What most CIOs get wrong about strategic IT plans

Wonder why Elon Musk wants to land people on Mars? It’s because any Martian business will enjoy an insurmountable advantage: With a 687 earth-days long year, Martian enterprises will go through about half the number of budgeting cycles their terrestrial competitors do.

In my younger and more sarcastic days I used to needle my friend the budgeting manager, who was also responsible for reviewing capital project proposals to ensure their projected ROI exceeded the hurdle rate. “What,” I asked him, “is the ROI for budgeting?” My friend would state, in response, “Your budget is your plan!”

Our conversations on the subject were, admittedly, repetitious, but we were younger then — the needling and counters were the point. They didn’t stop him from insisting that my department submit a budget and didn’t stop me from submitting one.

But it wasn’t, I insisted, our plan. That, I wish I’d had the sophistication to explain, was the consequence of our strategy. It’s just as well, because I would have been using the term “strategy” wrong, too, although less wrong than insisting that a spending forecast is a plan.

Anatomy of a plan

In the realm of business, strategy isn’t what most of us think. What it tries to be is a mirror of the military planning process, but more often it echoes The Princess Bride’s Inigo Montoya, who famously said, “You keep using that word. I do not think it means what you think it means.”

Military planners work at four levels: Political, Strategic, Operational, and Tactical. Oversimplifying a lot, the Political level is about reconciling and aligning stakeholder needs, objectives, and priorities. Most business planners get this one right, except for the unfortunate tendency many CIOs have of misidentifying some stakeholders as “internal customers.”

Strategy, in military terms, describes the broad-stroke view of how to beat an opponent. What business planners generally get right about strategy is that they describe in their plans how to achieve the goals defined at the political level. What they often get wrong, however, is failing to think in terms of beating an opponent at all; also, they typically use “strategy” to encompass all four levels of planning.

Operations is an intermediate level of planning. In military use it tends to focus on campaigns, fought at the theater or regional level. In business, were “operations” commonly used in planning conversations, it still might focus on region-by-region analysis; it also might deal with other formulations for defining broad customer segments.

Unfortunately, in many organizations, the operations-level planning that should take place is instead all about division-level efforts that end up reinforcing the separation, insulation, and rivalries that make organizational siloes anathema to effective action.

And finally, at the most granular level of planning, is Tactics. In military terms, tactics are where bullets are exchanged and wars are fought. Tactics are how military forces win battles, and, therefore, campaigns.

Sadly, in many business conversations, “tactics” is used disparagingly, synonymous with department-level planning. It’s thought of as the province of small and narrow thinkers who lack the vision to deal with strategy.

Centering on customers and competitors

Operations is a worthwhile facet of the plan to revisit. Some years back, operations-oriented business leaders discovered customers, who, it turned out, had been, with varying degrees of patience, waiting for this to happen.

Far be it from me to suggest customers are anything other than of primary importance, except for the times business leaders fail to recognize the role customers play in the greater scheme of things.

Which starts, as usual, with making sure definitions are sound. And so, there are three distinct customer-facing roles in the world of business that are often confused.

First, there’s the true customer — the entity that decides whether to buy your products and services. Second, there’s the consumer — the entity that makes use of your products and services. And finally, there’s the wallet — the entity providing the funds used to make the purchase.

Customer-centric strategic and operational planning should be laser-focused on true customers, caring about consumers and wallets only to the extent that consumers and wallets influence customers. In that vein, operations-level planning should place quite a lot of emphasis on choosing the right customers to sell to.

But customer-centricity isn’t always the right lead story. Often, business planners would be far better off concentrating their thinking on choosing the right competitor. To illustrate, rewind to the late 1990s. Best Buy chose Circuit City as its competitor to beat, and beat Circuit City it did. When the dust settled, Circuit City was gone, leaving Best Buy as Amazon’s showroom.

Depending how you count, Best Buy still hasn’t fully recovered from choosing the wrong competitor as its strategic (operations) centerpiece.

Now rewind to yesterday — maybe the day before. Imagine you’re responsible for Amazon’s strategic- and operations-level planning. (To be clear, we’re talking about Amazon the retailer, not AWS.) As Amazon’s planning lead, who do you choose as your competitor?

For this hypothetical, Best Buy might not be a bad choice. Better, perhaps, would be Walmart — a formidable competitor, with deep resources and a complementary but different (bricks and clicks) business model. Another possibility might be Costco. The point here isn’t that one of these is the right choice. It’s that they’re very different choices, calling for different operations and tactical plans.

Which is one reason this matters to CIOs: Different competitors call for different IT-based business capabilities in order to create and sustain competitive advantage. Not to mention the major potential unintended consequences planners must take into account when choosing competitors.

They must, that is, guard against the consequences of winning.