Netflix has come to its senses and revised its strategy in favor of the customer. After a recently announced decision to split out its DVD business from its streaming business, Netflix received a barrage of criticism from customers -- including my last blog post, where I questioned the wisdom of this strategy. Today, CEO Reed Hastings announced a 180-degree about turn -- well done Mr. Hastings. While it would surely have been wiser to have made a better strategic decision in the first place, changing course in face of customer criticism at least shows Netflix is still willing to put its customers first.
This turn of events highlights the difficulty of getting strategic planning right. While abstract analysis of strategic options may point to an optimal choice for any set of circumstances, any strategic analysis which ignores customer impact is fatally flawed. As my colleague Luca Paderni and I pointed out in our recent keynote at the Forrester CIO-CMO Forum, companies must become customer obsessed. Indeed, we highlighted Netflix as an example of a company that had succeeded in large part because it was customer obsessed and had mastered the customer data flow in a way that increased customer value.
There is a lesson here for us all ... success in the future will go to those companies willing to become customer obsessed and put the customer ahead of Wall Street.
One of the many interesting topics of discussion we get into in our Social Business Strategy workshops is around the social ecosystem. This is the name I have given the collection of business capabilities potentially enhanced by one or more social technologies.
First let me define social technologies. Note I’m using the word “technology” quite deliberately in place of the more common term “social media” because social media is too often associated with consumer-facing technology as deployed in support of marketing. In defining the entire social ecosystem I prefer the more generic “technology”. I define social technology as “any technology that enables one-to-many communications in a public forum (or semi-public if behind a security firewall)”.
Social technology is certainly a hot topic, but for many CIOs the emergence of islands of social technology across the enterprise feels like a touch of déjà vu.
IT has been here before, having to clean up islands of automation that left organizations unable to coordinate information and react rapidly to changing market dynamics. Many organizations are already pressing ahead with multiple social media initiatives aimed at solving business or customer challenges — and that's preferable to doing nothing. But should CIOs help their organization step back and take a more strategic perspective on social technologies? By doing so, I believe CIOs can help avoid integration challenges down the road.
I'm suggesting that the more mature organizations (where social technology is well-established) should begin to refocus social technology efforts in support of a broader business strategy. At the same time, IT needs to help ensure the technologies being deployed meet the technology architecture needs of the business of today and tomorrow.
This is the subject of a recent report called "Social Business Strategy." The research takes a strategic look at how organizations are using social technologies and reinforces the suggestion that CEOs need to establish a social business council. We need to think beyond point solutions in order to maximize competitive advantage.
Many clients have suggested their PMO mission is already elevated to this level. They now focus their efforts on everything from guiding business leaders through building a business case for the investments they want to make, to guiding decision-makers through selection from the portfolio of investment proposals, to tracking benefits realization and ROI after the fact. PMOs with this kind of business-focused, strategic mission have greater business impact and are often close partners with executives leading their firm.
Last week, I attended the ONS (Offshore North Sea) 2010 conference, one of the world’s largest energy conferences, with more than 49,000 participants, in Stavanger, Norway. The conference theme was “energy for more people,” an important goal, not only to keep pace with the growth of the world’s population (expected to hit 9-plus billion people by 2050) but to fight poverty and increase living standards around the globe. However, soon after the opening ceremony by King Harald V, it became very clear from the first panel discussion that the path forward to achieve this goal has many facets and that the leaders of the world, including politicians, academics, business people, and other authorities, are far from reaching consensus on the right path today.
Conventional Energy Resources
Global energy demand will increase by ~45% within the next 20 years (according to the International Energy Agency), but what will the distribution of energy resources look like by 2030? Most scenarios predict that fossil fuels will continue to be the primary energy source, with oil and gas making up 65% of the total demand. To no one’s surprise, most of the presentations and exhibitions at ONS 2010 were therefore dedicated to the future of fossil fuels that can be combined into the following themes to satisfy the energy demand of tomorrow:
Unlocking new oil and gas reserves in the world. The concept seems to be straightforward: Overcome technical and political hurdles and drill deeper, faster, and more efficiently to carry exploration into new territories such as the Arctic or ultra-deep sea.
Whether you are a CEO, CIO, IT employee, or working outside of IT, you have some level of understanding of your organization’s strategy. At least that’s what I believe. But how much do you understand? To find out we’re conducting research across the enterprise to see how well employees understand business strategy and whether they have any idea about the IT strategy or even the IT architecture strategy.
As a reader of this blog, I know you are an innovative thinker and business-savvy — I’m hoping you will please take five minutes now or later today to help out our research by taking part in this survey, no matter where you work or what your role is. Even if you cannot take the survey, you can still help by sharing a link to this post (http://bit.ly/cioblog29) with friends, colleagues, and associates who you think may be interested in the results.
The survey examines a number of aspects of business and IT strategy, such as:
How well defined and understood is the business & IT strategy?
How well understood are the measures of strategy success?
What time horizons are most common for strategic planning?
Frequency of planning updates
The perception of IT (from inside IT and from outside IT)
The maturity of enterprise architecture planning
Social technology strategy
I'll be writing future blog posts here based upon the data we gather as well as sending participants a summary of the results.
As CEOs put IT budgets under pressure year after year, CIOs and their teams focus on balancing money spent on running the business (RTB) versus money spent on growing the business (GTB). By decreasing the percentage of their budget spent on maintenance and ongoing operations (RTB), they aim to have a greater share of their budget to spend on projects that grow the business. In the best IT organizations, the ratio can sometimes approach 50:50 — however, a more typical ratio is 70% RTB and 30% GTB.
Unfortunately, such practices suggest an incremental budget cycle — one that looks at the prior year’s spend to determine the next year’s budget. While this may be appropriate for the RTB portion of the IT budget, it is far from ideal for the GTB portion. Incremental budgeting for GTB results in enormous tradeoffs being made as part of the IT governance process, with steering committees making decisions on which projects can be funded based upon the IT and business strategy. Anyone from outside of IT who has worked through IT governance committees understands just how challenging that process can be. And the ultimate result of such tradeoffs is that sometimes valuable projects go unfunded or shadow-IT projects spring up to avoid the process altogether.
Many companies are at the height of the IT strategic-planning season. For some, this is an annual ritual tied to the budgeting process. For others, this is part of a long-range planning process, with an annual review to check on progress. Still other CIOs are approaching the development of an IT strategy as an integral part of an ever-evolving business strategy, with regular adjustments as the business units flex and respond to market changes. Whatever your perspective, it’s apparent that in the past executives outside of IT have given scant attention to the machinations of the IT strategy — but this is surely changing.
The operational performance of any business unit is now so heavily dependent upon the effective and efficient deployment of appropriate technology that planning a business strategy without also planning technology strategy is like planning to win Formula One without any telemetry. You can’t even get to the starting grid.