Corporate Strategy Planning Simplified

What is Corporate Strategy and how do we deconstruct it?  Corporate Strategy can be simplified into two drivers:  Top-line and Bottom-line.  Top line is your gross revenue, and bottom line is what it costs you to obtain that gross revenue. Think about these as numerator and denominator drivers.  Together they make a formula that looks something like:

Yield(Investment)  x Market Opportunity x Accessibility
Cost of (Development x Support x Sales & Marketing x Admin)

So, the basic idea, for a software company, is that if you have frequent software enhancements and new products that match a ripe market opportunity, and you let your customers know about it, then you can collect a lot of top-line revenue.  The trick is to do this while spending the least amount on the bottom line. What's interesting about this process is that bottom-line cost is somewhat predictable and standardized.  Meaning, it costs your company probably the same amount of money to hire a development manager and to get a building to put people in as it does the company across the street. 

In order to shave expenses from the bottom line, you need to understand every competitive advantage your competitors have and newer industry trends in technology and implement them yourself as much as possible. The numerator factors are really what's unique about your products or services that set you apart from the competition. The more relevant these are to the existing market appetite, and the more your customers know about them, the faster your top-line will grow.

Now, wasn't that simple?

Mike J Berry

Why should Development care about Corporate Strategy?

We code, right!? We code, and play Warcraft. Why should we know or care about corporate strategy? Well, the answer is that most programmers probably don't really know what their organization's corporate strategy is. If you do, you likely have an outstanding manager who has learned that part of their responsibility as a manager is to communicate executive directives back to Development. A company that performs good 'Strategy Management' will do two things:

  1. They will broadcast their corporate strategy to all employees so that everyone can be on the same page.
  2. They will establish measurable metrics throughout the organization to determine how close everyone's efforts are to the decided strategy.

When this happens, an effective plan is for the Development department to adopt their own 'Department Strategy' that supports the Corporate Strategy. Then look for ways to measure how effective they are at pursuing that strategy.

For example, if your team has to report total hours for the week, reporting could be enhanced to include how many hours each programmer spends on each project. Then each project can be placed into separate 'strategy categories.' Then, time can be measured for each project worked on during the week, and a summary comparison can be presented to upper management showing that the Development department is 'following corporate strategic goals' by spending a proportional amount of time on projects that are aligned with various corporate strategies. If you are a manager and do this before you are asked to, you may even earn yourself a few stripes. Kapish?

Mike J Berry

What is Software Portfolio Management

What is Software Portfolio Management?  They never taught us about this in college.  This is when you are reading your email in the morning from an unhappy customer who wants new feature X when suddenly your phone rings and the VP of Sales wants to know when you will have an install ready for a customer Y whom you never heard of before and then all of the sudden the CEO walks in and announces that your team needs to start on pet project Z.  Sound familiar?  Enter SPM...a solution to stop the madness.

Here's how it works.  Your Executive Staff meets every two weeks.  You produce a list of all the hours available that your programmers collectively have for the upcoming two weeks (minus vacation, etc).  You produce a second list of ongoing projects, pending projects, and then you offer up the floor to whomever wants to request new feature X, Y, or Z.  They get to justify their request to the whole Executive Staff, preferably on paper, and then the whole staff decides when to start on the new project, and how to prioritize it. This way, project requests get presented and evaluated against the opportunity cost of the other projects, and not based on urgency or theatrics. 

There's a little more to it, but this basically describes an effective solution for an age-old problem.

Mike J Berry

Book Review: Optimizing Corporate Portfolio Management - Part 1

I just bought a new book on Portfolio Management called Optimizing Corporate Portfolio Management: Aligning Investment Proposals with Organizational Strategy, by Anand Sanwal (Wiley Press). To my amazement, the forward commentary is by Gary Crittenden, a long-time friend of mine. Gary and I lived near each other in Munich, Germany years ago. I believe my girlfriend at the time was a nanny for his kids. He led a group of us on a 5 day bicycle trek across Austria. Amazing experience. We went skiing together often in Der Schweitz.

Gary worked for Bain at the time, and later was the VP of American Express, and now has the CFO chair at CitiBank. (If your reading this, Gary, Here's a big 'Hello!') I'm eager to read the book because it details the challenges, solutions, and results American Express faced as it went through a Portfolio Management Revolution. Internally, they call the process Investment Optimization (IO), but it is known throughout the industry as Corporate Portfolio Management (CPM). This process scales very well to the software industry, except that only about 50% of all software companies in America have any kind of Portfolio Management process. Of those, few target Customer Value as the main driver for success. So there is a lot of work to be done in the software development industry in this area.

Mike J Berry

About Red Rock Research

Hi, I'm Mike Berry. The information found here and at my business consulting website is dedicated to pursuing and commenting on software development research and best practices.

I created this site to give back to the development community. Much of the information here I wish I had found years ago. I hope it's useful to others.

Mike Berry

My First Blog Post

I've started this site because I feel like it's time to start giving back to the IT community.  Lots of the information found on these pages I wish were made available to me years ago.  Probably there are software development managers out there just starting out that are hungry for information and want to perform their jobs better.  If you are one of these brave souls then cheers...this blog's for you.

Mike J Berry