Three ways to think differently in 2015, Part 1 of 3: Strategic Reactions

Happy new year and welcome to our first blog entry!

This week I will look at three new ways of thinking about something you will undoubtedly spend time and money on this year: technology.

  1. Strategic reactions: Exception handling as a means of driving strategy – 1/6/15
  2. “Enabling” vs. “Driving”: The issue with treating technology as an “enabler” – 1/8/15
  3. Technology and talent: Improving the experience of work through every technology project – 1/9/15

Strategic reactions: Exception handling as a means of driving strategy

The way the discourse around technology operations unfolds is always similar: you can either spend money reacting to problems (IT Operator) or growing the business (Strategic Driver). The problem with this reductive conversation is it understates three realities:

  • Even if you're driving strategy, you will still need to react to issues;
  • Technology will probably drive the implementation of your strategy whether it's incidental or intentional; and
  • Most businesses do not bifurcate responsibility for technology operations and technology strategy.

It is unlikely you have the luxury of technology that runs itself without any exceptions and therefore be allowed to fanatically pursue all your strategic goals. On the other side, you will necessarily need to engage in a technology project over the next 12 months to either keep up or to "enable"/“drive” strategic business improvements (more on this on Thursday). The question is how do you do execute the latter while managing the former?

Framework: Visualizing Reactions and Strategy

A more constructive conversation, in my mind, is one of tradeoffs that recognizes the strategic potential of any solution. Consultants sometimes use "process maturity" analysis to help executives understand where on the scale of reactive to strategic their technology decisions fall. This approach is that it implies a binary relationship between solving problems and driving strategy. This does not reflect the reality of how technology, which is now pervasive in every direction of your business, needs to work. You will have more issues to deal with in the next 12 months than you will have projects to drive: this is a guarantee. Great executives will make this work for their strategy. 

I am a proponent of speaking in terms of gradients rather than discrete scales. There are necessary tradeoffs you will need to make, sometimes prioritizing strategy and sometimes prioritizing operations. That’s ok. Is it possible to make some of those operating decisions also drive strategy, either in the short or the long term? Frequently you will find they can.

So rather than a straight-line or x/y axis maturity matrix, I prefer this visual: 

  • Dark blue represents basic operations, or “running the trains on time.” This makes your business work pretty well without substantially improving underlying functions 
  • Light blue represents incremental improvements that will either add up to something significant when combined with future improvements or will make it easier to do something big in the future. This can include adding functionality or reducing complexity.
  • Orange changes the game. This represents fixing a problem in a manner that transforms another function and allows you to achieve a strategic imperative.
Blog 1.6.15 Reaction Strategy Gradient.png

Example

As an example, let’s take a seemingly minor problem that may arise for many companies this year: 

Your accounts receivable (AR) department receives a payment from a customer but it’s missing an invoice number. They go to apply the payment against an invoice and find there are two records for similarly named customers, each with open invoices. What should they do?

For simplicity’s sake, let’s say there are five issues this raises (in reality there are more):

a)    Immediate functional problem: cannot apply the cash
b)    Future functional problem: this will happen again in AR if the customer record issue is not resolved
c)    Operational problem: the operational efficiency of all processes associated with duplicate customer data will suffer inefficiency and potentially ineffectiveness
d)    Cross-functional problem: if these records exist in other systems (e.g. CRM, order management, etc.) then upstream processes will be affected
e)    Strategic problem: Meaningful customer analytics are severely compromised or not possible

First, you will need to figure out which invoice to apply the payment to, solving problem (a). This will probably require the AR department to contact the customer and do a little research. This is simple operations for them now. They’re going to do this anyway, regardless of our conversation. But now the question is how to address (b), (c), (d) and (e).

Pure dark blue: Combine the customer records into one, consolidate the invoices to that single customer, and resolve any data conflicts that arise (e.g. duplicate invoices, multiple shipping sites, missing DUNS numbers, etc.). This addresses (b).

Dark blue moving to light blue: Consolidate the master records for this customer and then, thinking this may be an issue for other customers as well, run reports and figure out if there were other records this applied to. This address (b) more thoroughly, begins to address (c), and makes solving (d) easier and, therefore, more realistic.

Purer light blue: Look at other systems that use that data like your CRM systems to see if the same issue needs to be resolved there. This will address (c) and make it possible to address the rest of (d).

Light Blue moving to orange: Create a customer data management responsibility where someone in the business is responsible for proactively monitoring customer data, resolving issues, and over time working with a technology partner to automate duplicate identification, merges, etc. This address (b) and (c) completely and may substantially address (d) although this will also introduce some new process complexity that will need to be analyzed.

Orange: Implement a data management solution that can manage the customer data across all functions. This will improve the sales team’s ability to accurately identify and track leads, allow integration between social media and customer transactions, provide efficient lead-to-order-to-invoice-to-cash conversion, and serve as the foundation for great customer-based analytics. Odds are, customer-based marketing and spending analytics are on your strategic radar. This will address (e) and, in doing so, drive new ways of thinking, analysis and decision into all customer-related business operations. 

As you can tell, there are unlimited variations of each of these approaches and they all have different complexity, levels of effort, costs, and time horizons. But as an executive you need to make sure the business operates at all, operates at least reasonably efficiently and reasonably well, all while furthering your strategic goals. Maybe you do all of the dark blue things now because they are low effort and low cost, but begin the process of planning and prioritizing a project to address the orange potential.

The main point is, you’re reacting to an issue in a manner that furthers your strategy and demonstrating to the business, through step-wise improvements, that bigger investments in previously ignored, seemingly commoditized areas can result in game-changing improvement.

You never let a serious crisis go to waste. And what I mean by that it's an opportunity to do things you think you could not do before.

Up Thursday: Moving from an “enabler” mindset to a “driver” mindset for technology decisions. A.k.a. Making Technology Investments Matter.

 

Stephen Ronan

Ronan Consulting Group, 06907

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