Recent stock market upheavals, corporate fraud cases, and the events of September 11 emphasize just how critical it is for enterprises to have processes that have leading, not lagging, indicators of market, customer, social and political conditions.
It’s possible to think of an enterprise as a system that takes inputs from its environment, transforms them using some sort of process, and outputs the result.
Enterprises have always tried to manage to the last point in the chain. In the 1970s, they managed outputs because inputs and processes were stable. In the 1980s and early 1990s, they managed processes by working with core capabilities.
The environment is no longer stable enough to give you time to strategize using processes or outputs. You must move forward in the chain and manage inputs, closely monitoring the ever-shifting environment. This doesn’t mean you don’t have long-term aspirations. Rather it’s now much more a ‘sense and respond’ world.
But just how good is your enterprise’s ‘ sensing’ ability, and what role does IT play in that?
The Strategy Trio: Aspirations,
The three components of input-based strategy-making are as follows: articulating your aspirations and goals, working with a set of strategic assumptions, and sustaining flexible capabilities (the inputs). With these components in place you have the capability to assess your current position accurately, and to act quickly and change course when necessary.
The aspirations and goals set out what the enterprise is trying to achieve. For example, “we want to be number one in customer service”. The goals are lower level and stated in a measurable way – for example “we will increase our customer delight index by 10 points”. A set of valid strategic assumptions should be stated only as far out as the enterprise can see. In some cases, this visibility may be as little as three to six months. Then each assumption must be regularly checked against the environment to see whether it’s still consistent with reality.
Real-time IT helps to get demand and supply in sync in two ways. The first is by speeding up links to the environment. Just-in-time delivery of inventory, lean manufacturing, and computer integrated manufacturing are all examples of this. Second, IT helps shorten product lifecycles, which reduces the lag between an event and the enterprise’s response.
IT provides executives with real-time dashboards, which present critical information from a range of sources in meaningful and easy-to-interpret ways. The power of IT lies in its ability to capture details of events that previously would have gone unnoticed.
In addition to providing answers (which enable short-term synchronization), IT has an equally valuable role in prompting questions (which enable longer-term synchronization). These questions, if properly handled, can form the foundation for evolving the enterprise’s strategic aspirations over the long term.
For Real-time Enterprises
Adaptive real-time enterprises have six imperatives, three of which concern strategy and three, technology. First, they understand the volatile environment. Second, they articulate strategic assumptions and monitor them continuously. Third, they focus on inputs, not outputs – being able to “sense and respond” means having the right inputs available. The other three imperatives are based around IT. Such enterprises use IT to put demand and supply in sync, to aggregate and integrate data, and to raise and answer questions.
Over the past few months, I have been asking CIOs in different countries to jot down the six indicators that let them know how their enterprise is positioned in the marketplace. Out of the dozens I have spoken to, only two have had absolutely current information (and I don’t mean unprocessed data sitting somewhere) at their fingertips (usually on some form of PDA).
Ask yourself, “what are those six critical business indicators and what are we doing to get them into the hands of fellow executives ASAP?” There is no better way to raise the profile of the CIO than to make the life of the CEO and other senior executives a bit more bearable.
Dr. Marianne Broadbent is Group Vice Presicent and Global Head of Research for Gartner’s Executive Programs.