Viewpoint: May 20, 2003

The perspective on IT and strategic advantage outlined in the letter JSB and I wrote to HBR (see previous blog: “IT Does Matter”) is shaped in part by a broader view of strategy that I have developed over the past several years. When I work with senior executives, they express a real conflict: they know strategy is important (strategy, like IT, does matter) but they have a growing sense that traditional approaches to strategy are simply not up to the challenge of coping with increasingly uncertain business environments. What to do?

My first piece of advice: throw out two basic tenets of business strategy. First, reject the notion that strategy is sequential – that detailed strategic blueprints need to be laid out before a company can proceed with operational implementation. Secondly, abandon the traditional strategy view that the relevant time frame for strategic planning is a five-year horizon.

My second piece of advice: implement a FAST approach to strategy. FAST in this case is an acronym for Focus, Accelerate, Strengthen and Tie it all together. This approach urges executives to move along parallel paths, operating on two very different time horizons: one horizon takes a five to ten year view of the business and the second horizon zooms in to a much more tactical six to twelve month view of the business. The one to five year horizon that is so loved by traditional business strategists actually receives very little attention in the FAST approach.

Focus is the key activity on the five to ten year horizon. This requires senior management to develop a common view on two key questions for their business. Five to ten years from now, what will the markets that we participate in look like? Then, what kind of business we will need to have in order to continue to create value in these markets? Unlike strategic approaches of the past, Focus does not require management to develop a detailed view of the future, but it does require management to develop a clear, high level view specific enough to help the company make important near-term choices.

To illustrate the high level nature of the view of the future, look at Microsoft. Back in the late 1970’s Bill Gates defined a Focus for Microsoft that could be summed up in two sentences. First, computing power is inexorably moving from centralized mainframes to desktop computers. Second, to be successful in the future, a computer company will need to “own” the desktop. Simple and succinct, yet specific enough that it helped Microsoft to answer the unexpected call it got from IBM to help IBM develop an operating system for a new desktop computer it was developing, rather than the twenty other calls it undoubtedly received on that same day. This Focus helped to guide the company for two decades. It only began to need retooling in the late 1990’s as the advent of the Internet set into motion fundamentally new forces.

On the six to twelve month horizon, Accelerate and Strengthen are the key requirements. By Accelerate, I mean identifying a few key operating initiatives that have the potential to significantly accelerate the movement of the company towards the long-term Focus. Once these initiatives are identified and agreed upon by senior management, the question is what can be done to help these initiatives increase their impact over the next six to twelve months? Management needs to set aggressive and measurable operating performance objectives for these initiatives over the next six to twelve months.

On the same time horizon, Strengthen also comes into play. Here, management needs to ask, what are the major organizational obstacles that are preventing us from moving even faster to achieve our operational objectives? Then the question becomes, what can be done over the next six to twelve months to “de-bottleneck” the organization and strengthen our organizational capabilities so that we can move even faster in the next six to twelve month cycle?

Tie it all together integrates these three streams of activities. The key to success with the FAST strategy is to frequently iterate back and forth across these two time horizons and refine efforts on all streams based on the results of efforts to date. The near-term operating initiatives will provide management with much more information regarding both the market place and the capabilities of the company. This should help to refine the longer-term Focus view. In turn, this refined Focus view will be helpful in selecting and shaping the next wave of near-term operating and organizational initiatives. Senior management must actively monitor progress on all three streams and play an active role in shaping initiatives and setting objectives.

The FAST strategy approach respects the need for both near-term performance and longer-term direction, learning and adaptation. It favors incrementalism but recognizes that, without direction, incrementalism will inevitably sub-optimize relative to longer-term opportunities. Properly focused, incrementalism provides significant advantages relative to more tempting “big bang” transformational initiatives:

– Provides clear, near-term operational performance metrics to assess progress
– Focuses management on delivery of significant near-term operating results consistent with longer-term direction
– Enhances ability to fund major strategic thrusts by emphasizing the need for tangible returns early – initiatives potentially become self-funding
– Helps to build organizational support for longer-term direction by demonstrating tangible returns quickly while at the same time helping to neutralize opposition
– Accelerates organizational learning by providing clear metrics and creating rapid performance feedback loops
– Strengthens ability to adapt based on new information gained from near-term operational and organizational initiatives

Few companies today have adopted anything like a FAST strategy approach. You can use five questions to determine whether a company is pursuing this approach:

– Does senior management have a common view of what their markets will look like five to ten years from now and what the implications are for the kind of company they will need to develop? Some of the common issues companies confront here are:
>> Management avoids the issue entirely, claiming that the future is too uncertain
>> Management aims too low, under-estimating the amount of change that will occur and the size of the opportunities (and challenges) created by this change
>> Management fails to align around a common view – if interviewed individually, senior executives would offer very different views of the long-term requirements for success

– Has this view of the future been adequately communicated throughout the organization? Some of the common issues at this level are:
>> Management under-invests in communication of the long-term view
>> Management fails to make this long-term view tangible to the organization by not offering specific examples of how near-term choices will be affected
>> Management communicates through the ranks rather than directly to the rank and file, leading to divergent and confused views as the message becomes distorted with each level of communication

– Is there sufficient focus in the near-term on a few (3-5) high-impact operating initiatives that, over the next six to twelve months, can materially accelerate the company’s movement towards the long-term destination? Common challenges here are:
>> Management supports too many near-term operational initiatives, in part as “insurance” against uncertainty, with the result that initiatives are under-resourced and rarely achieve the impact anticipated
>> Near-term operational initiatives are not clearly tied to the long-term destination
>> Explicit six to twelve month operating performance objectives are not established

– Is senior management identifying and addressing major organizational obstacles that prevent even more rapid movement towards the long-term destination? Some of the issues here are:
>> Organizational changes rarely tied to high impact operating initiatives
>> Explicit six to twelve month performance objectives are not established – how will management know whether the organizational changes are having the desired impact?

– Are there systematic processes to assess near-term operating performance relative to the requirements defined by the longer-term destination? One of the most frequent issues here is:
>> Operating performance rarely assessed systematically in terms of implications for long-term direction

The FAST strategy approach provides a robust framework for incremental innovation. It offers a useful context for understanding how to create strategic advantage through sustained innovation in business practices enabled by IT capabilities. It also helps us to understand the deep business significance of the emergence of a much more flexible distributed service architecture. This new IT architecture will help businesses to accelerate their near-term operational initiatives even further. In doing so, it will provide a solid foundation for radical incrementalism.


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