Strategic Motivation
Following on from the Mission and Vision definition in the first stage, which clarified the big “Why?” we now consider Strategy. The OMG Business Motivation Model offers a nice bridge between the Business Model Canvas and the more detailed balanced scorecard discussed in this stage.
Strategy
At Glide the ethos of our approach is based on Richard Rumelt’s “Good Strategy, Bad Strategy”, where he uncovers fluff, waywardness, desires and woolliness masquerading as strategy. He outlines a compelling case based on the coherence of a good diagnosis, coordinating policies and the discovery of sources of power;
“The kernel of good strategy is a comprehensive diagnosis defining clearly the domain of action; a guiding policy that fully grapples with the situation and a set of coherent actions, specifically doing something impactful and making painful choices about what not do to.“
Goal Decomposition
In this stage we spend time discussing the key flows of activity through the organisation by using a model of the organisation’s Value Stream.
In the above diagram, the organisation is split into functional areas represented by vertical boxes. While all of the functional areas are valuable, they need to operate and work together to achieve any outcomes for the business. If each functional area were given the individual goal to ‘increase the size of their function by 5 per cent’, this may not result in the organisation achieving the overall goal of ‘increasing sales by 5 per cent’. Each function cannot deliver an overall business outcome on its own.
The business process, which runs horizontally, shows how an end-to-end business process utilises all of the functional areas of the business required to deliver a defined outcome. So, if the goal of this business is to increase sales by 5 per cent, it is the functional areas conducting their parts of the business process that will achieve this goal. In this example, the business process represents the work to achieve this high-level goal. At an enterprise level, these processes are called value streams and represent the value that the business offers through delivering its products or services.
Decomposing goals allows choices to be made about which goal, or goals, to do first. Each goal contributes to achieving the higher-level goal. Goal decomposition is extremely helpful when deciding what to do in order to offer value to customers. It helps to identify where an organisation should focus its efforts and at what point. However, it is also important to ensure that the decomposed goals are achieved in a way that aligns with the business architecture for the organisation. The business architecture provides a blueprint which defines aspects such as the value streams and capabilities of the organisation, and how these capabilities may be achieved. The POPIT model is a useful way of viewing the elements required to build the capabilities within the business architecture.
Operating Model Impact
If the organisation is multi-business or decentralised then Jeanne Ross’ work on Operating Models is used to drive discussion about levels of process standardisation and process integration across the organisation. When thinking about this model, it is worth bearing in mind how your organisation needs to be “boundaryless”, a term originally espoused by Jack Welch. What we’re trying to ascertain is if the business capabilities need to be physically distinct or shared and if they should have interdependencies.
Balanced Scorecard
We have now performed enough top-level analysis to produce our strategic map. The Balanced Scorecard is used to decode our story into clear execution.
The Balanced Scorecard was conceived to ensure that strategy is translated into action through the interplay of objectives, measures, targets, and strategic initiatives.
The Balanced Scorecard constitutes an interdependent group of items forming a unified whole. The objectives are concise statements of what the organisation must do well in each of the four perspectives of Financial, Customer, Internal process, and Learning and Growth. To drive the selection of strong indicators, the discussion must begin with “What must we do well?” to elicit the critical success factors.
Every component of the Scorecard is translated from the organisation’s strategy and we begin by translating the strategy into objectives on the strategy map.
The objectives are translated into performance measures, which in combination with targets are used to gauge progress. KPIs work as both progress and warning signals and if some KPIs are not achieving their targets, we diagnose why.
There should be a combination of both lagging and leading indicators and also include external factors that may be valuable for analysis of emergent strategy. Lagging indicators trail behind reality and offer accurate, but historical views of the facts. Leading indicators are measures with predictive power and the ability to drive or lead the longer-term lagging indicators. .
Ideally, the objectives and measures chosen will link together in a chain of cause and effect relationships, stemming from the drivers in the Learning and Growth perspective all the way through to improved Financial Performance reflected in the Financial Perspective.
The key linkages that should always be articulated in the Map are between the Internal Process and Customer Perspectives.
The next stage builds on the value chain by formally reviewing the strategic processes and also defines the enterprise models for information and systems.
Glide Consulting 