HDI’s SPOCcast is your single point of contact podcast for service management and support insights. For Episode 17, I interviewed David Cannon about strategy, including insights into what it is, why it’s important, and some errors organizations and people make when building a strategy.
Join David at Service Management World for a session on how to define and write a strategy.
RA: In one recent article on SupportWorld, you said, “The most common strategic planning practice is to define strategic plans as part of the annual budgeting process.” And then you go on to say, “…Research shows that the most common reason for strategies failing is the lack of budget!” Can you explain a little bit about why that is?
DC: I can try to…. I think very often…although strategy forms part of the budget cycle, the budget cycle is also involved with the operation of the organization. And so budgeting has to cover everything that exists today that is going to be done over the next year and is going to continue over the next year. It also includes things that we know about things that are coming down the line that we need to plan for. And then it also includes some of these ideas that people have had that they might want to tun into practice over the coming year. And thought the budget cycle really plans for all of that, not just strategy.
When it comes down to it—everyday operation—the money that gets spent as part of your budget, the priority for that, is always going to be keeping the business running…. If you need to spend more money on keeping the business running and doing what it’s doing today because of some unforeseen circumstance, you’re going to earmark that money for that purpose and it’s going to come out of your strategic budget.
I think the other thing that happens is that because the budget gets planned in advance of the year commencing, things change. So, what might have been a really good strategic idea halfway through the previous year, now that we’re halfway into the new year, is no longer such a good idea because things have changed and so maybe there’s no longer the budget for that new idea you want to come up with, so the old idea’s not any good, you want to come up with something new, but there’s not enough budget for the new idea that we’re planning. And so that has to go into the next year’s budget. And, of course, by the time the next year’s budget gets to be spent, that idea might not be as valid as it was. So, it kind of perpetuates itself.
So, a number of reasons why having the strategy plan as part of the budget cycle and only as part of the budget cycle is not always a good idea.
RA: What’s the difference between having an adjustable, fluid kind of strategy and not having one at all?
DC: Well, I think that not having a strategy at all is actually a strategy, because what happens is that your culture and the way you do things on an everyday basis—the way you make decisions, the way your processes work whether they’re functional or dysfunctional—those become the basis for the decisions you make, and those decisions, therefore, become your strategy.
So the way you do things today—the patterns that you have—as we refer to the Four P’s (Perspective, Position, Plan, Pattern)—your patterns become your strategy, and your strategy then becomes a highly reactive set of decision making.
RA: How does a strategy get communicated? Does everyone in the organization need to know where we’re going? And how often should that communication be updated?
DC: Let me start by saying I think that having a year-long strategy and updating it once a year is a flawed approach. A year is a very long time in today’s market, and if you’re going to wait for a full year before you think about updating your strategy, it’s always going to be out of date, and it’s going to be generally irrelevant by the time you get to the end of the year.
By all means have a year-long period, but make it a rolling year, and assess and reassess your strategy at least once a quarter, and I would say even more frequently than that—at least once a month. Make sure that you’re measuring what you’re doing and what the results are; make sure that you’re measuring whether your objectives are still relevant in the context of your organization, and your industry, and the market that you’re in.
Following on from that, one of the really important things that you have to do in your strategy is to instrument it, by which I mean you need to be able to turn it into a set of metrics that you can measure on a monthly and quarterly basis. So you need to be able to quantify the objectives you’re trying to reach, you need to be able to quantify all the initiatives that you’re taking as part of your strategy, and you need to be able to report on those on a regular basis—as I say, at least quarterly, preferably even more frequently than that.
And following on from that, then, you need a way of communicating those metrics, and the best way to do that, of course, is through dashboards. Once you’ve instrumented a strategy, in other words, you’ve translated it into a set of metrics, it’s very easy to put those into dashboards. And those metrics should include things like: Are we on track with this initiative, not only in terms of time but also in terms of money that we’re spending? Is it going to cost us more than we anticipated? Is it quicker than we anticipated, longer than we anticipated? Are the objectives still relevant? Has a competitor come into the industry and started disrupting, which means we need to adjust that objective? So we need to be evaluating that on a continual basis.
In terms of communication, it’s really interesting to me to go into an organization and find out the strategy is a confidential document. Which means that most of the people in the organization never get to see it. They may once in a while be communicated [to] with the Vision, or “Here is our Vision and Mission.” But the strategy seems to be this mysterious kind of document that’s locked in a safe somewhere, which is absolutely opposite to the intention of a strategy.
A strategy is there to make sure that everybody is on board. It’s a way of the governors of an organization—in other words the people who define where that organization is going and how that organization is going to operate—it’s a way for them to communicate to the managers and employees of that organization how to execute and do their jobs. So why you would try to keep it confidential, I don’t know.
A strategy is there to make sure that everybody is on board.
We need to be very clear about our strategy. We need to communicate it broadly and deeply…. We need to be updating people on the progress of our strategy at every all-hands meeting…. Get people used to the idea that this organization is constantly evolving, that it’s moving in a direction, and that that is a good thing…. And update your HR plans to make sure that if you’re changing people’s metrics and performance expectations, you’re updating their job descriptions and the way their bonuses and salaries are calculated, etc., etc.
Strategy is not just something that sits on the boardroom table and a couple of people get to see it and that’s it. It’s something that has to permeate through the whole organization like yeast in bread.
RA: How important are emerging technologies like AI and machine learning to strategies now, and do they need to be specifically included?
DC: That’s a really important question, and it’s not an easy one to answer, for a couple of reasons. First of all, let’s talk about artificial intelligence for a minute. A lot of the application of artificial intelligence is not strategic. Some of it is, but a lot of it is not.
For example, if you’re using bots on your service desk…as far as the organization as a whole goes, that use of artificial intelligence is not strategic, it’s operational. It improves the performance of the service desk. Now, for the service desk manager, of course that’s very strategic. But in the grand scheme of the organization, that particular use is not strategic and therefore it’s doubtful whether you would have an enterprise-wide strategy that covers all of those operational uses of AI in this particular instance. That’s on the one hand.
Now on the other hand, let’s take a look at AI as a disruptive technology. The fact that we are now seeing cars being used to disrupt an entire industry…. We’re starting to see self-driving cars replacing taxis and taxi operators. That use of artificial intelligence is disruptive and therefore very strategic to an organization, especially if you’re in the business of transport.
It’s a very interesting question because on the one hand there are things about emerging technology that are highly strategic and for which you absolutely need to have a strategy. On the other hand, there are applications of artificial intelligence that are purely operational, and I would say the way to handle that is through your architecture. In other words, your enterprise architecture needs to be continuously evaluating the environment, in this case artificial intelligence but also machine learning and there are a few others that are coming up.
They [your enterprise architects] need to be continuously monitoring this and looking for opportunities within the organization where those technologies can improve the way in which an organization currently functions. Now, for the enterprise architecture team, that is very strategic. But there’s a drawback to that. As we know, many enterprise architecture teams don’t have the authority to make those changes. And so what you find happening is that…they are defining future architectures, but then they have to try and influence the actual managers and the governors of the organization to adopt those strategies, and very often, depending on the culture of the organization, that can be very difficult.
Yes, even though technology application can be operational, it does need to be included in strategy in some way, either directly as a business strategy—here’s how we’re going to use technology to disrupt our industry—or as a way of improving the way in which our organization works.
About David Cannon:
David Cannon is known for crafting industry best practices for strategy and IT operations, which he uses to make organizations function more effectively and efficiently. He has led consulting practices in Forrester, Hewlett-Packard, and BMC Software, creating effective operating models that exploit both business and technology capabilities in integrated solutions. David believes that successful digital strategy is an enterprise initiative that integrates technology from multiple internal and external sources to achieve business success. He is the coauthor of the ITIL 2007 Service Operation book and the ITIL 2011 Service Strategy book, and he was awarded two lifetime achievement awards by itSMF. Follow David on Twitter @itilso.
Roy Atkinson is one of the top influencers in the service and support industry. His blogs, presentations, research reports, white papers, keynotes, and webinars have gained him an international reputation. In his role as senior writer/analyst, he acts as HDI's in-house subject matter expert, bringing his years of experience to the community. He holds a master’s certificate in advanced management strategy from Tulane University’s Freeman School of Business, and he is a certified HDI Support Center Manager. Follow him on Twitter @RoyAtkinson.