“What is interesting when studying the Agile IT Strategy is that it focuses on how to create business value in the digital era. It is IT being part of the business/industry ecosystem proving the right building blocks for digital success.”
In the last blog post, I introduced the topic of Agile IT Strategy and explained the need for a new method and approach. The key take-away from that blog post was that traditional IT strategy frameworks are based on the hypothesis of the stable business environment. But the fact is, that in many industries that is far from the truth. Digitalization is driving instability and unpredictability at an even faster rate than ever before in history – and there is no end in sight to how the dynamics is slowing down. It is time for a new era – the new normal. It is time for the digitalization era requiring new agile ways of working in IT development, people management, governance and IT strategy. This blog post will describe how to how dynamically with IT strategy to allow full business capabilities to meet and succeed in the digital age.
Let us start with a few definitions. There are obviously many definitions of IT Strategy and you might disagree with me. But my experience, working with IT Strategy in many organizations, is that we tend to see the main purpose and goal of IT to increase productivity (more output per input). The strategy is therefore the plan to increase productivity. This is an Operational Excellence approach and requires a stable environment (to leverage lean and outsourcing). If we would reverse that hypothesis, then the purpose and goal of IT would drastically change and require a new way of management.
Traditional IT Strategy: The optimization of IT capabilities to achieve high level of productivity in IT organization (assuming stable environment)
Agile IT Strategy: The optimization of IT capabilities to achieve high level of value creation in value chain in digital (unpredictable) times.
Key is to understand that the business environment determines the prerequisites for IT Strategy. The faster the industry changes, the more dynamic the governance of the business to reach set targets. For that reason, I listed five principles for IT strategy to set the scene for working with Agile IT Strategy:
- The IT Strategy needed to be iterated (revised) every 6 months to ensure that optimal business value was created.
- The development (and revision) of the IT strategy should take maximum 6 weeks!
- The IT strategy needs to include the minimum amount detail to provide a focused and dynamic strategic direction – and clear and effective communication, investment portfolio management and self-governing.
- Success is based on an agile culture with high degree of learning, self-governance, and trust.
- High level of engagement from leaders and employees to drive continuous transformation.
What is interesting about these guiding principles is that they define how we need to work with IT Strategy in the digital era. This is our starting point and the principles might change over time or be adjusted for specific industries. But it is key to understand that IT Strategy methodology is a function of the environment and the guiding principles are bridging that gap.
The key question is how to achieve the five principles for Agile IT Strategy in practice. Is it possible? Isn’t it impossible to derive an IT strategy in six weeks? Well, the thing is that it has to. If the New Normal requires IT to define its IT Strategy in six weeks, then we do it in six weeks. We have to adjust and challenge our selected truths about IT strategy work and re-engineer our way forward. It is doable with the right mindset, approach and knowledge!
Diagram 1: Agile IT Strategy Pyramid (Gillior, 2014)
The Agile IT Strategy structure is based on a Pyramid structure with replaceable blocks of strategic elements. Each block is there for a reason to provide the optimal business value based on the current workings of the business and IT environment (connected to the SWOT analysis), Is the environment would change in anyway; it would be easy to identify the non-optimal strategic block and replacing it with an optimal strategic brick. The beauty of the IT Strategic pyramid is that all strategic blocks are pre-defined covering for 10,000 combination of an IT strategy. Each strategy complemented with suggested guiding principles, KPIs and strategic initiatives. I would say that the IT Strategic Pyramid covers 99% of all possible IT Strategies. This is Agile IT Strategy made easy – without the need for expensive IT management consultants. Let me show you how it works.
Components of the Agile IT Strategic Pyramid:
||Vision of IT
||The description describes where the IT organization wants to be in 3-5 years time expressed in visionary words.
||For example: Enabler of IT Success in New Normal.
||IT Strategy statement
||Describing the role of IT in the business IT value chain. Answering the question: how does IT create optimal business value? Based on Value Discipline theories.
||Example: Customer Intimacy
||IT Strategic Themes
||Describing what focus areas will constitute the IT Strategy statement. What are the most prioritized areas for achieving the strategic statement? Made up of 17 generic strategic themes covering all possible IT strategic themes.
||Example: IT Stability, Operational Excellence, IT Leadership Development
Note 1: Each strategic theme will be challenged every 6 months. If environment has changed or satisfactory level of performance has been achieved – the theme is down prioritized.
||IT Guiding Principles
||Supporting a cascading of strategic themes down in the organization. Each IT unit is requested to define one guiding principle to support each strategic theme. How are we going to support the overall IT Strategy?
||Note 1: The guiding principles will be challenged (not automatically replaced) every 6 months. If the environment has changed in such way that it affects the Principles – they are replaced.
Note 2: The principles need to be designed by IT units to allow for self-governance.
||Monitoring the effectiveness of the IT Strategic Themes. How well are we achieving these themes?
||Note1: The number of enterprise IT KPIs should be limited to 6 KPIs to allow to focused direction and true self-governing
Diagram 2. The Agile IT Strategy Pyramid description (Gillior, 2014)
What is interesting when studying the IT Strategic Pyramid is that it focuses on what is important to create business value. It does not say anything about technological choices, architecture or forums to collaborate – because these areas do not directly create business value. It is not about the technology but how technology is used in a business context. It has removed everything that is irrelevant to optimizing business value creation and allowing for quick iteration. That is the sole purpose of the Agile IT Strategy – to focus on what is relevant. Let us go a bit in depth to understand how the different levels work in practice (focus on level 2 and 3):
Level 2 harbors the IT Strategy statement and is based on the theories of Value Disciplines. The theory is such that it states that any organization can create value in one of three ways – 1) Operational Excellence, 2) Customer Intimacy and 3) Product Leadership. (Please read further at http://www.valuebasedmanagement.net/methods_valuedisciplines.html) for better understanding of theories). The idea here is that the IT department must chose its role in the value chain and how it supports business success. Do we support business success by optimizing cost and risk efficiency (operational excellence) or by understanding customer needs and delivering what business actually needs (Customer Intimacy)? It is a key question for any IT organization and need to be clarified. It is also necessary to understand that each strategic theme (value discipline) is linked to the dynamics of the industry. For low dynamics, an Operational Excellence role is sufficient but the more dynamic it get, the role need to transfer into Customer Intimacy and finally Product Leadership.
On level 3, we find the Strategic themes and these are a key building block in the Strategic Pyramid. Based on what T Strategic Statement was been selected, a number of strategic themes are available. In total, there are 17 strategic themes available what can be mixed and matches. But each strategic statement requires different governance style and structure and that limits the selection process.
|IT Operational Stability
||Business IT Agility
|IT Operational Excellence
||Value Chain Optimization
||IT Organizational Vitalization
|IT Service Quality
||IT Investment Management
||Digital Awareness & Development
||IT Leadership and Culture
|IT Methods and Tools
||IT User Experience
||IT Competence & Skills
|IT Sourcing Excellence
||IT Management Excellence
Table 3: Generic IT Strategic Themes (Gillior, 2014)
As described in the earlier blog post, there are several levels of IT governance maturity (vertical axis shown in the diagram below).
Diagram 4: IT Governance Maturity Diagram (Gillior, 2014)
Each of the IT Strategic themes are linked on one or more specific IT governance maturity level. For example, IT Service Quality is linked to level 2 of the IT governance maturity model. The trick here is that any IT organization has to earn its credibility in the organization at one IT governance maturity level before having access to then next level. In other words, each level and each strategic theme (linked to it) need to be secured before moving up the scale. Before an IT organization is allowed to discuss Innovation and Business Growth (higher levels in the scale), it need to secure stability and cost efficiency (lower levels in the scale).
A common dilemma for many IT organizations is that IT strategies including focus areas demanding different management styles and governance – creating confusion for employees and managers. For example, focusing on cost efficiency (level 2), stability (level 1) and innovation (level 5). Innovation requires a completely different management structure than Stability and this mixture will create inefficiencies in governance. The recommendation is to select strategic themes that are at similar IT governance maturity levels.
There is one odd strategic theme in the table and that is Management Transition. The fact is moving from one IT governance maturity level to the next requires different governance structure and styles. We need to review the governance structure, create engagement in organization for change, update leadership skills, train the personnel and change our management routines. There are therefore strategic themes labeled as management transition – and that is to help us move upwards in the IT Governance Maturity scale to ease the transition to the next level.
What is important to understand from this model is that:
- The Strategic Pyramid constitute of a number of strategic blocks on different levels making up the strategy.
- Each strategic block in the strategic pyramid are replaceable and are challenged every six months.
- Each strategic block is pre-defined and link to a certain situation defined in the SWOT analysis. If the situation changes – there is always a more suitable block to support he pyramid.
- The pyramid does not have to be re-built every 6 months but each block is challenged based on changes in the environment.
- The strategic theme blocks are supporting either a specific level in the IT governance maturity model or supporting the transition to another level in the same model. Only by securing the strategic themes in one level can an IT organization move up the scale.
- Each strategic theme is equipped with a suggestion of appropriate guiding principles, KPIs and strategic initiatives.
- Maybe most important: to avoid too much stress from change, the maximum allowed number of strategic themes in the pyramid is three.
But how does this framework work in practice? Well, that will be the topic of the next blog post on Agile IT Strategy. To give you a teaser, the Performance Management framework (Plan/Do/Check/Act) is a good starting point for iterating the IT Strategy Pyramid to ensure that it is always aligned with business demand and resulting in right effects. We are going to look into this framework a bit further next time and see how it can be utilized to achieve the Agile IT Strategy principles and the IT Strategy Pyramid.
- Investigate what level of the IT Governance Maturity scale you are positioned and where you would like to be. What is the dynamics of the industry?
- Ask yourself: What is the role of the IT organization? How does it create business value?
- Ask yourself: Is the content of your IT strategy focused enough to support the selected way of optimizing business value.
- Contact The Goodwind Company – we are experts at Agile IT Strategy and can help you reach your potential. One thing we do to get started is to diagnose how well your strategy is aligned to the Agile IT Strategy principles. We then design an IT strategy in six weeks – and give you the tools to continue the process yourself. Give me a call
What is important to understand is that the Agile IT Strategic framework was not designed to provide just another fancy framework to the market – but rather that the framework was designed to address the increased digitalization and unpredictability supporting the Agile IT Strategy principles in the best possible way. There might be other solutions to IT strategy methods to meet the principles and that is fine. I am not saying that my framework is the only way forward – but rather that here is a framework that works in the digital era. The question I asked myself when working on the Agile IT Strategy framework was – if there was an Agile IT Strategy framework – how would it look like? How would it smell? How would it taste like? All with a purpose to free my mind from traditional frameworks designed for a stable and predictable environment.
For a more detailed presentation of the Agile IT Strategy framework – do not hesitate to contact The Goodwind Company.
– Hans Gillior