Overview
Every year companies set ambitious goals for the organization to reach, called a strategy, for most this usually serves as a guide for the direction in which companies want to go. Most strategies today involve a digital adoption/transformation component. Depending on the nature of the business the implementation of the strategy is disseminated amongst the various divisions or business unit leads.
These leaders then pursue the mission of reaching this grand business goal as there is an incentive to achieve it. The challenge we have found with many organizations following this standard approach is that their first task is to look at their existing technology suite to see what they have off the shelf, or they start reaching out to prospective vendors to pitch for RFPs to win the job hoping they will execute flawlessly. The failure rate of digital adoption/transformation initiatives can be quite high, with research suggesting that up to 90% of these projects may not achieve their intended goals.
With such a high failure rate, we propose an alternative approach that yields better results. This involves having a clear well-defined strategy that links strategic initiatives to goals more clearly, and having a well-defined operating model to ensure the initiatives you embark on impact the right part of the business and lastly a technology map linked to your business architecture. In the article below we will walk through a few frameworks and examples as to how you can achieve this.
Business Strategy
Your business strategy is a roadmap for achieving your business goals. It establishes a set of principles that inform your business’ priorities, decisions, and actions. It’s not, however, the actual tactics you’ll leverage to execute your business strategy. (1).
When setting our strategy each year we enjoy the framework below as it serves as a useful guide for us to know where the entire organization will be focused for the next 12 months. Below is a breakdown of each section:
- Vision: A vision serves as a constant within our organization, this is why we are doing what we do and what impact we are trying to have on the world we serve.
- Mission: The mission is about the day-to-day, how we show up and serve our customers, and what we do. As the company’s influence grows this evolves with it.
- Commercial: These are the financial metrics we care about like top-line and bottom-line growth, and income split across services and products we also like to include what our bonus pool should like to highlight to the team what’s at stake for them if we achieve the goals, we set out.
- Customers: This section is about who we serve, this is where we really think deeply about the tradeoffs because focusing on everyone is not realistic as we will most likely drop the ball. It also helps in the positioning of the business in our marketing efforts.
- Brand Promise: This section is focused on the commitment we make to our customers, if we are promoting ourselves as an innovative brand then our customers need to be able to trust what we bring to the table.
- Customer Experience: An area that usually receives little attention but can make a massive difference in our engagement with customers. A clearly defined customer experience linked to our brand promise can truly create a customer experience that wins the hearts of our customers.
- Culture: Underpinning the above 4 sections is the culture we create. If your mission is data-driven, innovative, or customer-centric, it must be reflected in the culture you explicitly create.
- People: Who are the people need to bring into the business to achieve the vision and mission we set out. This could also mean who within the team should be groomed to fulfill those roles.
- Product/Service: This section is all about our offering and how we package it to the market. In this section we can highlight new capabilities we might want to bring to the market as well.
- Infrastructure: This section is all about the foundation required to deliver our product or service offerings to the market. If you are a remote first company this could mean further investing in Cloud solutions as the foundation to unlock your team.
- Moats: A moat is something that gives your business a competitive edge over the rest, it’s what makes your business unique and difficult to compete against. Examples are IP that you own, unique capabilities in highly regulated spaces or a strong footing within a certain segment of the market.
- Protecting our flanks: A sports analogy that focuses on ensuring the protection of your blind spots. These are usually linked to your team getting poached, being well-capitalized to go after unique opportunities or being prepared for regulation changes that might hit your business sector. Doing a SWOT analysis could reveal these.
- Extending our wins: We can never rest on our laurels in business, so once we win, we need to ensure that we double down on our efforts to ensure that no-one swoops in at the last minute.
Operating Model
The operating model is the necessary level of business process integration and standardization for delivering goods and services to customers, which can be the enabler for growth.
There are Four Types of Operating Models:
- Diversification (low standardization, low integration)
- Coordination (low standardization, high integration)
- Replication (high standardization, low integration)
- Unification (high standardization, high integration)
Characteristics of the four operating models:
To decide which quadrant your company (or business unit) belongs in, ask yourself two questions:
- To what extent is the successful completion of one business unit’s transactions dependent on the availability, accuracy, and timeliness of other business units’ data?
- To what extent does the company benefit by having business units run their operations in the same way?
The first question determines your integration requirements; the second is your standardization requirements.
What operating model you choose will drive important design decisions around the autonomy of business unit managers and the role of IT.
Operating models inform the appropriate level of business process integration and standardization to deliver the organization’s promises to stakeholders.
The operating model informs IT leaders about how various technical and business components should be designed and implemented to enable the chosen operating model:
Coordination and unification models benefit more from consolidated views of customer and data across the enterprise than do diversification and replication models.
Before we decide on where to place investments in technology a key part of our process is to understand our operating model needs to establish where the gaps are. Defining an operating model will help us to understand our organizations needs to support the various teams and their goals linked to the business goals.
Investing in Technology
If you were able to go through the exercise of defining your business strategy and operating model, most of the heavy lifting has been done. The next step is to decide which projects you will be investing in for the next cycle. A rule of thumb in terms of investing in technology is that on average most growth focused companies aim to invest 10% of their annual revenues with the expectation of 30 – 50% ROI on the project.
Below is a workflow we like to use to visualize investments to be made when considering the adoption of technology to solve problems identified in building an operating model to reach business goals.
Once we have bedded down our operating model and investment workflow it is a useful exercise to start documenting our business architecture and overlaying the proposed technology solutions that address those challenges. Below is a diagram that serves as an example as to what a future fit wealth management firm could look like if they were to invest in technology to support their operating model and business goals.
Conclusion
In summary, the road to achieving business goals through digital transformation is paved with strategic planning, operational alignment, and judicious technology investments. This holistic approach not only mitigates the risk associated with digital initiatives but also unlocks unprecedented opportunities for growth and innovation. As organizations continue to navigate the digital age, the strategic leverage of technology will undoubtedly be a defining factor in their success, transforming challenges into opportunities and aspirations into realities. Let this be a call to action for businesses to harness the power of technology, not just as a means to an end but as a foundational element of their strategic vision and a key driver of their success in the digital landscape.
References
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