Cathleen Benko: Best Intentions - ' Paying Attention '

Paying Attention

Too many companies that invest heavily in growth have too few projects with the potential to improve business performance under way. At one high-technology equipment maker, which leads its sector by a very healthy margin, as many as 75 percent of its project efforts are focused primarily on delivering short-term results. To paraphrase the CIO at this company, it has a bad case of corporate attention deficit disorder. Unfortunately, many companies show symptoms of this very syndrome. It's not uncommon today to see companies looking for long-term growth freeze budgets or even reduce customer service efforts when they really need to improve service and increase cross-selling.

How does your company measure up? Try answering a simple question: "On balance, how well aligned is your organization's project portfolio with its objectives?" To answer this, first compile a quick list of company projects that are currently funded and under way. Choose projects based on budget size, expected impact, level of risk and the like. Second, take some time to think about the individual and collective business impact and value these projects represent. Third, based on this analysis, infer what your organization's objectives must be. In other words, mentally plot where the organization will be once the expected business results these investments represent are delivered. Finally, compare your list of implied objectives with your organization's stated intentions.

How did you do? Since these project investments represent your company's future currency, the larger the gap between your company's actual and imputed objectives, the greater the need—and opportunity—for increased alignment between your project spending and the organization's objectives. But how can you tell what your organization's intentions are?

No portfolio alignment effort can succeed without a clear understanding and communication of a company's objectives. And here, every company is really trying to deliver on three different sets of objectives. Two of these will be familiar to every experienced business and IT executive: short-term, or more operational objectives, which might include incremental efficiency improvements or improving customer service, and long-term, more strategic objectives that may include revenue growth and product innovation. But there is a third type of organizational objective, which depends in part on what I call "traits"—specific characteristics of a company's culture that set the tone for its ability to function in its current and future business environment.

Business leaders are grappling with the challenge of how to deliver for today while adapting for the changing business context, which is being fueled, in large part, by a confluence of linked technology advancements. The defining characteristics of this shifting landscape include increased organizational transparency, faster and faster data flows, reduced transactional friction, and the further blurring of the traditional roles of competitors, partners, sup- pliers and customers.

Trait objectives provide a structure for—and the ability to measure—an appropriate response to these new realities. Defining trait objectives calls into focus the behavior and thinking that can help align projects—and ultimately, the mind-set of the organization—with the rapidly changing market and business environment.

Although the four traits—Eco-Driven, Outside-In, Fighting Trim and House in Order—are new, companies are no strangers to the concepts that stand behind them. The first trait, Eco-Driven, promotes effective collaboration and takes into account the changing roles of customers and partners in the marketplace. Consider the rivalry between activewear makers Hanes and Fruit of the Loom. In the face of the North American Free Trade Agreement and mergers among retailers, Hanes "de-verticalized," concluding that it could maintain brand value without controlling manufacturing, provided that it restructured itself to successfully manage the virtual value chain that began with manufacturers, led through itself and ended at retailers. The result was increased market share and lower cost structure. Fruit of the Loom, in a vain effort to keep owning and doing it all, fell into bankruptcy.

The second trait, Outside-In, involves a mind-set where companies routinely see themselves as their stakeholders and constituencies see them, deliberately—and consistently—driving processes, structures and information flows toward their constituents' needs.

Hallmark Cards Inc. is a good example of Outside-In. It uses a 24/7 online community to gain insights into its customers. Visitors to its Web site, not all of whom are Hallmark customers, gather to share ideas such as recipes and decorating tips, discuss issues of interest and even make friends. The results of what was initially an experiment include fast consumer feedback and a five-times higher spending on Hallmark products by participants than before they joined the community.

The third trait successful companies will need to acquire is readiness for the coming real-time economy. They have to achieve Fighting Trim—maintaining agility and coordination, while keeping open the options required to act on new opportunities, respond to external change and contend with uncertainty.

Fighting Trim companies foster rapid, willing action in response to compelling new information. For example, the Seven-Eleven Japan Co. collects sales and other data several times during the day via satellite from its 10,000 stores and makes decisions—incorporating information such as weather data—up to a few hours before products are distributed to stores. Many of the items it sells are influenced by the weather, so having the right product available at the right time has had a dramatic impact on its inventory turn. Seven-Eleven, now the largest retailer in Japan, turns its inventory an impressive 48 times a year.

The last trait, House in Order, involves developing and maintaining an efficient intra-enterprise culture that values and promotes collaboration. Take Harrah's Entertainment Inc., a major operator of casinos, hotels and resorts. The company has spent a great deal of effort on developing a loyalty program for frequent clients. Initially, the management teams at different hotels resisted sharing information on their best clients, but with perseverance this critical information now crosses properties fluidly. The payoff was well worth the effort. Harrah's more than doubled its profits and was able to quickly recover from the aftermath of Sept. 11, restoring occupancy at its flagship property in Las Vegas by the end of that unfortunate month.