Strategic Direction is a critical enabler for governance as development projects can trace their requirements all the way to Strategic Goals via Portfolio Requests. Without this practice it is not possible to ensure that development projects are aligned to the business strategy and will actually create business value.
A plan that provides overall direction for an organization and a framework for decision making.
Business Strategy is closely tied to governance which provides various practices for implementing and monitoring the progress of business strategy. The key things that Business Strategy needs to provide are clear understanding of:
- The value proposition
- The current state or position
- The business purpose, vision and direction
- A top level plan of how to get there
Technical elements of Business Strategy will drive the Enterprise Architecture which in turn constrains the portfolio. Various tools can be used to derive a business strategy such as:
- Simple Assertion
- Business Model Canvas
- Wardley Mapping
- Strategic Mapping
- Business Modelling
- Balanced Scorecard
Many organizations struggle to define strategy. Frequently strategy and strategy documents are criticized by sponsors, managers, executives and their workforce for a variety of reasons such as being irrelevant, boring, lacking in direction, too abstract, etc.
Yet without strategy organisations lack direction, find it difficult to justify investment and risk commissioning uncoordinated activity without purpose. Therefore, a good well-communicated strategy is fundamental to the success of any business endeavor.
Why do organizations need strategy?
Strategy is the instrument by which executive decision makers communicate and drive the future direction of their organization. Without clear well-communicated strategy, the organization becomes directionless. The purpose of strategy is to set the overall direction that an organization will take; it is the expression of executive intent and is effectively a contract between the directing layer of an organization and its sponsors (shareholders or elected representatives for public sector concerns). Strategy, specifically in the form of Strategic Goals, forms the very top of the requirements stack driving the portfolio of work and shaping enterprise architecture.
What should a strategy look like?
Business Strategy is the top level plan for an organization to attain its Strategic Goals. The business strategy is not always expressed as a plan with milestones, but that is its purpose and as such it must be possible to derive a roadmap or outline plan from Business Strategy, describing the actions and aspirational timescales to attain Strategic Goals.
Some strategic choices do not have an end state, instead they’re focused on continuous improvement, maintenance of current state (moral, professionalism, architecture etc.). Although these “maintenance” goals may make sense initially, they must be regularly reviewed to make sure that “staying good” hasn’t eroded into “prevent improvement”.
Strategic direction provides a context against which customer requests and business requests are considered and against which Enterprise Architecture can evolve. This activity, referred to as “Portfolio Selection” involves determining acceptance and rejection of, as well as prioritization of, these potential pieces of work.
Do layered hierarchical strategies work?
Large organizations with thousands of employees often create a top-level corporate strategy which is refined and implemented by departmental strategies. This works when the corporate strategy sets out clearly defined goals, direction and departmental responsibilities, the subordinate departments can then form departmental strategies which are effectively an executable and implementable part of corporate strategy.
However, there are potential pitfalls with a hierarchy of strategies. If the corporate strategy is weak the subordinate strategies will lack purpose and cohesion leading to organizational fragmentation and divergence. If departmental and inter-departmental responsibilities are not well defined at the corporate level the subordinate implementation efforts will have both overlap and gaps. These negative aspects become further exacerbated with multi-layer hierarchies.
As the bad strategy bug bites, we see strategies that are often devoid of meaningful content, instead being power-plays, resource grabs, empire building or simply self-justification. Often every layer of organisation is soon required to develop a “strategy” even at individual team or service level. This isn’t strategic thinking, it’s organizational narcissism.
Leading indicators of problems in strategic planning are:
- Every team has a strategy, or is asked to create one
- Sub-ordinate strategies claim tenuous links to the in-vogue buzz words to seem important
- Sub-ordinate strategies are in competition with each other to achieve top-level strategic goals
We have encountered specific situations where internal competition wasn’t wasteful, but this is normally when fostering creative invention rather than forward business planning. Of course the first indicator of such a problem is that the corporate strategy itself is weak, although it seems in practice that this weakness is difficult to identify.
The biggest problem with most strategies is that they’re boring and irrelevant.
An inherent problem in a hierarchy of strategies is that over-arching corporate strategy becomes diluted and obscured the deeper the hierarchy extends (this risk is inherent in all hierarchical planning). For this reason alone, it is good practice to restrict the depth to corporate and departmental strategy, anything below this should be represented by specific implementation plans or team roadmaps. If possible stick to a single corporate strategy. Reduce layers wherever possible.
How does strategy fit with emergent change?
Emergent change, including unstructured Innovation and Research, needs to become a part of organizational strategy - being acknowledged as an valid source of change with appropriate governance mechanisms, funding, resourcing and executive support. This is in sharp contrast to organizations without strategic leadership and direction that are reliant on only uncoordinated emergent change in the misguided hope that a solution will appear that resolves their problems - that is a very high risk approach that we cannot recommend.
Strategic goals are objectives that an organization wants to achieve to support its mission/vision
Strategic Goals are SMART (Specific, Measurable, Attainable, Relevant and Time-bound) objectives that Business Strategy progress can be measured against. Portfolio Requests can be traced to Strategic Goals to ensure strategic alignment of work throughout the portfolio. As a result Strategic Goals can be thought of as the top of any Requirements stack.
We recommend that Strategic Goals are fairly long term (e.g. 1yr, 3yr and 5yr goals).
We recommend that Strategic Goals are describes in terms of Business Value:
Generating or delivering Business Value is the purpose of a business. Typically, a commercial business will measure Business Value financially however public sector organizations, charities, open source communities and others will measure value differently.
Recommendations for effective strategy
Articulate how Business Value is understood and measured - this helps everyone understand the business purpose and the primary measurement of success helping avoid implementation of intermediary measures that are mis-aligned to strategy.
Minimize the number of organizational layers - this avoids unnecessary translation of information across layers and unnecessary middle-management resourcing. See information on Resourcing Levels and Workforce Shaping for more.
Make bold strategic changes - if change is required then sometimes drastic change is required rather than a series of small changes, it might be painful but it's likely to be more cost-effective to make a bold change.
Push tactical decision making as low as possible in the organization - empower individuals to use their skills properly within the organization and prevent strategic decision makers from getting swamped by minor issues. Business Leaders must back up tactical decisions made by their staff for this to work.
Continuously make small tactical improvements - don't wait for a large change in a year to improve something small that can be fixed today. Make the change and measure the improvement. Validate the effect of numerous small changes with measurement to ensure systemic improvement.
Forget the past - Business situations involving large numbers of people are extremely complex and so similar situations from the past are not good indicators of present or future events. Correlation does not equal causation.
Create a holistic strategy - do not separate business, technical, accommodation and other strategic elements. These aspects, and more, are required for complex organisations to succeed and they need to be changed in harmony. We recommend creating strategy that takes into account all of these various aspects. Where fragmentation is necessary, niche strategies should always be in support of a top-level strategy and not exist in isolation.
Tests for a good strategy
Overall - Where?
Does the strategy communicate a clear change and direction?
Is it engaging, inspirational and compelling?
Is it clear and unambiguous?
Does it describe the rationale for change?
Is the Business Strategy achievable? or worth risk of failure?
Is it relevant to the prevailing business environment?
Are strategic goals identifiable, measurable, tangible business state-change milestones?
Do strategic goals follow a logical sequence to a desired end-state?
Do the business goals provide value to the sponsors?
Does it contain a roadmap/plan? Or can one be easily derived?
Does it contain short, medium and long-term goals?
Does it consider resourcing necessary to realize the goal?
Is it executable?