11
Enterprise Strategy
If an organization does not have a clear strategy, parts of the organization will, at best, not be aligned and, at worst, compete against each other like a tornado leaving a path of destruction. Whereas if you have a strategy that creates alignment, it is like a trade wind pushing faster to your destination.
An Enterprise Strategy makes it possible to create a long-term plan and have a method to achieve objectives and goals, which are key to any type of strategic planning.
In addition, in this chapter, we will consider how Enterprise Strategy for an organization needs to adapt in the same fashion that teams adjust. Leveraging the ability to adapt and change is what keeps organizations relevant and allows them to continue to grow.
We’ll cover the following topics in this chapter:
- What is Enterprise Strategy?
- What do we mean by Strategy Agility?
- How is Enterprise Strategy different from portfolios?
What is Enterprise Strategy?
Enterprise Strategies – often called competitive strategies – identify how each individual enterprise will compete within its respective market and industry. Superior enterprise strategies are imperative to the success of the business because they link the business to its markets. So, enterprise strategies form the foundation for a successful business.
Unfortunately, most enterprises don’t have a clear understanding of strategy! The following quote from Geoffrey Moore is indicative of the conversations that we have had with senior leaders, which is really concerning:
Pro tip
I try to research a company’s strategy before starting an engagement; you can gain valuable insights from its website or its published financial statements. Failing which, ask them for their strategy (which, more often than not, has been created by a third-party consulting firm that is now gathering dust somewhere in someone’s drawer!).
A strategy is best described as a plan of action to achieve the mission of the enterprise. Therefore, defining a strategy may be the most critical activity of every enterprise, which makes it even more surprising many companies outsource this to a third-party consulting firm to devise.
An effective strategy answers four critical questions about the business:
- What customers and markets do we serve?
- What products and solutions do we provide?
- What unique value and resources do we bring to the endeavor?
- How will we extend them in the future?
From a Scaled Agile Framework (SAFe®) perspective, we recognize that we are not experts in defining strategy. It is not what we do as SAFe® Practice Consultants (SPCs); we need to understand the basic constructs that make them up and recognize that it needs to exist because it provides two critical outputs:
- Portfolio budgets
- A set of Strategic Themes for each portfolio
Businesses have various approaches to developing an Enterprise Strategy; however, a model adapted from Jim Collins’s Beyond Entrepreneurship shows a number of elements of Enterprise Strategy formulation [2]:
- Vision: This represents the future state of what the business wants to be. It’s persistent and long lasting.
Pro tip
If you are presented with a vision that is a 200-slide PowerPoint deck, then talk to the leadership team to try and persuade them to make something more engaging. There are a lot of good examples of visual and engaging representations of a vision, for example, a short video or a postcard from the future. My favorite example is from Bosch – Live like a Bosch [3].
- Mission: This identifies the business objectives that implement the enterprise vision and frame the strategy. They may be somewhat more temporal and likely be incremental in that each builds on the one that came before.
- Core values: Core values are the fundamental beliefs of the organization. These guiding principles dictate behavior and can help people understand the difference between right and wrong. Core values also help companies to determine if they are on the right path and fulfilling their goals by creating an unwavering guide.
Pro tip
Create core values that have been co-created by the people that work in the organization and have to live by these values. Then make sure that they are published on the internet and on the office walls, so they are there for all to see. I still have mine on a laminated credit card I carry in my wallet from a company I left over 10 years ago.
- Enterprise business drivers: Reflect on the emerging industry themes and trends that affect the business.
- Distinctive competence: Strategy naturally leverages distinctive capabilities, the unique advantages that differentiate this business from others, and provides a competitive edge.
- Financial goals: Whether measured in revenue, profitability, people market share, or other metrics, financial performance goals should be clear to all Stakeholders.
- Competitive environment: Competitive analysis identifies the most significant competitive threats to the business.
So, now we understand at a high-level what Enterprise Strategy is and why it is critical. We also considered the elements for strategy formulation, but let’s now consider what happens when market conditions change, and we have to adapt our strategy.
Strategy Agility
Strategy Agility is the ability to sense changes in market conditions and implement new strategies quickly and decisively when necessary; by that, we mean that it has to be dynamic and more frequent than the traditional yearly, or worse, five-year, cadence that we see in many organizations.
In recent years, we have seen several extraordinary global events that have disrupted the market, and in these situations, your strategy cannot remain static. The global Pandemic of 2020 was a recent example where whatever strategy you had in place needed to be ripped up and rethought; retail shop doors closed, the travel industry stopped, doctors couldn’t see you in person, cash payments were no longer accepted, to mention just a few of the many disruptions that forced companies to rethink their strategy. But it is easy to adapt when a gun is put to your head, as it was during Covid-19; the skill is being able to do it when there isn’t one, or you can’t see the gun.
Case study
Primark, a European fashion retail store, was forced to close all 375 stores 12 days after the initial Covid-19 lockdown in March 2020. They did not reopen for 6 months and reportedly lost £800m in revenue because they could not sell online [4].
Market sensing represents the culture and practice of understanding changing market dynamics based on the following:
- Market research
- Analysis of quantitative and qualitative data
- Direct and indirect customer feedback
- Direct observation of the customers in the marketplace
Savvy, lean-thinking leaders go see and spend significant time in the place where the customer’s work is actually performed. They return with current, relevant, and specific information about the realities of their products and services instead of opinions filtered through other perspectives. There is no substitute for hands-on learning; data and reports don’t cut it.
Go see is often called Gemba, a Japanese word. A Japanese police officer will often be heard saying “I’m at the gemba” – the scene of the crime [5].
Identifying and defining a new strategy is only the first step. Once determined, the strategy must be communicated to all Stakeholders in a new vision and roadmap and then, of course, be implemented. After all, significant changes to strategy often affect multiple solutions in the portfolio and require coordination and alignment.
Consequently, most large strategy changes require new Epics [6] to implement the change across Value Streams, and work that is no longer aligned with the strategy is purged from the backlog or even stopped during execution. In Chapter 16, we will consider how we equip our leaders to lead the change in an Agile way. However, the one thing that the global Pandemic of 2020 and 2021 taught us was that whatever strategy you had in place at the start of the Pandemic had to change almost overnight. With an ever-changing world, we can now assume that our strategies will not be long-lived but need constant revisiting. If the strategy has to change, then this will have an impact on your portfolios so, let’s have a look at what we mean by a portfolio.
How is Enterprise Strategy different from Portfolios?
The enterprise represents the business entity to which one or more SAFe® Portfolios belong, and a SAFe® Portfolio funds one or more development Value Streams – each dedicated to building, deploying, and supporting a set of solutions the enterprise needs to accomplish its business mission.
SAFe® is not two-dimensional because an enterprise might have multiple portfolios, and a portfolio could have development multiple Value Streams and Solution Trains and/or Agile Release Trains (ARTs).
Let’s look at an example of a bank. The enterprise, Big Bank Group, has within it a number of business units, for example, retail, credit card, capital markets, and wealth, which each have its own portfolio.
Within retail, we will assume lending has its own portfolio. By completing a Value Stream identification workshop (see Chapter 12), we can identify a number of operational Value Streams that could include (but not be limited to) Mortgages, Personal Loans, and Overdrafts.
We will go on to determine we need a Solution Train for Mortgages and also Personal Loans and a single ART for Overdrafts:
Figure 11.1 – A portfolio view with two large solutions and a single ART
Figure 11.1 shows an expanded view of the portfolio with Mortgages and Personal Loans both configured as a Large Solution and Overdrafts only requiring an Essential SAFe® configuration.
One of the great advantages of SAFe® is the ability to scale to support large organizations, however the reality is that the majority of the time you only need the simplest configuration – Essential SAFe®. A single enterprise with a single Value Stream (maybe just one product) is realized by a single ART. Figure 11.2 is the SAFe® Big Picture configuration graphic of Essential SAFe®:
Figure 11.2 – Essential SAFe® (© Scaled Agile, Inc.)
Pro tip
In the same way that we try to avoid or minimize dependencies across teams and ARTs, we also try to avoid dependencies across portfolios.
Portfolios tend to be aligned to independent business units; this is often a good starting point when considering what portfolios to instantiate. Also, consider grouping solutions that are connected, especially by systems, as they can also be good candidates for portfolios. Either way, try to make them independent.
Summary
In this chapter, we learned that it is important that an enterprise has a clear strategy; however, as Coaches, we do not craft that strategy – this is not what we do as SPCs. That said, we can certainly influence senior leaders to at least present the strategy in an engaging way.
Recent events have forced organizations to recognize that strategy is not static and has to be more dynamic to reflect changes in market conditions.
Finally, we learned that a SAFe® Portfolio is a collection of related development Value Streams under common, strategic, and budgetary control. In the next chapter, we will look at how to build your portfolio.
Further reading
- Moore, Geoffrey A. (2011). Escape Velocity: Free Your Company's Future from the Pull of the Past. HarperCollins.
- Jim Collins, William Lazier (2020). Beyond Entrepreneurship 2.0: Turning Your Business Into an Enduring Great Company. Penguin Publishing Group.
- The Internet of Things presents – #LikeABosch: https://www.youtube.com/watch?v=v2kV6pgJxuo
- Primark loses £800m in Covid-19 Lockdowns: https://www.theguardian.com/business/2020/jul/02/primark-loses-800m-amid-covid-19-lockdowns
- Gemba: https://en.wikipedia.org/wiki/Gemba
- Epics: https://www.scaledagileframework.com/epic/
- Further SAFe® reading around Enterprise Strategy: https://www.scaledagileframework.com/enterprise/