Strategic Essence — The Missing Link in Integrated Business Information System Implementations

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Integrated Business Information System Implementations

1.“Strategy” – widely abused and seldom understood

    I continue to encounter sub-optimal Integrated Business Information System (IBIS = ERP+) implementations.  I sit through big brand and not so big brand system vendor and implementer presentations, sift through their marketing material and visit their websites.  The word “strategy” is scattered all over the place in absolutely inappropriate contexts.

    If one reads the context of every place where the word “strategy” occurs, one must conclude that there is NO single, coherent, consistent, congruent definition of the word.  To some it is wheeling and dealing, to others it is a plan or a way of doing things, to others it is an important sounding word to impress people.  The result being that strategy is, in fact, a widely discounted word.  Very few people agree what strategy is, very few people know how to determine strategy, let alone DO strategy, whatever THAT means.

    When it comes to business software I am not sure that I have EVER seen the word ‘strategy’ used correctly.  Michael Porter says that technology is NEVER strategy!

    2. The ESSENCE of the organization and HOW it thrives

      What IS “strategy”?

      Many years ago I wrote a paper for a conference on the importance of aligning business information systems with strategy, and then found that I could NOT define strategy.  So I started to research the definition of strategy.

      Professor Malcolm McDonald says “strategy is doing the right things, viewed from the perspective of the customer” and “tactics are doing things right, viewed from the perspective of the customer”.  He goes on to say that if an organization “does the right things well, it will thrive”, if it does them NOT so well, it will “survive” and if it does the WRONG things, it will “die”.  The better the organization does the wrong things the FASTER it will die!  That definition has stuck with me and forms the basis of my corporate logo.

      Michel Robert defines “strategic driving force” and asserts that every organization has a single driving force that will seldom or never change.  If one gets in the way of that driving force, one will compromise and damage the organization.  If one enhances it, the organization will thrive.

      Professor Michael Porter asserts that “differentiation” is the essence of strategy.

      All three of these authorities significantly influenced my thinking to the point where I concluded that “strategy is the ESSENCE of the organization and HOW it THRIVES”.  It is what is unique, that which differentiates the organization, what makes it stand out so that it attracts AND retains customers.

      It is that essential something that has brought the organization this far and will propel it into the future.  It is the RIGHT things that cause YOUR customers to buy from YOU.  It is the fundamental element that if you damage it, you will destroy the organization and IF you do it RIGHT the organization will THRIVE.  Strategic essence is unique to every organization.

      3. Underpin and enhance the essence

        The interesting thing about this definition is that when I interview an executive team, individually, one on one, and ask “what is your strategy?” their replies are all over the place.  When I ask them “what is the essence of your organization and how does it thrive?” they frown, they think, they scratch their heads, but, eventually, after thinking aloud, the final result of the individual interviews will generally be a fairly consistent view of the strategic essence of their organization.

        Once you understand the concept of strategic essence, you begin to understand that this should be THE reason you invest in new systems.  It should guide and direct the procurement and implementation of new systems AND business improvement projects because the concept of the essence embraces the very core of what makes the organization successful.

        This strategic essence originated intuitively from the founders recognizing a market need and filling it.  It embraces differentiation and competitiveness.  Organizations thrive BECAUSE they are different and yet just about every systems implementation I have seen, just about every management consulting intervention, focuses on operational “me too” stuff and GETS IN THE WAY of the essence and therefore the competitiveness of the organization.

        Some years ago I undertook a short diagnostic investigation, something that I call a “Pulse Measurement” into a systems implementation that had been stalled for nearly a year.  The client was in the Freight Forwarding and Clearing business, and they were in the process of implementing a “best of breed”, “industry leader” software package – the “obvious” choice.  I interviewed the executive team, one on one and, by the end of the first day I had established that their market was the 10% of customers who were very time sensitive, and that they had differentiated themselves with very tight response times and a service promise which amounted to “if we promise you delivery by a certain date and time and the shipment is delayed we will make good your loss”.  They NEVER had to make a payment and they had a portfolio of very satisfied and very loyal customers.

        There was major tension with the software company which was also managing the implementation.  The second day of the investigation I phoned the owner of the software firm in another country and quickly established that his strategic essence was to be the dominant software provider in the field globally, which meant of necessity that he was focussed on the 90% of the market where service levels and response times were NOT such an issue.  There was a FUNDAMENTAL strategic misalignment.  I met with the executive who had briefed me and explained what I had discovered.  He took one look at me and exclaimed “of course! the LIGHTS HAVE JUST GONE ON!”  That single discovery FULLY explained the tensions, the frustration, the lack of commitment to service, the entire ‘sorry saga’ of a project that had run for eighteen months and caused nothing but heartache and frustration.

        THAT is the power of understanding the strategic essence of an organization.  On the strength of that ONE piece of information, which delivered a massive “AHA” to the man in charge, the project was summarily terminated the same day!

        I was then engaged to assist the client to select the most suitable software.  Accompanied by my client, we visited three software companies.  At the third presentation the chief executive of the small niche player, unprompted said “we are committed to service, in fact, we are so committed to service that if you miss a deadline as a consequence of a problem with our software we will reimburse you your losses” – I am sure you can understand that no further evaluation of software was necessary, at that presentation we ascertained that the software met the basic needs of the business at a basic level but MUCH more importantly, we had found a supplier whose strategic focus was strongly aligned with that of my client.  The software went in without difficulty.

        It is NOT always that simple but failing to ensure alignment at the level of the strategic essence will ALWAYS give rise to problems, and alignment with the strategic essence will ALWAYS greatly improve the probability of a successful outcome.  There ARE additional factors but that is for another day.

        4. Differentiation

          As mentioned above, an essential element of strategic essence is differentiation – that which enables the organization to compete and thrive.  Without differentiation we do NOT have customers.  When an organization cripples that which differentiates it, it loses customers, when it enhances it, refines it, takes it to the next level, customers flock through its doors.

          Another example: another stalled project, ERP plus Warehouse Management System.  Customer was also involved in Brand Management for a range of global brands and, in fact, its ability to manage and enhance those brands, was the reason it was successful.  Yes, it was good at distribution but that was NOT the essence.  The stalled project TOTALLY ignored brand management and focused on the warehouse.

          I developed a Product Classification for the ERP that focussed on the brands, right down to what we called the “brand line”, the specific component of the brand that groups distinct elements of what you find on the retailers shelf.  I then designed some software to use the intelligence in the Product Classification to facilitate new product take-on so that the Master Data was highly intelligent and of the highest possible quality.  I also added a range of customer specific custom strategic attributes to the Product Master File that uniquely classified the products in accordance with the way my client and their customers viewed the products from a marketing perspective.

          I then specified a further piece of custom software that provided functionality to auto-generate marketing projects into the Projects module of the ERP based on the Product Classification (i.e. the Brand Hierarchy).  The client now had a project per brand line coded in such a way that they rolled up per brand and supplier with a budget and actual cost bin per brand line, per month across 29 marketing cost lines.  Overnight the client went from massive manual analysis in clumsy and unreliable spreadsheets with double punching to a comprehensive suite of brand management reports that NONE of their competitors were able to match anywhere on the planet.  Within a couple of years their turnover was up significantly and they won one of the most prestigious brands in the world away from their competitors; because they could do something their competitors could NOT do.

          At this point the cost of the project became insignificant relative to the improved turnover AND profitability that resulted – they could do MORE, better and with the same headcount!

          THAT is the power of strategic essence.

          Yes there were months of grunt work using very specialized techniques to make it all work but if you START OUT ON THE WRONG ROAD it is all fruitless and most IBIS projects DO start off on the wrong road!

          The absence of understanding of these factors is what makes most IBIS and ERP projects frustrating to executives.

          Understanding and applying strategic essence is the GREAT opportunity for any organization embarking on an IBIS project today.  It is ALSO the opportunity for any organization whose systems and operating procedures are slowing it down and getting in its way.

          Introduce strategic essence thinking and methods into EVERYTHING that you do, refocus your efforts and your investment and you will be surprised at what you can accomplish.

          5. The essence IS different

            Fundamentally the strategic essence IS different.

            Strategic essence thinking is a TOTAL turnaround on traditional systems implementation thinking.

            One of the things that floors me every time I come across it is why otherwise intelligent executives select business information system software on the basis of what their competitors are doing!

            The reason they are your competitors is BECAUSE you are doing something differently to them!  Yet now you choose the same system and same implementer they are using, on the grounds that they are in the same industry!  And then you complain that your system is getting in your way?   Most executives ALSO leave the selection of their new system, a CRITICAL STRATEGIC DECISION, to their mid-level management or even the CIO or IT Manager, and then are surprised when they get no meaningful strategic information.

            Determine the ESSENCE of your business and how it thrives.  Translate this into a STRATEGIC requirements definition and go to the market looking for the product and implementer that most clearly evidence an INTUITIVE understanding of your strategic essence, AND can explain HOW they will enhance it.  Find a strategic fit, go through a robust procurement and contracting process and sign a solid and enforceable contract.  AND appoint an independent strategic advisor to look after your interests, and serve as your proxy for day to day project decisions.  Somebody who intuitively understands the essence of your business AND the technology.  Someone who can advise you objectively and effectively and is entirely aligned with YOUR interests.

            Exactly the same approach applies to appointing ANY firm of management consultants for ANY form of business “improvement” – focus on the essence, lead from the front and do NOT abdicate to “IT” or anyone else.

            An Integrated Business Information System (IBIS) is, by definition, the most far reaching business improvement project you will ever embark on, IF undertaken correctly.  Done right it can add HUGE strategic value.  Done WRONG it can put you OUT of business.

            Since the CEO is the custodian of the INTEGRATED view of the business, that is after all what the executive team is, the integrated view of the business, the custody of the IBIS should rest with the CEO.  Back the CEO up with whatever strategic and operational advisory support he or she requires.  Put the CIO firmly in charge of the system from the top table.  Reposition your IT Manager as “Head of Business Systems”.  Do WHATEVER it takes to support the CEO to champion and DRIVE the operation of your integrated business systems from a STRATEGIC ESSENCE perspective.  Failure to do this is the BIGGEST single reason why businesses fail to get strategic value from their business information systems.  AND why integrated business systems are seldom implemented as INTEGRATED systems.

            6. The essence should be comprehensively communicated

              The strategic essence of your organization should be comprehensively documented and communicated.  Every member of staff, right down to the person who cleans the corridors, should know the essence of the organization and how it affects THEIR role.  In the early days you might go so far as to put up posters, put a banner on the wall facing the desk of ever executive and manager, talk about it constantly until it is totally known and totally understood.  Just doing that will improve the competitiveness, effectiveness and profitability of your organization.  That is IF profit is your motive, IF you are a “not for profit” or a Government organization, the strategic essence is every bit AS IMPORTANT in delivering whatever service it is that you deliver.

              The view of any person and particularly any business systems implementer or management consultant, is framed by their first hour of contact with the organization.  That is WHY I insist on interviewing the CEO first, one on one for an hour.  It is ALSO why I do NOT interrogate their website before I meet them (I do NOT want some mid-level persons view of the business first).

              My FIRST question is “what is the essence of your organization and how does it thrive?” and “how does it differentiate itself and compete”.  And then another two or three standard critical questions that I have honed over the years.  Together these questions will take the CEO and every other executive individually a full hour to answer.  And, if given the opportunity, they will overrun that hour.  I active listen, (feedback) and take LOTS of notes.  By the end of that first hour I know more about the heart of the organization than other consultants who have been working with the client for months.  In many cases I find that at the end of this strategic discovery I understand more about what is REALLY important to the client than other consultants ever understand!

              That insight allows me to quickly and accurately interrogate why systems are NOT delivering, diagnose the root cause of the problems, and prescribe the solutions.  Because when it comes to business systems, the root cause of poor system performance is almost NEVER technology or anything under the control of technologists.  Organizations are organic, they are made up of people and it is generally the “people“ issues that cripple systems.  So, giving the project to hard issue people who do NOT understand the soft issues, is a massive mistake.  Yes, you need the people who understand the bits and the bytes BUT they need a translator to tell them what to do in order to align the bits and bytes with the ESSENCE of the business.

              By extension, the next time you interview for the executive team, tell them your essence and ask them to describe on the basis of THEIR experience how they can help you enhance it.  When you next evaluate competing management consultancies, do the same.  When you are shopping for new business systems, be it the FULL IBIS suite or simply some additional component, do the SAME and evaluate the competing offers against your essence.  Pick the vendor / implementer with the PEOPLE who demonstrate intuitive understanding for the essence, and then LOCK them in contractually for the duration of the project.

              Do NOT allow bidders to wheel in the strategically intuitive mastermind for the pre-sales meetings, and then send that person off in search of the next trophy as soon as you have signed the deal.  Lock that man or woman into the project contractually and prohibit the bidder from introducing ANYONE to the bidding process who will NOT be part of the project team.  Orientate them to the essence, and then MAKE SURE that they evidence deep intuitive ability to ENHANCE and support the essence.

              7. The essence should be the point of departure for EVERY project

                By now I hope that it is apparent to you that the strategic essence is the point of departure for EVERY project.

                If you cannot clearly define how an IBIS procurement, or much more mundane project will strengthen the essence of the business, do NOT DO IT!

                But operations” I hear you cry.

                Surely operations are an essential component of the essence of the business?

                Remember Malcolm McDonald’s massively important definition “if you do the right things well your organization WILL thrive”.  The essence IS the right things, operations is about doing the essence of the business very well indeed.

                The moment you allow yourself to be seduced into believing that you can do operational things without reference to the strategic essence of the business, then either your definition and understanding of the TRUE essence is FATALLY FLAWED, or you are WAY OFF THE MARK with what you are doing!

                The reason that virtually every IBIS / ERP / WMS / TMS/ … system project on the planet fails to support the business to thrive; and the reason that 98% of CEO’s are disappointed with / frustrated with / off-the-record-ANGRY with their ERP / IBIS and its implementers and operators, is because the project was undertaken with NO reference to the essence and the system GETS IN THE WAY of the essence.  The expectations of just about every executive are NUMBED OUT with regard to their systems because of all the … they have been sold and told.

                Process obsession is the single biggest PERVERSION AND OBSTRUCTOR OF STRATEGY on the planet today.  Process obsession is a management consultant’s money printing DREAM.  Process obsession majors on the minors and totally IGNORES the strategic essence of the business.   Process obsession encourages and enables mid-level operational consultants to facilitate mid-level operational people for days and days and days to get TOTALLY IN THE WAY of the strategic essence of the business.  When process obsession projects fail it is ALWAYS the clients fault (fundamental management consulting commercial principle)!

                When you focus on the essence and enhance the essence, then workflow WILL be optimized as an EXECUTIVE DIRECTED OUTPUT of the project, a spin-off, a side output because the ESSENCE and equipping and empowering people to enhance the essence is THE ISSUE.

                Want to reduce the cost of running your ERP?  Focus on the essence!

                ERP NOT properly integrated?  Focus on the essence!

                Too much dead wood?  Focus on the essence!  Double your turnover and headcount is NO LONGER AN ISSUE!

                One of the first projects that I ever did focussing on strategic decision support delivered exceptional executive information and operational performance management AND, totally unplanned, ALSO delivered a 75% reduction in audit costs and a 25% reduction in administrative staff costs.

                Make your people more effective in terms of the strategic essence of the business and the REST will FOLLOW!

                8. Enhancing the essence should be the focus of every project

                  Every step of the way, focus on the essence.

                  In every decision, ask yourself if you will be enhancing the essence.

                  Once you are focussed on the essence, sterile debates about what aspects of the business should be “BPR’d” fall away.  In fact, the whole concept of “Business Process Re-engineering” will fall away.

                  Why do 70% of BPR projects fail outright?

                  Because they should NOT have been undertaken in the first place!

                  Why do another 20% of BPR projects materially fail to meet management expectations?

                  Because they should ALSO not have been undertaken in the first place.

                  Incidentally, how do you “re-engineer” something that was NOT engineered in the first place?  I am an engineer and I have to say that I regard the whole concept of “Business Process Re-engineering” to be an entirely inappropriate use of the word “engineering”!

                  The essence is NOT about process, it is about doing the things that are central to the way the business works better and better and better and, IF there is workflow involved OPTIMIZE the workflow.  Note that the way to optimize workflow is NOT to spend thousands of Pounds / Dollars / Euros / … on “as is” process mapping — what a LOVELY WAY for consultants to MAKE MONEY and a total waste of client money!  “We are going to build a new bridge and demolish the old bridge so we will document the way the old bridge works in minute detail!

                  NO!

                  Focus on the essence!

                  Optimize in support of the essence!

                  Lean operations?” – focus on the essence!

                  Focus the ENTIRE organization on getting EXCEPTIONALLY good at doing the ESSENCE of the business and it WILL thrive.

                  Focus the existing systems on enhancing the essence.  Reconfigure where necessary.  Add a data warehouse together with strategic taxonomies that focus on the essence and redefine your strategic management information.

                  Add every conceivable attribute to your databases that relates to the essence of the business.  Add essential strategic attributes onto every master file: your products, your people, your customers, your suppliers, your …

                  Seek to get to the place where your IBIS and accompanying data warehouse can answer EVERY question you can reasonably expect them to answer.  Including answers to the QUESTIONS YOU HAVE NOT YET THOUGHT TO ASK!

                  If you focus on the essence you will find that things flow easier, faster, more efficiently and more effectively.

                  If you focus on the essence you will find that the latest techno hype from major software and hardware vendors is NO LONGER strategic.  In fact you will wonder why you ever paid any attention to their hype at all.

                  You will quite likely find that your five year / ten year / … year old system IS capable of growing with your business and you will find ways to add clever pieces of software that enhance the essence AROUND the core databases.  You will realize that the major ERP and Business System products are MASSIVELY UNDIFFERENTIATED and that it really does NOT matter which product you have or buy.  A customer record is exactly the same NO MATTER what software and database you are using!  It DOES matter who advises you and how intuitively they understand the ESSENCE of your business.

                  One senior consultant part time who deeply grasps the essence of your business will add a THOUSAND times more value than an army of the other kind.

                  9. One size fits all CANNOT work

                    By now I hope that you realise that choosing a business systems product on the basis of what your competitors are doing is a BIG MISTAKE.

                    Choosing a system JUST because it is the BEST OF BREED for your industry is an even bigger mistake UNLESS, of course, you are the defining player in your industry in which case you are clearly NOT doing the essence well because, if you were, by now you should have taken over all the rest of them!

                    The same applies to your choice of consultants and the type of business improvement projects you undertake.

                    Understand YOUR essence and then go out and carefully head-hunt the firm that aligns with YOUR essence, the firm with the essential cultural fit, the firm whose service promise aligns with YOUR service promise, the firm that specializes in optimizing the products or services that constitute the essence of YOUR business.

                    I hope that I have challenged you to think differently about your organization and its systems.

                    I have spent most of my consulting career learning about strategic essence and how to incorporate it into IBIS, ERP and WMS procurement, configuration and operation with leading edge concepts and proven methods to engineering levels of rigour.   I have also developed a highly effective, light touch, short duration “Pulse Measurement” based on Military Quick Attack techniques to determine the health of your systems and prescribe the treatment to fix them.

                    I would welcome the opportunity to assist your organization to put any and all of the principles discussed in this article into practice to assist your organization to THRIVE, commencing with a Pulse Measurement at a minimal cost compared to the value that you will derive from it.

                    Yours sincerely,

                    Dr James A Robertson, PrEn
                    The ERP Doctor