structure and technology that enable delivery. Definitions of value and desired performance are also critical to a fully fleshed out model. A lot goes into the preparation of such a comprehensive model, and businesses in earlier stages of process maturity are concerned with the ability to implement and maintain it.
Here’s a tip: start with a specific area of the business to focus on and work outwards instead of trying to boil the ocean. Identify and link the layers of WHY, WHAT and HOW for that area before moving on.
The pillars of an agility-enabling model: WHY, WHAT and HOW
Some may say that strategies live outside the “operational” model, some say within, but the long and short of it is that including strategies as an integrated part of the model helps reinforce the connection they must have to the other organizational elements. Companies use guiding strategies to articulate the results they want to achieve and the methods they imagine will get them there. For the community of business leaders, operational managers and process practitioners, their responsibility is to determine what work needs to be done, and what the most effective way is for it to get done. If the efforts they go to are not connected to strategy and measured against it, chances of the business meeting their goals are slim to none.
Creating strategies is often seen as step 1 of a top-down approach to operational modeling. This does not mean that every strategy needs to be modeled before moving on to examine other elements of the business – this will create analysis paralysis and other than keeping many executives and business architects very busy, will not create any tangible value for your business. Starting with one strategy, and drilling in from that perspective is a more pragmatic approach.
For each emerging strategic business objective, there must be a way to measure success. Create critical success factors for each, and for every success factor, a Key Performance Indicator, or metric. Figuring out what the CSFs and KPIs are for each strategic goal actually help the refinement of the strategy itself and the best way to articulate it. Over time, measurements will help determine what ranges are acceptable and will help hone the metrics. Presenting this information in performance dashboards will provide insight to business decision-makers on where operational changes may need to occur.
An organization’s process landscape is a means of describing what they do in a hierarchical (level of detail) way, and potentially from varying perspectives. Creating these landscapes often starts with the question, “What are the core processes to a customer value chain?” For example, the core processes of a software company are: software development; product marketing; marketing; selling products and services; fulfillment; and customer service. There are also secondary processes like strategic planning, human resource management, facility management, and more. Processes like these make up the “operational process landscape”. For a quick start to organize processes into a hierarchical landscape, adopt a publicly available process framework like the Process Classification Framework (PCF) from APQC (www.apqc.org). You can also model “reference landscapes” that you want to use to align to or benchmark your organization against, such as the Information Technology Service Management (ITSM) for its IT processes; or Sarbanes-Oxley (SOX) for financial regulatory compliance. And finally, you will certainly want to model the “support landscape”, which describes a subset of the operational processes that are automated or enabled by a particular IT application (e.g. SAP). By keeping these three landscapes modular – separate, but connected – you will be much better equipped with knowledge of how your business works, which will give you the flexibility to manage change later on.
Business competencies define what your business is equipped to do, using a mix of skills, resources and capabilities. These competencies can be catalogued as Core, Strategic and Enabling if that helps, but most importantly, they must be identified in context to overall strategy. This connection is important as management moves forward with adapting strategies in response to outside changes – to help them identify where there may be untapped capabilities and resources at their disposal, or inversely where they are missing the wherewithal to actually execute on the new plans.
Operational competencies can be organized by business area and business group to help see better how they can be used in different parts of the business, especially if your organization has governance or compliance reasons to keep resources and processes separate.
In large organizations, it’s easy to imagine the number of strategies, competencies and processes and the complexity in the links between them. The operational model provides the ability to expose this complexity and provide transparency around how changes need to ripple through the organization and which areas are impacted. This reportable meta-model doesn’t have to be comprised of difficult-to-read reports that only an analyst can make out – high level information should be made available to management in easily understandable graphs and indicators that help pinpoint intersections, and information should get more detailed as one drills further into the heart of the business. The key is traceability all the way through to the workflows being performed at the lowest level of the organization, so that process transformation can become real rather than stagnate as an unrealized strategic plan.
The fluidity in which change occurs in today’s business environment requires equal fluidity in the reaction of businesses. Changing business objectives or the metrics that measure them require a rapid evaluation of whether the business has the competency to fulfill the change. Processes and work that is performed must be modified to fulfill the new measures. This overall adaptation of the business, or transformation, has to occur quickly before the reason for change has morphed or become obsolete.
BUT (you might have known that was coming): there’s more to Strategy to Execution than models…stay tuned.
*Shift Business Excellence Into High Gear: Drive Strategic Performance Through Process Excellence, Process Excellence Network, January 2014
For more on the Strategy to Execution Blog Series, check out the next post: Keeping it Real – Model Reality for Better Business Agility.