Developing Strategy Using OKRs and KPIs to Assess Progress Toward Strategic Intent ?

In Nicholas??Carr’s Does??IT??Matter, he asks, isn't it enough for IT to enable companies to operate more efficiently or deliver better services to reduce cost or heighten customer satisfaction?

This question is the infrastructure question. Carr suggests that investments in IT have gone to waste after the dominance of the Internet. Much has been wasted on what are probably poor business decisions, IT investment as a strategic initiative still has merit. This merit needs to be connected to the financial performance of the business. The measurement and valuation of these investments must occur the same way other investment decisions are made. Carr's thesis is that IT has become a commodity service rather than the basis of differentiating strategic advantage. As IT costs decrease, its power increases and IT capabilities outstrip the company's needs. Again, this is an infrastructure view of a T. Like the railroads and electric utilities, if this is only a utility, it will have difficulty describing its differentiated advantage.

What is Strategy, and Why Should We Care?

Strategy creates fit among a business’s activities. The success of a strategy depends on doing many things well, not just a few. The activities that are done well must operate within a close-knit system – the strategic framework. If there is no fit among these activities, then there is no distinctive strategy, and there is little to sustain the strategic deployment process. Management of the business reverts to the task of overseeing independent functions. When this occurs, operational effectiveness determines the relative performance of the organization.

Improving operational effectiveness is a necessary part of management, but it is not a strategy. In confusing the two, managers unintentionally adopt a way of thinking about the value that drives ITs business enablement processes away from strategic differentiation and toward the tactical improvement of operational effectiveness.

Managers must be able to distinguish operational effectiveness from strategy clearly. Both are essential, but the two agendas are different. Operational effectiveness involves continual improvement of business processes that have no trade-offs associated with them. Operational effectiveness is the place for constant change, flexibility, and relentless efforts to achieve best practices. Strategy is the place for making clear tradeoffs and tightening the fit between participating business components. The strategy involves continually searching for ways to reinforce and extend the company’s position in the marketplace.

Strategic planning and management systems used to communicate the strategy must have Measures of Effectiveness (MOE) and Measures of Performance (MOP). For any strategy, these measures start with OKRs and KPIs.

Objectives and Key Results (OKR)

• Objectives capture what accomplishments are needed to fulfill the strategy
• Objectives are time-bound qualitative goals
• Key Results measure what is intended to be accomplished
• Key Results are quantified objectives reported as specific metrics measuring the achievement of the goals
• Strategy outcome-centric
• Written as SMART (Specific, Measurable, Attainable, Relevant, and Time-Bound)
• Set individually aligned to strategy
• Shared transparently and reported on a regular cadence, typically quarterly
• OKRs are about objectives and the processes that produce them
• Refer to the big picture and the Key Results telling is how to get there

Good OKRs

• Represent meaningful change, improvement, and growth
• Prioritized 30 to 90 days out
• Specific and time-bound, aggressive and realistic, measurable and verifiable

Key Performance Indicators (KPI)

• KPIs are critical (key) indicators of progress toward the intended performance result.
• KPIs quantify the progress toward a specific objective and are decomposed into specific metrics used to measure the achievement of the Objective.
• Provide evidence to inform decision-making
• Focus on strategic and operational improvements
• Create the analytical basis for decision-making
• Focus attention on what matters most
• Indicators of progress to achieving strategic objectives
• KPI document results as measurable values

Good KPIs

• Provide objective evidence of progress toward achieving the desired result
• Measure what is intended to be measured to help inform better decision-making
• Offer a comparison that gauges the degree of performance change over time
• Can track efficiency, effectiveness, quality, timeliness, governance, compliance, behaviors, economics, project performance, personnel performance, or resource utilization
• Are balanced between leading and lagging indicators

Resources and Guidance for Developing a Strategy

The pursuit of operational effectiveness is seductive because it is concrete and actionable. Caught up in the race for operational effectiveness, many managers do not understand the need for a strategy?- Dr. Micheal E. Porter – Professor of Business Administration, Harvard Business School.

• Connecting IT and Business Value – combining IT infrastructure with IT business enablement provides a seamless line of sight between strategy and execution of that strategy.
• Notes on Balanced Scorecard – Performance-Based Project Management – this?Notes-On?presentation describes how to develop a Balanced Scorecard needed to define the strategy of a project, from which the Capabilities needed to accomplish a mission are derived.
• Balanced Scorecard Strategy Map ?- The Leader's job is to set a clear direction of what their organization means by?results – Peter Drucker.
• Program-Based Strategy Map ?- a Balanced Scorecard for an?effective enterprise IT organization at the National Nuclear Security Agency IT department cleanup project.
• Balanced Scorecard Roadshow ?- taking a Balanced Scorecard?on the road?to the stakeholders of the strategy.
• Integrated Performance Management - The importance of performance measures for Balanced Scorecard Initiatives
• Notes on Balanced Scorecard - Performance-Based Project Management
• Capabilities-Based Planning and Balanced Scorecard Process
• Social Interest Solutions: Balanced Scorecard Strategy Map ?- What products and services must we deliver to satisfy our stakeholders and clients?
• Balanced Scorecard IT Strategy and Project Management , Denver IT Balanced Scorecard Conference, November 7, 2002.
• Building a Strategy-Focused IT Organization using Balanced Scorecard , Arizona SIM, March 21st, 2007.
• Creating the Balanced Scorecard - Small Group Hands-On
• Information and Communication Technology Communications Group Balanced Scorecard, CY 2004
• Introduction to Balanced Scorecard - Large Group Orientation
• Information Technology Department Balanced Scorecard
• Using Balanced Scorecard to Build a Project-Focused IT Organization ?- -Inverting the Balanced Scorecard pushes strategy down into the organizations to the project management level.
• Balanced Scorecard Readiness ?- Deploying the Balanced Scorecard is an evolutionary process, requiring awareness along the way of the?readiness?of the organization to proceed to the next step.
• Technology Services Division (TSD) Balanced Scorecard ?- BSC for a public agency Information Technology department.

? Balanced Scorecard Institute