Digital Strategy | MEASURING

Insight is the ability to gain an accurate and deep understanding of a subject. It might be interpreted as knowing and feeling the underlying nature of things. Insights are a result of human intelligence, including emotions, experience, and feelings. They are a supplementary component of the data, and are a result of an individual’s experience and personality. Therefore, the greater an individual’s experience and expertise, the more useful their insights will be. Insights cannot be produced by artificial intelligence.

Some principles of strategic measurement for digital organizations are outlined below:

• Ensure the frequency of strategy review matches the volatility of the organization’s environment
• Adjust and evolve the existing strategy
• Change budgeting policies to link with the strategy cycle, not the other way around
• Align operational reporting to strategic reports so that the real impact of a strategy is easier to measure, and also so that changes effected by the strategy are easier to implement

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As with any other managed object, a strategy is likely to be measured and evaluated to ensure the progress, check the results, and validate the direction. In other words, there are three main reasons to measure strategy, which are to:?

1. determine whether the strategy is being implemented as planned (the progress)
2. evaluate whether it is achieving its defined objectives (the performance)
3. indicate whether it is still relevant/suitable given changes in the internal or external environment (the relevance).

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1.???????? MEASURING THE PROGRESS

Stakeholders will need to ensure that the initiatives used to implement the strategy are proceeding as expected. They will need reports that communicate the status of each initiative, and that alert them to any potential or actual exceptions to what has been planned.

The leaders of the initiative will need to know the status of every action, who is performing it, and whether it is on time, within budget, and to specification. Actions or decisions made in response to these reports will include:

• determining whether additional or different resources are needed for an activity
• alerting senior leaders and strategy stakeholders about potential delays or cost overruns
• rescheduling or resequencing work.

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Are strategic initiatives proceeding on time, to specification and to budget?

If there is a deviation, leaders can:

• Allocate additional funding to an initiative
• Revise the timelines of the strategy
• Alert key stakeholders of delays (or acceleration) to the delivery of a particular outcome
• Decide on whether to continue with the initiative or switch to an alternative
• Adjust the strategy as appropriate

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2.???????? MEASURING THE PERFORMANCE

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Completing initiatives does not automatically result in achieving all the objectives of the strategy. There are many other factors at play.

Leaders responsible for defining and implementing the strategy will need to know how the organization is progressing against its stated objectives. Some of these will be performance-based (e.g. whether revenue is increasing). Others will be related to achieving a milestone. Yet others might be measured in other achievements, such as avoiding emission penalties in factories, or achieving accreditation to deliver a service in a market.

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Even if all initiatives are on track, is the strategy meeting its objectives?

If there is a deviation, leaders can:

• Change the strategy to respond to a particular event – for example, delaying one new product line while doubling efforts to launch another on time
• Move to implementing an alternative scenario
• Allocating additional resources to one part of the organization
• Withdrawing from an opportunity or market, thus cancelling that part of the strategy

?Executives and members of the governing body who are not directly involved in managing the strategy will need to be informed of changes to it. This will enable them to get involved in decisions as required.

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3.???????? MEASURING THE RELEVANCE

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Even if an organization is implementing strategic objectives according to plan, and the organization is moving towards achieving its strategic goals, changes in the internal and external environment might change that at any time. It is vital that those responsible for the strategy of the organization continue to monitor the factors of the environment that led them to define their current strategy.

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It should be remembered that as soon as the organization starts implementing a strategy, it brings about change. If these changes are not anticipated, the strategy will need to be adjusted. Strategy reviews should consider that the strategy itself is causing change, not just reacting to changes in external factors. This means that strategy metrics must focus on changes to the environment that happen independently of the strategy, as well as cause-and-effect relationships embedded within the strategy itself.

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INSTRUMENTING STRATEGY

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Information that is gathered and processed is primarily used for producing reports, but might be valuable in a variety of situations, such as audits, quality management, continual improvement, and service validation. Metrics are usually presented as reports or dashboards, which are intended to support good decision-making. They should be relevant to the recipients of the information and related to the required topic. Reports and dashboards should make it easy for the recipient to see what needs to be done and then take action. The metrics and reporting used in measuring and improving strategy should be defined in the strategy itself.

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Reports normally contain not only measurement results, but also post-processing outputs, such as:

• comparisons between actual and target values (to highlight deviations and to evaluate the current state of the management managed object)
• comparisons between actual values and data from previous periods (to assess trends over time)
• comparisons between different indicators (to evaluate correlations and identify bottlenecks).

?Reports can also lay out the reasons behind the current state of the object, together with conclusions and recommendations, and even action plans. Based on their purpose and content, reports can be categorized as operational or analytical.

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A. OPERATIONAL REPORTS AND DASHBOARDS

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Operational reports help to quickly identify deviations from plans and objectives as they happen, so that necessary corrective measures are triggered.

Because of the high level of automation, little time is required to produce such reports. This means they can be delivered often, e.g. daily or even several times a day. This provides the most up-to-date data to support decision-making.

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• Replace lengthy planning documents with electronic, digital strategy dashboards linked to various strategic reports and artifacts
• Real-time visibility of the strategy’s status of from all perspectives (strategy implementation, effectiveness and relevance)
• Ability to identify actions and respond quickly

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Organizations are beginning to replace lengthy planning documents with electronic digital strategy dashboards linked to various strategic reports and artefacts. The purpose of these dashboards is to have real-time visibility to view the status of the strategy from all perspectives (strategy implementation, effectiveness and relevance) and respond quickly. Appropriate links between documents and other artefacts, and feeds from business operation systems and external sources, can quickly identify the need for attention, and even allow leaders to model the impact of changes to the strategy.

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STRATEGY DASHBOARD EXAMPLE

B. ANALYTICAL REPORTS

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The purpose of this type of report is to identify hidden issues, define causes, and discover improvement opportunities. While an operational report focuses on facts, the analytical report helps to understand the facts and come to conclusions and recommendations.

Analytical reports cannot be fully automated. An expert, analyst, or consultant is needed to help develop it. Depending on the scope of research, this can take anywhere from several days to several months. For that reason, analytical reports are less frequent than operational ones, and support long-term decision-making with a planning horizon of a quarter or beyond, such as developing a new business or operating model.

Normally an analytical report takes a printed, paginated form. Interested parties receive copies of it. In some cases, an analytical report may require a release authorization.

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STRATEGY REVIEW

Keeping a strategy relevant and maintaining its effectiveness is the subject of continual strategy planning.

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• Purpose: To ensure the ongoing relevance and effectiveness of strategy
• Every strategic cycle contains a review step
• Review should examine the impact of the metrics that have been defined for the previous cycle – especially to detect unintended consequences
• Data provides a basis for review, but means little without insight

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Data is at the core of the personal and organizational decision-making process and evolution. Yet it is not the only source of knowledge used in decision-making. In fact, the term ‘data-driven’ often implies that data equals or includes insight. If data is assembled from facts, statistics, quantities, symbols, etc., the exclusive use of a data-driven approach might limit an organization’s potential to evolve, and might prove to be unwise.

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Digital Strategy is enabled and supported by tools and approaches, this will be covered in the next article.

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