Don Sull's blog

In many companies, the global economic crisis is taxing information systems to the breaking point.  To spot opportunities and threats in turbulent markets, managers need reliable and granular data quickly.  Shrinking demand, price pressure, and scarce resources reward companies that excel at execution, and flawless execution likewise requires supporting information. Facing these demands, many executives asking themselves which acronym (e.g., BI, CRM, ERP) is right for us? Which enterprise software provider should we work with? How much should we spend? Will it work?

These are the wrong questions. Instead, Chief Information Officers, Finance Directors, CEOs and outside directors should be asking, and answering, a more fundamental set of questions: What type of supporting data do we need to make sense of a rapidly changing market? What other information is required to support execution? What organizational, behavioral, and cultural changes will we need to capture the benefits of improved information?

To excel at execution, teams and individuals within an organization must master four interrelated activities: making sense of fast-changing situations; making choices on what to do, not do, and stop doing; making things happen across organizational silos; and making revisions to the plan in light of new information.  Each of these activities requires different types of information described below.

1) Making sense. The first step in successful execution is understanding what is going on. Teams must develop a shared mental map of the situation, what matters, and what they should do. To interpret an ambiguous, fast-moving, and uncertain situation, teams require what I call RUSH data, which is real-time, unfiltered to allow team members to spot anomalies, shared by the entire team, and holistic-i.e., drawing on different sources. (My next post will discuss RUSH data in greater detail).

2) Making choices. In a world of scarce resources, organizations must allocate cash, talent, and attention to the opportunities and threats that matter most. Teams at every level need to make hard trade-offs among competing demands, and revisit these choices as circumstances shift. Execution stalls at many companies because teams from the board down to the shop floor try to do too many things and dissipate resources. Making choices, at its heart, is about prioritizing. Companies need an information system to consolidate, communicate, and track progress of priorities throughout the firm. Companies can spend hundreds of millions of Euros or dollars on IT systems and still find themselves unable to track key priorities. One French engineering company deluged middle managers with over four dozen “strategic” priorities in a two year span, leaving people baffled about what really mattered. In contrast, InBev (which last year acquired Anheuser-Busch) chose three corporate priorities each year, communicated these throughout the organization, translated these into a small number of performance objectives for each employee or team, and tracked progress against objectives on a weekly basis.

3) Making it happen. Execution peters out when people fail to deliver on their commitments to get things done. Unfortunately, most companies lack systematic data on whether people are on track to deliver on their commitments. The first sign of trouble comes when business units or projects fail to hit their financial numbers–a lagging indicator. Firms can track commitments in several ways. When Akin Ongor took over as CEO of Turkey’s Garanti Bank, he instituted several systems to track the promises people made to one another, including publishing them in the company’s newsletter. CoThrive, a company I am involved with, has a cool software product that allows managers to track promises requested and made through email.

4) Making revisions. Execution in a changing world requires teams to periodically compare their ingoing assumptions with reality, identify gaps, and make mid-course corrections. To do so, they need clarity on which assumptions drive the success of their strategy and what new information would convince them that their plan is wrong. In terms of supporting IT, they require a system that spots variances from plan in great granularity and surfaces them quickly. More than a decade ago, Ispat International (the predecessor company of Mittal Steel), gathered data on raw material costs, energy use, quality, prices, etc. on a daily basis to spot gaps versus the plan. European and North American steel makers, in contrast, relied on data reported at monthly or quarterly basis. Needless to say, Mittal executives could spot emerging opportunities or threats well ahead of their competitors.

Information alone cannot ensure execution. It must be supported by organizational factors including the right people, an execution culture, incentives, and others. The absence of good information, however, can hinder efforts to execute. But to harness IT, managers must ask and answer a more fundamental set of questions.