The validity of the strategy is equal to the validity of the information and/or hypothesis that it is based on. Inaccurate information will deliver an inaccurate strategy. But how do we boost the value of information and ensure great decisions? Here are my views!
November is the time of setting the direction and budget for the coming year. For some time, most organizations has analyzed and discussed how to address the new digital arena with fierce and fast moving competition. Trends have been examined and benchmarking has given new light on the cost levels in the organization. The new direction and budget is decided in executive forums and later distributed and cascaded down in the organization. Everybody is to follow the revised direction within the set cost frames. But how valid and accurate are these decisions – and do they actually create customer value in heist of digitalization? The fact is that the decisions taken today or tomorrow are based on “old” information that does not reflect the current challenges. Let us discuss how to improve decision-making for a while. It is all about the value of information.
The value of information is based on how well it represents a situation at any given time – to enable correct and valuable decisions.
I often meet companies (especially IT organization) who present their strategy as a great piece of art. It has been developed for a long period of time using the best consultants in the business or the best minds in the company. It is “the” document that will guide them through the threats of digitalization and strengthen their market position. It is often a masterpiece! When I suddenly ask them how the strategy was developed, and the validity of its information and/or strategic hypothesis – I get a face of confusion.
“Well, you know, we did a thorough trend analysis and benchmarking, and that is what the strategy is based on. It took us 7 months to gather and analyze the information – and another 5 months to produce a world-class strategy. It is now decided in our executive forum! We are prepared and very proud!”
Wait a minute! In my world, the validity of the strategy is equal to the validity (or quality) of the information and/or strategic hypothesis that it is based on. Inaccurate information will deliver an inaccurate strategy. Frankly, I do not question the method for trend analysis or benchmarking (or strategic analysis). I am questioning the validity of that analysis from a time perspective – are the assumptions, analysis and hypothesis still valid 12 months after they were collected? In most (IT intensive) industries, the value of information has been reduced by 70% over a 9 months period. This means that the information collected 12 months before does not represent the current business conditions (high probability of high deviations) – and hence, the strategy should not be trusted. How much are you willing to pay for the accurate information?
“In most (IT intensive) industries, the value of information has been reduced by 70%
over a 9 months period.”
My point of view is that the problem of inaccurate information is one of the biggest concerns of a company today. First of all, that most strategic documents are based on invalid information and secondly that it takes too long time to companies to respond to information (normally around 18 months). Accurate information is the foundation for running a digital business, meaning that the company (governance function) needs new routines for how to quickly collect, analysis and make strategic decisions – while the information is still valid. The more digital the business is (IT intensive), the faster this chain of activities needs to work. In other words, the way to enhance the value of information is to continuously validate the strategic hypothesis that your strategy is based on. Are they still valid after 3-6 months? If not, what has changed and how does that affect the strategy? We call that an iterative strategic process (time boxed) that revolves in the same pace as the market.
My favorite example of inaccurate information are worldwide studies that are produced insights to a certain industry or function. These reports are valuable for the direction of business and IT organization. But the fact is that most of these studies take 12 months to produce – and the information based is often invalid when the study is released – and even older when the information is used for company steering. To actually base a strategic decision on these reports is absolutely lethal. The question I ask myself is what purpose these reports fill – other than pure marketing?
- When studying your business or IT strategy, what information (sources) and hypothesis is the document based on. Are information and/or hypothesis still valid?
- How long time does it take your organization to a new digital trend? What if a digital start-up challenged your business with new innovative products/services – how would your company react?
- Contact Hans Gillior – expert in iterative strategic processes!
It is the time for setting direction and budget for the coming year. But already now, most of the strategic information and/or hypothesis are quite invalid – and should not be trusted. The decisions taken in executive forums are based on imperfect information – guaranteeing inaccurate decisions. But it does not have to be that way! There are methods of guaranteeing accurate and valuable decisions by viewing information from the right perspective – by continuously validating the value of information. How difficult can it be? That is exactly what we do in our personal lives when we study the weather – to select appropriate clothing.
Hans Gillior: Senior Advisor and Digital Evangelist