The Art of the One-Page Strategy

Transcription

1 G The Art of the One-Page Strategy Published: 13 July 2015 Analyst(s): Heather Colella Strategy can be an art or a science. Most CIOs and IT leaders experience more personal and organizational success when they demonstrate how IT contributes to business success using an artful approach to strategy development. Key Findings Business strategy is at the heart of every enterprise, but when a traditional approach to IT strategic planning is used, the business community often disengages from the process, because traditional approaches to IT strategic planning tend to be too lengthy and technical. Most enterprises separate the planning processes for business strategy and IT strategy, creating a need for processes that "align" IT strategy to business strategy creating inefficiencies in the strategic planning process. CIOs and IT leaders tend to report the facts when developing an IT strategy, and storytelling is not commonly a technique in the IT executive's toolbox, but needs to be for better business engagement. Recommendations CIOs and IT leaders: Be bold. Learn how to create a strategic business conversation and picture of the business model that can be used to create a collaboration across all aspects of the business, from marketing to operations to HR to finance to IT. Avoid the need for "alignment" processes by telling a business story and talking about business success 100% of the time. Learn the enterprise story from business stakeholders, including customers. Use these stories to create a picture of the business model. This business model will serve as a foundation for conversation with business colleagues and the IT organization to use for implementation of the business direction.

2 Table of Contents Analysis...2 The Art of a One-Page Strategy...4 Establish Context and Create Focus... 4 Examples of One-Page Strategies... 6 Choose an Approach...11 Answer Key Questions for a Rich Story...12 Commit It to Paper Tips and Tricks Frequently Asked Questions Gartner Recommended Reading List of Tables Table 1. Refine the Approach...13 List of Figures Figure 1. The Science to Creating an IT Strategy... 3 Figure 2. Model for Strategic Differentiation...5 Figure 3. Use Strategy as a Lens for Operations... 6 Figure 4. Southwest Airlines Was Formed on a Napkin... 7 Figure 5. IT Moves From Delivering Value for Money to Creating Value-Added Solutions...8 Figure 6. Tie Process Steps or Maturity Levels to Outcomes... 9 Figure 7. ABC Company Goes Global Figure 8. One-Page Strategy Sketch Analysis Corporate results are derived from small pockets of excellence, and one of those pockets of excellence is strategy. Draw a triangle on a page; at the top of that triangle is the relatively small number of companies that are great at creating, articulating and executing strategy in a manner that maximizes results. That excellence pays off in terms of higher revenue and greater net income for the enterprise. Most enterprises invest substantial time and energy into robust IT strategy documents that Gartner refers to as "WORN" (written once, read never) an oxymoron, since they never are used enough Page 2 of 16 Gartner, Inc. G

3 to become worn. In addition to volume, another reason these documents are rarely used has to do with the topic itself. As pervasive as technology is in our day-to-day lives, the reality is that IT is still perceived as a black hole to its business stakeholders, whose eyes begin to glaze over the second they see such a large strategy document. They begin to disengage as they open it up to read it. This limits the usefulness of hundreds, if not thousands, of hours invested in creating the document. The fact is, without the buy-in of all business leaders, the IT strategy has no business value. There is a science to developing an IT strategy. Gartner's strategy template in "IT Strategy: A CIO Success Kit" guides users to create a document approximately 20 pages in the categories shown in Figure 1. Figure 1. The Science to Creating an IT Strategy Source: Gartner (July 2015) But there is also an art to developing a strategy, and this research focuses on the art of creating a one-page strategy. Refer to Figure 1 above, and reflect on the following: If a CIO is to do one thing, and nothing else, it is to create context for the enterprise, and to use that context to articulate the contribution of IT to business success and capabilities. To create context, they answer three key questions: 1. What do we need to do to "win" in the marketplace? 2. What new business capabilities are required to achieve success? Gartner, Inc. G Page 3 of 16

4 3. How will IT contribute to that success? CIOs and IT leaders can play a significant role in starting that conversation, and this research is designed to teach the reader how to facilitate that conversation. The Art of a One-Page Strategy Establish Context and Create Focus The Value Disciplines model and research by Michael Treacy and Fred Wiersema found that companies that can clearly articulate how they win in the marketplace how they achieve their competitiveness are more successful than those that cannot. 1 There are three approaches to market differentiation highlighted in Figure 2: Customer intimacy. These companies make their money by being customer-centric. Everything they do, every product they offer and every service they deliver is about the customer. Retailer Nordstrom's has just such a reputation. The folklore of stories includes a woman who wanted to return car tires. She was told by the salesperson that Nordstrom's did not sell tires, but the salesperson took the return anyway. Operational excellence. The research defines "operational excellence" as companies that provide reasonable quality at a very low price. The focus of these companies is to drive costs out of core processes (business and IT), in order to deliver that price competitiveness for which their customers are looking. Walmart is an example of a company that competes on price. Product leadership. Product leaders have an eye on the future. They are able to accurately predict and create consumer demand. Apple is a product leader. Every move Apple makes involves product innovation and shaping consumer demand. Steve Jobs taught us to crave products we didn't even know could exist! Page 4 of 16 Gartner, Inc. G

5 Figure 2. Model for Strategic Differentiation Source: Gartner (July 2015) The Treacy and Wiersema research found that companies that focus on one of these strategic approaches are more profitable than companies using two or more strategic approaches in the marketplace. It is easy for some companies in some industries to assume there is only one approach to competitive success. For example, in the transportation industry, it is logical to select operational excellence as the core business strategy, because without cost-effective transportation, a customer is unhappy and will leave for another competitor without pause. It is true that all companies in this industry have to meet a minimum standard to even be in the industry, but assume there are two companies within this industry. Company A wants operational excellence to be the differentiator, and Company B maintains that customer intimacy is its focus. While both have to meet a minimum standard for moving materials, in the case of Company B, it might go further and look to understand its customers' customers, and to develop products and services that make its customers more competitive. It is a powerful interpretation of the business strategy, and an example of how focus in one area can deliver different results. The value of knowing how a company competes in the marketplace is that it helps focus the enterprise, and it acts as a lens for all other activities. Figure 3 illustrates how a strategic approach is used to help create this lens. Assume that Enterprise A wins in the marketplace by placing its emphasis on customers. That means it can divide its business processes and supporting applications into two categories: those that differentiate the enterprise and those that do not. Higher levels of investment can then be made in those processes that will "move the needle" for the customer and subsequently for the business and for all other processes. They can be considered a commodity to be supported at a level that is "good enough." Gartner, Inc. G Page 5 of 16

6 Figure 3. Use Strategy as a Lens for Operations Source: Gartner (July 2015) Likewise, it is now easier to see how this lens changes, depending on how a company differentiates itself within the marketplace. A company that is a product leader will focus on very different activities from a company that chooses to be customer-centric or operationally excellent. Now it is also easier to understand how performance can be higher if a company focuses on one approach to market differentiation. Investments and resources can now be more concentrated in a smaller set of activities, making it easier to reach mastery performance versus spreading limited resources thinly across a myriad of activities and achieving mediocre performance at best. For those in the public sector, when reflecting on this model, think about a strategic approach in terms of the mission of the agency. Replace the "how we win" model with that mission. In most cases, public-sector organizations benefit by focusing on efficiently delivering their services to the enterprise, but not always, the activities of warfare are an example of where differentiation is critical. Think about your company: Do you know what competitive approach it uses to win in the marketplace? Does the executive team understand what truly differentiates the enterprise in the marketplace? Likely there are many opinions, but no true agreement across the executive suite. Imagine how helpful it will be to facilitate that conversation about how value is created for the enterprise. That conversation can help begin to create a strategic mindset for the entire enterprise. Examples of One-Page Strategies Five examples of a one-page strategy follow for a sense for what a target outcome looks like. The first example is the U.S. airline carrier Southwest Airlines. In 1967, over a few drinks, Rollin King and Herb Kelleher created a vision of a low-cost commuter airline moving passengers across three Page 6 of 16 Gartner, Inc. G

7 cities in Texas (see Figure 4). From that vision, an industry was born for low-cost air transportation. 2 Germanwings and EasyJet airlines are just two other companies that follow a lost-cost delivery model started by Southwest Airlines. Figure 4. Southwest Airlines Was Formed on a Napkin Source: Southwest Airlines Figure 5 shows the strategy for a leading IT services company in Europe. This company designs, builds and operates IT systems and services for large-scale clients in both the public and private sectors. After 30 days on the job, their new CIO shared a picture of the strategy he would implement over the next three to six years. Gartner, Inc. G Page 7 of 16

8 Figure 5. IT Moves From Delivering Value for Money to Creating Value-Added Solutions Source: Gartner (July 2015) In the words of this CIO, the strategy was outlined as follows: "On the bottom layer of the triangle is service and cost. That's the foundation," he says. "IT delivers service and good value for the money. We had little investment for years before I arrived, so I spent Year 1 on this layer, including putting a team in place that could manage it. Of course, this work continues to be critical and will always be subject to a continuous improvement program." "The middle layer involves removing duplication and complexity, both from IT and business process. We centralized IT and introduced standards. I spent Years 2 and 3 on this layer, and work will continue in some areas for some time but the direction is clear and stable and delivering real value both for our business areas as well as for IT." "The top layer is where we create and deliver value-added solutions system and process development work aimed at growing the business. We could only work here when we had the other two layers under control. I have been able to spend the last year and a half here, working on change management. We would have moved up the triangle faster if the core had originally been in place." To grow the business in this top layer is where the enterprise would expect to see the development of new products and services or growth strategies designed to attract new customers anything that would provide enterprise growth. Page 8 of 16 Gartner, Inc. G

9 Because IT didn't have much business credibility when this CIO arrived, it was important for the CIO to build an "inside-out" IT-business strategy by starting the story purely from an IT perspective. One of his key messages was: Once he got his house in order, he would partner with his business colleagues to fix the other issues he found during his assessment. He would work with them to optimize business and IT processes so they could build a strong foundation for business growth. Most one-page strategies focus solely on the business and not on IT, but in this case an "IT first" strategy was necessary. The third example of a one-page strategy started as just that an example of how a company could represent its growth strategy in a series of steps, shown over time (see Figure 6). An attendee at a workshop at Gartner Symposium/ITxpo 2013 in Orlando, Florida, saw this example, and thought: "I report to the CFO and have an upcoming meeting with the executive team for the first time since I have been with the company. This is similar to what our company is looking to achieve." He adapted the picture to the specifics of his company. As a result of his ability to demonstrate the business context within which IT contributes to business value, he was given a permanent seat at the executive table and his reporting structure was shifted from the CFO to the CEO a powerful picture on many levels for this CIO! Figure 6. Tie Process Steps or Maturity Levels to Outcomes Source: Gartner (July 2015) Gartner, Inc. G Page 9 of 16

10 The fourth example started in a similar manner: It was an example used at a workshop at Gartner Symposium/ITxpo 2013 in Orlando. In this case, the CIO attending the workshop was presenting to the board of directors the week after returning from the event. He adapted the picture to the specifics of his company's growth story (see Figure 7). As a result of his ability to clearly articulate the corporate strategy and IT's contribution to that strategy, he now regularly participates in board meetings and IT is a permanent agenda item for the meetings. Figure 7. ABC Company Goes Global Source: Gartner (July 2015) The fifth and final example is a sketch drawn up while talking to a client (see Figure 8). The business was clear about how success was measured. The idea was to create a dashboard at the top of the picture using the business measures of success. Underneath that scorecard would be the capabilities required to achieve this business success. In this case, the business executives needed some education about the IT investment model. Like many business associates, they assumed that every dollar invested in IT would result in at least a dollar of new business capability. Yet the reality is, there are components of that dollar that need to be understood. Using Gartner IT Key Metrics Data, we know that 68% of every dollar goes for "run the business activities," leaving only 32% available for growth and transformation initiatives, including enhancements to the existing applications portfolio (see "IT Key Metrics Data 2015: Executive Summary"). This CIO was intending to weave that point of education into the story so her business colleagues would begin to understand the role they play in the investment/governance process. Page 10 of 16 Gartner, Inc. G

11 Figure 8. One-Page Strategy Sketch Source: Gartner (July 2015) The adage "A picture is worth 1,000 words" is true. More powerful is the ability to tell a story. If a picture is worth 1,000 words, then a metaphor is worth 1,000 pictures. Let's explore how to develop that business story and metaphor. Choose an Approach After establishing context and choosing a model for strategic differentiation, the next step in developing a one-page strategy is to choose an approach for creating the picture. There is no right or wrong answer, and the approach chosen may change the further into the process you get. That is okay. The thought process that goes into this is very important, and will serve you well when people ask, "So why did you choose this approach?" To choose an approach, select one of the following: Look at your strategy through the eyes of your internal stakeholders. Tell your story from the point of view of your customers/clients. Use a process view of the enterprise to highlight the vision. Gartner, Inc. G Page 11 of 16

12 Begin with a picture of the business you are in for example, the product you make or the store from which you sell your products, and identify the capabilities that the enterprise needs in the marketplace to win. To help select an approach, use the following tips: CEOs and other key leaders often have a mantra that helps them quickly and effectively communicate their vision and create focus for the enterprise and investors. For example, in the 1980s, Ford Motor Company promoted the vision "Quality Is Job 1." This mantra implied that process was more important than anything else the company could focus on, and that designing processes that efficiently produced high-quality cars was key to success. What are the mantras your key leaders use, and what story do they help tell? How does the enterprise tend to talk about itself? Does it refer to people ("Our employees are the most important asset of the company.")? Does it talk about process ("Quality Is Job 1.")? Does it talk about the product ("Innovation is the core of the enterprise with the introduction of three to six new products annually.")? If process talk is common, then selecting a process approach might be appropriate. Likewise, if people refer to clients and internal stakeholders, then use that perspective. Finally, if the product is king, then use a product approach. Use the results from the Treacy and Wiersema model for strategic differentiation to determine an approach. If the enterprise approaches the marketplace from a customer perspective, then one of the first two approaches above are likely appropriate. If the company is focused on operational excellence, then a process view focusing on and improving the top five to seven core business processes is more appropriate. If the company is a product leader, then a picture of the business the store from which products are sold might serve as the basis for the approach. Answer Key Questions for a Rich Story After selecting an approach, answer the corresponding questions in Table 1 to help refine the "story." Look for what does work, what can be leveraged going forward and what does not work. Page 12 of 16 Gartner, Inc. G

13 Table 1. Refine the Approach Approach Key Questions Examples Internal stakeholders Customers/ clients Processes Capabilities If you were to tell a story from a stakeholder perspective, what would stakeholders say? If you were to tell a story from a customer or client perspective, what would they be saying about your company? What end-to-end issues exist with the current process? How do you know? What works well with the process today? How do you know? When the process is "perfect," what will happen? What are the capabilities the enterprise needs to be more competitive (win) in the marketplace? Executives: "How can we determine our strengths if we don't know our revenue and profits by product?" Customer service: "It takes me 10 minutes to boot up my system every morning. How am I supposed to help customers if I can't get online immediately?" Users: "I love how this works; I wish other areas worked this well, specifically..." Customers: "Every time I call in, I'm on hold forever." Customers: "I'm sick of the arrogance of customer service." Customers: "I know the product better than the product folks!" Customers: "I love how they call me by my first name, I feel as though they know me personally." Minimal process handoffs Decisions made in a single step Customers served as close to "immediate" as possible Examples: The ability to cross-sell products and services and the ability to launch new products monthly Source: Gartner (July 2015) Commit It to Paper Now the fun begins: Draw a picture, keeping the following tips in mind: Expect the process to be iterative. Use the stories told by your business peers to lead you toward a base picture. Imperfection is perfect. The purpose is to create something that will help initiate a conversation. The fifth example shown above is a good example of a strategy ready to be used to facilitate a conversation in an organization. The strategy will refine over time, and through the process people will understand, contribute and commit to the business strategy more easily. Tips and Tricks Consider the following tips and tricks when developing your one-page strategy: Most people are better editors than creators. Resist the urge to create the perfect picture. IT professionals have a tendency to strive for perfection, and it makes sense when developing an Gartner, Inc. G Page 13 of 16

14 application or warding off intrusions into the environment. When working with business peers and trying to engage them in sharing a vision, "good enough" is in fact good enough, and is the right starting point. If you've made the picture "perfect," then business peers do not feel the need to contribute by making their mark, yet making their mark is exactly what you want them to do. While developing the picture, consider enlisting the help of the public relationships or corporate communications organizations. Once the one-page strategy is complete, resist the urge to laminate it. Lamination implies something is done and static. Great strategy is an ongoing conversation and is adjusted as conditions change, be they financial, competitive or in the marketplace. Use this picture as a starter for every conversation about strategy, every success to date and every change that has taken place. The more truly worn the document is, the better. It takes time for people to internalize a message, in part because so much comes at us each day. Using a consistent picture to show vision, progress and next steps will help people really understand what the strategy is and what their role in achieving it is. Develop a library of "stories" to help bring the vision to life. Talk to various stakeholders, listen to the stories they tell and document them. Think about your strategy from various perspectives customers, employees, business executives and investors and project what they would say. Document these stories as well. Use these stories to help people fully internalize the strategy. Build context around the one-page strategy. Your strategy is in response to the environment: the market, competitors and a deep understanding about how the company will win in the marketplace. Use this context in a manner in which, when your conversation is done, people conclude, "That strategy makes sense given the conditions our business is experiencing." Frequently Asked Questions Gartner analysts take hundreds sometimes thousands of inquiries each year on IT strategy. The following are the three most frequently asked questions on this topic: Q: How do I get started when the enterprise does not have a documented business strategy or is not clear about its strategy? A: If an enterprise does not have a documented business strategy or is not clear about its strategy, then consider using industry measures as a de facto strategy. Ask yourself: "What are the basic capabilities that need to go right in order for any company in this industry to be successful?" That will offer a starting point for a picture and a conversation. Q: What should I develop: a business strategy or an IT strategy? A: In most cases, develop a representation of the business story, because within that story IT's contribution is implied. The only time a CIO would lead with the IT story would be in the case of the second example above: IT didn't have the credibility to talk about business, they needed to Page 14 of 16 Gartner, Inc. G

15 build a strong repeatable IT core first before they could talk to what the business needed to accomplish. Q: What do I do when the enterprise chooses multiple approaches to winning in the marketplace (for example, product and customer)? A: Share the Treacy and Wiersema research findings that companies that focus on one approach to competitiveness are rewarded with higher revenues and profits. If that is not convincing, then share the perspective in Figure 3, which demonstrates how a strategic approach can be used to focus an organization. If that is not successful, then accept the company for where it is in its maturity, and use the multipronged approach to competitiveness as the lens. Over time when it becomes clear how each investment dollar is diluted when taking a multipronged approach to success, the enterprise will be ready for more focus. Most companies, when talking about strategy, use the word as a noun, yet great strategy is a verb. In looking at a definition of "strategy," we see "a systematic plan of action to achieve a goal." That plan of action is not static. It is very dynamic, and so is great strategy. Continue to lead with strategy in every conversation, and use the strategy developed here during regular meetings to reassess the marketplace, customer changes and the enterprise's competitive stance. Gartner Recommended Reading Some documents may not be available as part of your current Gartner subscription. "Effective Communications: IT Strategy" "Improve Your IT Strategy by Using the 'Counterstrategy' Test" "Effective Communications: Lead Through Storytelling" Evidence 1 M. Treacy and F. Wiersema, "The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market," Basic Books, D. Roam, "Southwest Airlines Keeps Up the Napkin Spirit," The Back of the Napkin Blog, 19 April Gartner, Inc. G Page 15 of 16

16 GARTNER HEADQUARTERS Corporate Headquarters 56 Top Gallant Road Stamford, CT USA Regional Headquarters AUSTRALIA BRAZIL JAPAN UNITED KINGDOM For a complete list of worldwide locations, visit Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner s prior written permission. If you are authorized to access this publication, your use of it is subject to the Usage Guidelines for Gartner Services posted on gartner.com. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner s research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner s Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see Guiding Principles on Independence and Objectivity. Page 16 of 16 Gartner, Inc. G