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Real-time enterprises need leading, not lagging, indicators to be able to synchronise strategy with turbulent environments

Recent stock market and corporate fraud upheavals and events of September 11 have emphasised just how critical it is to have processes which have leading, not lagging, indicators of market, customer, social and political conditions.

The traditional strategy process, with its focus on output measures that take time to change, isn't much use in this real-time world. By the time the measures show something's wrong, it's too late to respond effectively. Today smart enterprises are putting more emphasis on the inputs or capabilities they have available any time, rather than defining their outputs a long way in advance.

Volatile times are shifting the focus of the strategy-making process, and there are real implications for what CIOs need to deliver. Just over 12 months ago I wrote a column on emerging approaches to planning, referring to the challenge of strategy as the challenge of synchronising: synchronising the business and its environment and the business and IT. Let's rethink what this means for CIOs.

Focus on input, not outputs. It's possible to think of an enterprise as a system that takes inputs from its environment, transforms them using some sort of process, and outputs the result. It's what your enterprise does each day - taking materials, expertise or knowledge and providing products or services to the marketplace or to citizens.

Enterprises have always tried to manage to the last point in the chain. In the 1970s, they managed outputs because inputs and processes were stable. In the 1980s and early 1990s, they managed processes by working with core capabilities.

The environment is no longer stable enough to give you time to strategise using processes or outputs. You must move forward in the chain and manage inputs, closely monitoring the ever-shifting environment. This doesn't mean you don't have long-term aspirations. Rather that you acknowledge that you will have to duck and weave to get there. It won't be a linear journey, as it's now much more a "sense and respond" world. But just how good is your enterprise's "sensing" ability and what role does IT play in that?

The strategy trio: aspirations, assumptions, inputs. The three components of input-based strategy making are articulating your aspirations and goals, working with a set of strategic assumptions, and sustaining flexible capabilities (the inputs). This way you have the capability to assess your current position accurately, and to act quickly and change course when necessary.

The aspirations and goals set out what the enterprise is trying to achieve. The aspirations tend to be high level - for example, "we want to be number one in customer service", or, "we want to be in the top two in our industry in five countries by 2005". The goals are lower level and stated in a measurable way - for example, "we will have increased our customer delight index by 10 points". Making aspirations and goals explicit better ensures that enterprise personnel are pulling in the same direction.

A set of valid strategic assumptions is the lifeblood of synchronisation strategy with the real-time external environment. These assumptions must be made explicit, and should be stated only as far out as the enterprise can see. In some cases, this visibility may be as little as three to six months. Then each assumption must be regularly checked against the environment to see whether it's still consistent with reality.

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