Section 2.4. Understanding Your Company s Strategies

2.4. Understanding Your Company's Strategies

In this next section, we're going to discuss ways to look at and uncover your company's current strategies. We're doing this for two reasons. First, corporate strategy is not always well defined and second, it's sometimes not formally stated. In order to align your IT strategies with corporate strategies, you have to know what those corporate strategies are. The expectation isn't that you're going to go on a mission to develop your company's strategies, just that you're going to do a bit of research and a bit of thinking about these issues so you can begin to align your IT efforts in that direction. Don't get overwhelmed thinking you have to go do all these thingsthese are tools you can use if and when you need them. Your job is not to single-handedly develop your company's strategies, but if you don't understand where your company is headed, you have a very slim chance of aligning your IT strategies to your company's strategic objectives. Read through this section, but don't turn it into a big action item for yourself. The action part comes later.

Cheat Sheet…
Corporate Strategy

Volumes have been written about corporate and business strategy and our goal is not to rehash everything ever written. However, there are a few key things you can learn about corporate and business strategy that will help you better understand your company's direction and how IT can play an important role. Here's the short version.

Corporate strategy is typically created at the top of the organization and it should be relatively stable. Companies that continually change corporate strategies are often floundering looking for the right answer. A strategy may involve using (or even trying out) different tactics, but the overall direction should remain relatively stable over time. Let's look at an example. Microsoft developed a corporate strategy that was summarized by, "A computer on every desk and Windows on every computer." Their strategy was to dominate the desktop market. How did they plan on dominating the market? They used a number of different tactics to do so. In some cases, they bought their competitors; in other cases, they added features or slashed the price of Windows. Microsoft's detractors would say that Microsoft sometimes used heavy-handed tactics, but the point is that Microsoft created a long-term strategy to dominate the desktop computer and they are succeeding. Their methods or tactics along the way changed based on changes in the market, but their overall strategy did not waiver. With new technologies on the horizon, Microsoft may have to modify its strategy, but that would come after years of successfully holding fast to a single strategic vision.

2.4.1. Corporate Strategies and IT

If you want to create a more strategic vision of your IT department, the first step is to learn about your company's corporate strategies. In some companies, there is a clearly defined plan shared with top executives and sometimes middle management. If you're not privy to the company's strategic plan, sit down with your boss or a top executive and learn about it. If you aren't sure how to begin this quest, think of it as a corporate job interview. Do some researchmuch of the information is just a few search engine clicks away. If you are going to sit down with corporate executives, make sure you've done your homework. Answer as many of these questions on your own as possible. If you're well prepared, you'll create a positive impression and you'll likely get better answers from the top execs. Research the answers to these questions:

• What industry or niche is this company in?

• Where is the company headed? Where does it want to be in 3-5 years?

• What are the company's mission, vision and core values?

• Who are the key competitors and what are they up to?

• What's happening in the broader market or market niche that will potentially impact the firm?

• What impact do economic cycles have on the company? Does it do well in growing or shrinking economies or is it not particularly vulnerable to economic fluctuations?

• Does your company lead or follow its market? (Some companies are always out front innovating, others are always back in the pack, less innovative but often more stable. There is no "good" or "bad" answer here.)

• If the company is publicly held, what do the quarterly and annual reports say about the company, its goals and direction?

• If the company is publicly held, how has the stock price fared compared to its competitors and compared to the overall market? How has it done year-to-date (YTD), in one, three, and five years? Are securities analysts recommending buying, holding, or selling your company's stock?

• How are the company's financials? Strong, weak, improving, deteriorating?

• What do your company's press releases say the company is up to?

Even if you're not particularly strong in business and finance, if you understand your company and the business it's in, you should be able to understand the fundamental concepts related to your firm. For instance, some companies track very closely with the economy. Others don't at all. How does your company fare when the economy is running full-speed ahead? How has it done in the past three or four years when the economy was in recession? Here's an example. The adult education market is a multi-billion dollar market in the U.S. with a wide variety of companies providing degree programs for working adults during evening or weekend classes. During lean economic times, people often choose to get further education to help them keep their jobs or find new jobs in a tight market. During expansive economic times, people seek further education in order to qualify for new jobs and new opportunities that arise as businesses expand. Therefore, when you look at demand for education in that particular niche market, you see it's almost impervious to economic fluctuations. Other businesses do track with up or down economic cycles. You don't need to have a Ph.D. in economics to understand how the economy could impact your business and by taking time to consider these higher level issues, you'll learn a lot and be able to develop a better IT plan. We'll discuss devising your IT strategy later in this chapter.

Obviously, the company is not going to come right out and announce to the world (and consequently, to its competitors) what all of its short and long-term strategies are, but the overall direction can certainly be discerned by asking questions and doing some research. Answering the questions posed above will give you a better than average overview of your company. Once you've answered all the questions you can, request a meeting with someone above you in the organization who is likely to answer your questions. If you prepare the answers to the above information in a brief document and bring it with you to this meeting, you'll impress the boss with your preparation and won't waste his or her time asking questions to which you could have (and should have) gotten the answers on your own. You can use this document and the data you collect as the basis of a conversation about where the company is headed. The point is to gather enough information so you can create an IT strategy that does better than just align with the corporate strategyit contributes to it in a new, substantive, or innovative way.

Sound like a tall order? It is, but it might be the most important thing you do as head of your IT department. Yes, the day-to-day projects, initiatives, and crises will continue and you'll still have to deal with those, but if you can find a way to take the information you glean from this process, synthesize it, and create a strategic IT plan that contributes to and improves upon the corporate strategy, you're going to find that there is far more executive support for IT projects than ever before. And, if you recall, executive support is number one on the list of success factors for a project. If you are an IT project manager and not the IT manager, these same principles apply even though you are not responsible for the overall direction of the IT department.

2.4.2. Business Strategies and IT

Business strategies are those strategies that are a response to changing market conditions. Businesses don't exist in a vacuum and though they may spend a lot of time and effort developing their corporate strategies (which should remain fairly stable through time), business strategies will have to be modified by changing market conditions. In some circles, these strategies are called business strategies to differentiate them from long-term corporate strategies. If a company's main competitor suddenly reduces its prices by 30%, the business strategy might have to shift overnight to respond to this change. The overarching corporate strategy remains unchanged. For instance, GE had as its goal to be number one or number two in every market it was in. This meant that the business strategies could change to respond to market conditions as long as the result was to keep GE in the number one or number two slot. Business strategies will change and flex as the market shifts, but overarching corporate strategies should remain fairly constant.

So, what does all this have to do with IT? The strategies you implement via your IT strategic plan should contribute to (or be aligned with) the overall corporate strategy, but the business strategies you implement will change to respond to changes in the external marketplace. This is important to understand, especially when looking at IT projects. While your project may contribute to the long-term corporate strategy, it's also likely it will have to align with business strategy to ensure the projects help the company respond quickly and effectively to changes in the market. This is a tall order to fill, but understanding these elements helps you discern where your IT projects fall in the scheme of things and it might help you manage them more effectively down the line.

Cheat Sheet…
The Skinny on Corporate and Business Strategies

Corporate strategies come from within the company and do not change based on what's happening in the outside world. Business strategies derive from changing forces in the external marketplace and may influence the corporate strategies and corporate (and IT) operations.

Now that we've defined corporate strategies and business strategies, we're ready to jump into the specifics of developing IT strategies. If you're not the head of the IT department or not your company's CIO, you can still use this information to improve your business skills as they relate to IT. Even if you are not responsible for developing these plans, thinking about these issues will make you a more valuable contributor.

There are numerous methods you can use to develop strategies and a thorough discussion of them is outside the scope of this book. However, there are some common elements to these methods and we'll discuss these to give you specific tools to use to devise your IT strategies. Also keep in mind that you may already have a solid understanding of your company's strategies and some excellent ideas about what your IT strategies are or should be. If so, feel free to use this information rather than going through the exercises described in the next section. The methods described next are simply tools to help you look at the current environment so you can develop strategies based on the information you uncover. Remember, any method simply provides a framework in which to thinkit will not do the thinking for you nor will it provide you a list of strategies when you're finished.

2.4.3. Methods To Assist In Developing IT Strategies

The first step in developing your IT strategies is to take some time to think about where your company is headed and what its strategies are or have been. If you've ever thought, "If I ran this company, I would…" then this is a great opportunity to put those ideas to the test. Although there are probably numerous factors to which you are not privy, your evaluation of the company's direction is the best place to start. One way you can do this is to look at what your company has accomplished in the past three to five years. You can also look at any public corporate documents such as news articles, press releases, and stockholder information if the company is publicly held, as mentioned earlier in this chapter. All of this information gives you an idea of not only what the company intended to do, but also what it was able to accomplish. Take time to review what role (if any) IT played in the intended and actual results of the company in the past three to five years. Did IT contribute significantly? Did IT play a "utility" role? Did IT projects get cancelled, delayed, funded, extended? Answering these questions will help you begin to see the role of IT in the company in the recent past.

2.4.3.1. Core Competencies

Companies often try to define core competencies as a way to continually focus on what they do best and leave the rest to someone else. Sometimes they outsource these non-core competencies; sometimes they simply stop doing them altogether. The same holds true for IT core competencies. Whether your IT department primarily manages the network and its users or develops custom software solutions, you should look at your core competencies. Here's a good example. A company in the hotel business has a great IT department that manages the reservations system, hotel inventory system, and restaurant services system. Is developing an integrated software program that includes these three key functions part of the IT department's core competencies or not? There is no simple yes or no answer here. If the IT department has a group of talented, experienced software developers, the answer might be yes. If the IT department is primarily focused on deploying, maintaining, upgrading, and repairing these three core applications and its related infrastructure, the answer might be no. If it's not a core competency and the company wants/needs an integrated solution, the IT department can either develop the requirements and have an external company develop the application, or it can develop the skills internally through targeted hiring. As you can see from these examples, there are often several approaches that might be feasible, but usually only one or two solutions that leverage core competencies.

Identifying the core competencies of your IT staff and department will help you develop an appropriate strategy for moving forward. If you can't define your core competencies, you may have an IT department in transition from one role to another or you need to step back and really focus on what core competencies it should have and work to develop/acquire those. Understanding your IT department's core competencies will also help you make smarter decisions when planning new IT projects. We'll discuss that in more detail later in the book.

2.4.3.2. SWOT Analysis

Another useful planning tool is the SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats. This is a commonly used technique in all types of business planning. Some like to view strengths and weaknesses as internal to the company and opportunities and threats as external to the company. In truth, you can do a SWOT analysis on just about anything and this includes your company, your competitors, and the marketplace. For instance, after looking at your company's strengths and weaknesses (internal), you might also see some opportunities and threats that are internal to your company. Internal opportunities might be those related to leveraging your core competencies. Internal threats might be politics, significant changes in top management, or a change in corporate ownership, for example. You don't have to spend days or weeks on this exercise, but you should give these factors some thought. What does your company do well (strength)? What does you company not do as well as its competitors, or not do well at all (weakness)? Based on your company's strengths and weaknesses, what are the opportunities in the marketplace that will leverage your company's strengths? Based on your company's weaknesses, what are the external threats that exist? Are there any opportunities or threats that are internal to your company (pending take over, change in direction, etc.)?

Next, do a SWOT analysis on your IT department. Be brutally honest and be willing to look at the good, the bad, and the ugly. What is your IT department very good at? What is it not so good (or terrible) at? What are the current or possible opportunities for your IT department, and what are the known or possible threats to your IT department? By looking at these elements, you'll begin to see the picture come into focus. If you're really brave (or secure), you may want to ask department outsiders for their view of the IT department's strengths and weaknesses. You might be quite surprised by what you learn and you can incorporate that feedback into your planning process.

For each strength you identify, you should look for corresponding opportunities. You want to play to your strengths and minimize your weaknesses. You also want to correlate each of your identified weaknesses to potential opportunities and threats. For instance, if there is a great opportunity, but it really hits you in your weak spot, you might choose to forgo the opportunity or take steps to strengthen that weakness. Similarly, if you spot a threat that plays right into a weakness, you'll need to take decisive action to mitigate the threat or improve strength in that area. Knowing these four elements will help you align your priorities, activities and projects so you take full advantage of your strengths while managing the downside (weaknesses and threats).

2.4.3.3. Trend Analysis

Another method of developing a strategic IT plan is to look at trends in the market. These can be broken down into four main quadrants and it's possible that there may be a slightly different set of four for your company's specific industry or market. The four quadrants are:

• Customer

• Competition

• Technology

• Regulation

2.4.3.3.1. Customer

What's happening with your customers? What are customers looking for in general? How does IT play into this? Trends these days include customers increasingly looking for more value at a lower cost, judging a company by the service it provides, and demanding higher quality (lower tolerance for poor quality). In some cases, brand is also an issue. Understanding the trends in your customer market is vital to a good plan because without customers, you are out of business. Remember, in the IT world, you often have two (or more) customers: the internal corporate customers for whom you provide IT services and the external corporate customers who purchase your company's products and services. If your IT department develops software that your company sells as well as manages the network infrastructure, you probably have two distinct customer setsinternal users and external paying customers. You'll need to look at all IT customers in developing your IT plans.

2.4.3.3.2. Competition

What are the trends with your competitors? Are they gaining or losing market share? Are they equally impacted by economic trends? How are they responding to changing customer demands? How are they responding to globalization? What is the impact of technology on their business? How are your competitors managing their business knowledge? Are they outsourcing? How are they using technology in their business? How are they innovating with technology? Have they created any key alliances? Finally, are there any new competitors now or on the horizon? What are the "new guys" doing? When looking at your company's competitors, you also want to try to find out what technology they're using, how their IT department is structured and/or functioning and anything else you can glean from your competitors about their IT efforts.

2.4.3.3.3. Technology

How do the changes in technology impact your company (and your competitors)? How has the Internet changed your business and how will it drive change in the future? How has technology impacted your relationship with your customers (internal and external)for better or worse? (Press 1 if you've ever been trapped in a voice mail system, Press 2….). How have increased mobility demands impacted your company? How have changes in the security environment impacted your company? How has the competition implemented technology? What technologies are "industry standards" in your field? What types of emerging technologies might give your company a competitive advantage if implemented early and well?

2.4.3.3.4. Regulation

How has the regulatory environment impacted your company? Has the opening of new trade markets (NAFTA, etc.) helped or hindered your company? Have the regulations regarding health care privacy (HIPAAHealth Insurance Portability & Accountability Act) or financial reporting (Sarbanes-Oxley) impacted your company? How have these or other regulations impacted your IT department?

Applying Your Knowledge

The methods mentioned here are only a sampling of ways you can go about analyzing where you are and where you need to be, but they are among the most user-friendly ones. While it won't hurt you to use all of these methods (and some of you very detail-oriented people out there will), you can keep it simple by selecting one method that aligns best with the way you prefer to think and work. Set aside a time to meet with key team members and gather input and ideas. Spend time processing the results of the meeting and reconvene again in a week or so and gather team responses, comments, and insights. Just dedicating time to this activity and making it a priority is a great start and will likely generate ideas and information you can use. If possible, include as many members of your team (or better yet, a cross-departmental team) as possible to help you avoid blind spots in your planning process. The old adage "two heads are better than one" is doubly true in the planning process.