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June 18, 2005

Strategy and the ROI in Change

Strategy moves from being an intellectual awareness to a progressive practice when strategists describe strategy in a way that describes manageable processes of the business.

However, this does not simply mean translating strategy into operations.

Instead, "strategy" is the model for the ROI in Change.

By definition, all "change" involves a comparison of states.

In strategy, Change is a difference (of states) described in two dimensions: impact and risk.

Regarding impact: the difference in states is between the currently expected state and the future actual.
Regarding risk: the difference in states is between the preferred normal and the allowed incidental.

Strategy acknowledges that you have a stake in changes, and it expresses a theory of how you structure and leverage your stake for benefit.

This commitment to change is essentially an investment, and strategy models the return on that investment.

The model for the ROI in Change cannot be reliable if "ROI" itself is misunderstood. The essential observation to make about ROI is that the "return" comes as an asset that is a potentially more valuable resource than was the resource consumed to produce it. Famously tired and dry arriving at a roadside hotel in a strange town after midnight, I was desperate for a soft drink from what incredibly was the only nearby source - a vending machine that took only coins, of which I had none! The sixty-five cents in coins that I bought from another late traveller for a dollar bill was worth far more to me than the dollar bill.

Strategy models an ROI by coordinating highly plausible differences into a pattern that is manageable.

To do that, strategy must find a way to identify differences as resources and design a process that converts them. This is basically what is meant by "seeing change as opportunity".

Strategy research takes responsibility for formulating the terms that identify the differences -- including current expectations, future actuals, preferred norms and allowed incidentals.

In the language of forecasts, targets, standards, and exceptions, strategy recruits management practices to critically intervene in the course of events and relationships, making them resources.

Much of this intervention is seen in practice as discipline, for which numerous aids are employed including methodology, processes and automation to improve execution.

But the emphasis on discipline too easily makes the strategy seem to be the product of the discipline, instead of the discipline being a service for the strategy.

Creative interventions, focused on the findings of strategy research about change, are an ideal goal of operations but too often current operations are a protected resource themselves, unavailable for "unusual" strategic deployments.

This puts pressure on the quality of the strategy in its role as the model for ROI. Operations must become available on demand to strategies, and this means that the constraining presumptions of conventional discipline must be overcome by the logic of returns from change.

Posted by Malcolm Ryder at June 18, 2005 8:29 PM

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