Strategy, Anyone?

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Let’s say it clearly: If a company doesn’t understand its competitive advantages and its current and future business models, it’s doomed. Not only will it fail in the marketplace, but also it will waste tons of cash on technology along the way.

So what business are you in?

If the strategists in your company have difficulty answering this question, then you’re in deep trouble–especially if you’re a technology manager expected to make decisions about what to buy, build, in-source, or outsource.

Scenario planning can help reduce uncertainty about the future. Because it can bring business goals and objectives into focus, IT should be intimately involved to produce a better alignment of business and IT resources.

For the uninitiated, scenario planning is a methodology that, when successfully implemented, produces a range of possibilities surrounding future events. The possibilities are defined around some specific parameters, such as the amount of government regulation, the penetration of the Internet, and the depth of business-to-business transaction processing. The objective of scenario planning is not an elegant document suitable for publication in the Harvard Business Review, but a vehicle for provoking thought.

Environmental Trends Analysis

To get started, you need to monitor the trends that pertain to your industry on a regular basis, including social, political, workplace, work habit, regulation/de-regulation, national and global economic, and macro technology trends.

Competitor Analyses

Next, you need to monitor and report on known and anticipated competitors. The good news here is that people love to read stuff about the competition. This is because we benchmark and validate our behavior against our competitors. The huge danger is that if the competition you’re tracking only exhibits a linear extrapolation from your current business models — and that’s all you track — you’re likely to miss the out-of-the-box, unconventional competitors that can do serious damage to your market share.

Current Business Profiles

You should also profile competitor business models and processes–as well as your own–at least annually, including details about the products and services they offer, their channel strategies, and their market niches.

Potential Business Profiles

Based on all of the above–the environmental scan, competitor analyses, and existing business models–you should be able to define future models and processes. This is the essence of the scenario generation process. The key here is to simultaneously extrapolate from current trends and leapfrog current models into whole new business arenas. What, for example, will be the new model for customer service? What will your sales and marketing strategies have to look like? How will you cross-sell on- and off-line?

Confidence & Risk Analysis

During the scenario planning process, a key question you have to answer is this: Do you have the expertise in-house to think creatively and objectively about future business? If you do, then beg, borrow or steal their time; if not, hire some industry gurus with deep industry knowledge and empower them to speak candidly. Once you’ve corralled them get them to validate each other’s insights.

Prioritization Analyses

After you’ve modeled the future, prioritize the processes, products, and services that will keep you competitive. Keep the list short: a 20-item to-do list will always yield 15 orphans.

Technology Requirements

Then convert the prioritized processes, products, and services into high-level technology requirements with specific references to communications, applications, data, security, standards, and people investments you’ll need to make. You should also make a list of services that might be in-sourced, co-sourced, or outsourced. And, yes, you should begin to price out the big-ticket items, such as a communications infrastructure upgrade or an enterprise applications migration.

Reality Checks

You will also need to create a “devil’s advocate” process run by some tough critics of all this creative thinking. The objective here is to subject the new business models and processes to a serious reality-check. If you can’t find in-house honest brokers then get some tough consultants in to scrub the scenarios.

That’s enough about the substance of the process. Let’s turn to the politics. To build influential scenarios, you’ll need the following:

Buy-in and resources from senior management, without both of which you will fail.

The right mix of people: You should populate your relatively small group (7-10) with mostly business professionals. The ideal breakdown should be 60% with wide and deep business sense, 20% with wide and deep business sense and wide technology sense, and 20% with wide business sense and wide and deep technology sense.

A time commitment: Participants will have to devote no less than one and no more than two days for the major events, such as defining future business models and processes, and a continuous commitment of small time chunks to review the process along the way. This assumes that the owner of the process preps the group in the form of briefings and materials that provide explicit guidance about how the process works, scenario elements, and precisely what they will be expected to do and not do.

Support. You’ll need administrative support to organize and run the process. There will be at least one major event a year–a one or two-day soirie for generating future business models and processes–and several short on-site events for reviewing materials (like competitor analyses). All of this must be professionally scheduled, organized, and facilitated.

A facilitator: For special events, you’ll need a facilitator that understands the domain (insurance, manufacturing, pharmaceuticals, and so on) as well as the process. This is critical: If the facilitator is bad, the process will fail. And if you fail the first time you organize the event, you’ve failed forever. Facilitators must have engaging personalities and know as much or more about the domain as the participants. If the facilitator is a dud and doesn’t understand the business models and processes that dominate the vertical industry, the process will break down and the political repercussions of your efforts could be “significant.”

A budget: You will need cash to support the process. You have two options here. You can charge the participants or you can lure them in to your all-expenses-paid scenario development vacation. Try #1 first; if it fails, go to plan B. Plan B is politically smart: If the sessions are productive you get double credit, and if they’re not, at least you can’t be accused of foolishly spending their money.

Finally, strawmen: You will need to jumpstart the process. Since people are often better critics than creators, you need to have some strawmen models and scenarios at your disposal.

These are minimum prerequisites to success. If one or more is missing, you’re toast.

Good luck!

Next month we’ll look at communications.//

Steve Andriole is the founder & CTO of TechVestCo, a new economy consortium that focuses on optimizing investments in information technology. He is formerly the Senior Vice President & Chief Technology Officer of Safeguard Scientifics, Inc. and the Chief Technology Officer and Senior Vice President for Technology Strategy at CIGNA Corporation. His career began at the Defense Advanced Research Projects Agency where he was the Director of Cybernetics Technology. He can be reached at steve@techvestco.com.