Advancing Organizational Capabilities
In 2006, when Esat Sezer joined Coca-Cola Enterprises as senior vice president and chief information officer, the company was facing rising costs and flat revenues. It had failed to keep pace with the rapidly changing business landscape that included shifting consumer preferences, retailer consolidation, and rising production and delivery costs.
Operating in 46 countries with 74,000 employees, the company is the world's largest marketer, producer, and distributor of Coca-Cola Company products. It services 414 million consumers and one million retail stores, and supplies products to more than two million vending machines, beverage dispensers, and coolers.
Sezer joined with the senior management team to put together a global business strategy that would expand the product portfolio, transform the go-to-market model, and improve efficiency and effectiveness. During a recent Q and A session with the BTM Exchange, he explained: "To support this strategy to become the best sales and customer service company, we identified the need to make sizable investments in technology and to integrate our technology strategy with our business strategy."
It has worked. For 2008, Coca-Cola Enterprises had net operating revenues of $21.8 billion, a 4 percent increase compared to $20.9 billion in 2007.
“The turnaround was one of the reasons I wanted to join Coca-Cola Enterprises,” Sezer says. “For about 20 years, the company had grown through acquisitions in which we inherited varying processes and procedures. In addition, we were facing the most difficult commodity cost environment our industry had ever seen. In 2007, we created a global operating framework, which for the first time stated the company's mission, vision, and key strategic priorities from a global scale. It also included the core capabilities we needed to invest in and to improve. Technology was identified as a key investment area to support our business priorities.”
Although he may not have called it by that name, this is a textbook example of the strategy and planning principles of business technology management (BTM) – creating an enterprise strategy, identifying the management capabilities needed to execute it, and investing in the technology that will enable these capabilities.
Key Capabilities for Strategy and Planning
To better understand how enterprises can establish strategy and planning processes into repeatable practice, let’s look closer at the organizational capabilities (as defined by the Business Technology Management (BTM) Framework) needed:
The Business-Driven Technology Strategy capability identifies the appropriate strategic positioning, value discipline, and value type of the enterprise, infusing technology into business strategy. It tests and elevates strategy development and execution, establishing the interconnection of business and technology that is essential for enterprise success.
The Strategic Planning & Budgeting capability makes an ongoing, adaptive strategic planning process fundamental to the operating stance of the enterprise, providing for the establishment of goals and milestones. It also grounds the assessment of the effectiveness of the business technology strategy in established financial measures.
The Strategic Sourcing & Management capability supports the creation and management of relationships with those partners best suited to an organization’s strategy. This includes identifying areas of strategic opportunity for outsourcing, co-sourcing, and vendor selection, resulting in the creation and development of value nets and an effective extended enterprise.
The Consolidation & Standardization capability helps enterprises identify the impact of acquiring businesses, products, customers, or other assets and provides the foundation for identifying opportunities for standardization and integration into the organizational and governance structure of the enterprise.
How does an organization improve its strategy and planning?
Our research shows a distinct variance within organizations depending on their level of maturity. The following provides a snapshot of such findings:
At level 1, an organization typically execute some strategic business technology management processes in a disaggregated, task-like manner;
At level 2, an organization often exhibits limited business technology management capabilities, attempts to assemble information for major decisions, and consults their technology group on decisions with obvious business technology implications;
At level 3, an organization is "functional" with respect to business technology management;
At level 4, an organization has business technology management fully implemented across the board;
At level 5, an organization has matured far along enough to know when to change the rules to maintain strategic advantages over competitors who themselves may still be advancing their maturity of business technology management and convergence;
Many, if not most organizations will find themselves at Level 2. We can describe these companies in the four dimensions: process, information, organization and technology (automation).
Process. Processes in these companies are not comprehensively defined. For example, there may be an “IT strategy,” but it is most often a recitation of programs underway, coupled with a wish list of future items, together with a series of unverified financial business cases.
Financial processes are focused on reporting and performance versus stated run rates; budgeting is a yearly exercise focused on percentage increases (or decreases) from current levels. Sourcing is broken into various areas, with that of staff augmentation and “outsourcing” most often separated from that of materials and software, and handled separately by business area.
There is little – or no – consistency in business technology’s involvement in mergers and acquisitions, or in consolidation activities.
Organization. Some organization structures are in place. A CIO with direct reports is generally in charge of technology domains. An “IT finance” function has responsibility for technology business management, filling primarily a reporting and accounting role.
There are various sourcing managers and most often a separate technology procurement area. There are known business technology employees within the enterprise who are called in to work on consolidation and standardization efforts; such work is often done instead (or in addition to) their “regular jobs.”
Information. Data and metrics are inconsistently available and mostly useful in providing general estimates to guide strategic decision-making and performance measurement. Financial data may be generally available, but it is formatted primarily for financial reporting purposes. Other data is kept in separate and difficult to reconcile data stores, which complicates decision, measurement, and management processes.
Technology. The organization relies on point solutions for support of all capabilities. Desktop tools are the system of choice, although most enterprises do have standardized financial systems.
Maturity at level 4 (Synchronized) for Strategy and Planning has several measurable earmarks. All Capabilities within the Functional Area are implemented, measured and quantitatively understood and controlled. And, there is increasing similarity in maturity among all of them.
For example, processes at Level 4 are standardized, and they are in general use throughout the enterprise. The idea of a Business strategy with Business Technology deeply woven into it is increasingly familiar and accepted – and that of the influence technology can have on business strategy is beginning to gain increasing credibility, in particular where the business offerings of the enterprise rely on technology.
Formal processes by which strategic intent drives guidance for investment allocations for the business technology portfolio are in place, and they are used with breadth and increasing consistency. Sourcing selection and management is increasingly objective and driven by strategic needs of the business, by proven strengths of the partners and providers, and by quantifiable performance characteristics of the partners and providers. And, there is now an understanding that technology in fact does have a role to play in making acquisition, consolidation, and other business / corporate finance decisions.
There is now a formal, structured Office of the CIO (OCIO) whose members not only are direct reports to the CIO, but they are also business partners with enterprise leadership in their areas. Business Technology Strategy development often is headed up by an area head who works consistently with enterprise business strategy leadership and who works also to ensure that there is ongoing face to face contact between business areas and their technology partners for strategy development as well as for execution.
There is now a CFO of Technology who has at least a dotted-line relationship to the Enterprise CFO. A Chief of Sourcing partners with enterprise leadership in procurement; and, the leader of Consolidation and Standardization works regularly with mergers and acquisition leadership, with the Chief Operating Officer’s organization, and with the Finance organization to ensure that the voice of technology is heard with consistency.
Information is now increasingly consistent and available, and an increasing number of business and technology leaders have access to it through enterprise-wide analytic and decision support software.
With processes and organizational bodies having been introduced at level 3 (Aligned) and implemented at level 4 (Synchronized), the focus of the enterprise moving toward level 5 (Converged) increasingly turns to the dimensions of information and technology. The hallmarks of level 5 are fully data-driven decision making, full technology utilization throughout the enterprise, and fluency by business and technology professionals in the domains of each other to the point that they are almost indistinguishable.
Implementing Maturity Advancement
Working toward a known goal and following an agreed-upon path, an Enterprise can move from a state of repeatability in Strategy and Planning upward through Alignment to Synchronization – and, then to Convergence.
In order to advance through the maturity levels an enterprise must create and execute a Maturity Advancement Plan (MAP). The first step in creating the MAP is to create a maturity baseline. The baseline needs to be analyzed in the context of the current business strategy and the critical technology initiatives that are either in place, or planned, to support that strategy.
The MAP provides a guidebook for improvement, and puts into place durable Operating Models, Policies, Processes and Procedures that will ensure the changes made in the enterprise during implementation become a way of life.
The measurable business value of maturity improvement must be detailed and analyzed in order to understand the reasonable scope of the maturity improvement effort – otherwise, the effort will be regarded as having been largely an academic exercise.
**The above article is adopted from the forthcoming BTM Research series, “Advancing Management Maturity for Convergence”.
Faisal Hoque is an internationally known entrepreneur and author, and the founder and CEO of BTM Corporation. His previous books include Sustained Innovation and Winning The 3-Legged Race. BTM innovates business models and enhances financial performance by converging business and technology with its products and intellectual property. © 2009 Faisal Hoque | email@example.com