Just because you can build it, doesn’t mean you should
At Daleth we develop competitive strategies, helping technology scaleups become more competitive and scale harder/faster/more efficiently. We therefore interface with technology and product teams all day, every day.
Our job is to align the competitive strategy (i.e. how and where we plan on winning) with growth, data and product/technology strategies (i.e. what is used to deliver on that positioning).
More often than not we support technology leaders in the development of the Technology Strategy. Our focus (and time) is typically on what not to develop, which means we have to make hard decisions as a team.
This post talks about the alignment of technology and competitive strategies, why it’s important and what can be done to improve it.
What is a Competitive Strategy?
A business’ competitive strategy is oriented to increasing the chances of success, by positioning the business in a place with no or low competition.
A Competitive Strategy is the conscious choice as to what parameters to work on in order to improve a company’s perceived competitiveness within an industry.
They should be big picture and have a low time preference – i.e. focussed on long term success.
Implicit in this, is what not to work on to improve perceived competitiveness. This is a core takeaway, especially relating to the Technology Strategy.
What is a Technology Strategy?
A company’s Technology Strategy is a plan to efficiently develop competitive advantage through technology over time. It should consist of a vision, objectives and tactics relating to the implementation, development and use of technology across the company.
A Technology Strategy should make the business more competitive, not less – meaning it should be building a competitive advantage through technology and not creating future liabilities in the form of ‘technical debt’.
Technical debt is [basically] the accrued opportunity cost because of technology. It can manifest in 2 core ways:
- Deploying crap code to production
Ultimately this means the implied cost incurred by a business to ‘rework’ fast/cheap deployments that will impact them in the future
- Trying to build everything
A development team that ‘builds everything’ increases the implied opportunity costs of not being able to capitalise on opportunities fast enough due to technology related constraints.
An example of this would be a development team choosing to build a popup banner for the website, or even a proprietary CRMS – when they are not necessary to developing competitive advantage.
As a business, do you really want to be paying to build and maintain your own code for services you can rent and maintain for a fraction of the cost?
Why is strategic alignment important?
Without alignment between competitive and technology strategies the business will not deliver on the technical components of its Competitive Strategy (basically it will build the wrong ‘stuff’) and likely accrue technical debt in doing so, which will compound over time.
This can take 2 basics forms:
- Time to fix bugs > available development resources, resulting in worsening customer experience.
- Growth/marketing/capabilities don’t keep up with competition, resulting in slower customer acquisition and worsening customer experience.
Compounding technical debt is costly, and can easily sink the chances of a new venture as costs increase or growth rate declines. Both of which are enough to cause major problems for startups and investment.
An example of alignment might be when the competitive strategy indicates developing into a network of services through integration is key to winning over the longer term, the technology strategy should be developing capabilities to build networked services and APIs.
Businesses that don’t have this alignment will almost certainly fail, primarily as their development teams will build products that do not develop a business’ competitiveness, and instead build technical debt into the business.
Why do technology teams not align with competitive strategy?
Typically development teams are made of talented, eager engineers wanting to build great products. So why do they misalign? Ultimately, it comes from the top – this is not really a bottom up thing!
There are many potential reasons as to why [in practice] this might not happen (e.g. poor communication being a major issue), but there is one main reason; a lack of focussed development.
A lack of focussed development comes when the leadership and strategy are unclear, and the team don’t understand the ‘why’ behind the plan.
This manifests in development teams
‘building everything, because they can – not because they should’.
What is built should not simply be because it sits at the top of some subjective prioritisation process, (or at worst some executive say so), instead it should be intricately linked to strategy – meaning the rationale should be easy to explain and understand.
What is not built should be very clear.
How to get alignment of Technology and Competitive Strategies
In order to define the Competitive Strategy a range of analyses are undertaken to better understand the structural parameters for success within an industry, as well as market opportunities.
Both of these components require the evaluation of technology as a parameter(s), meaning decisions need to be made relating to how to leverage technology to better ‘position the business’ to win.
These parameters should be discussed at length, to ensure both understanding and options for how to deliver on them. Once agreement is made on how to compete through technology, these then need to be adhered to within the technology strategy.
Technology leaders can then ruthlessly prioritise the development of technology assets in a way more strategic manner.
Strategy is better defined by what you don’t develop
Where a business points its development resources is obviously vital to its performance.
A CTO/Head of Engineering should ensure only technology adding the most value to the attainment of strategic goals are prioritised. This could be [but is not limited to] customer facing software interfaces, internal data systems, proprietary technology of some form.
A Technology Strategy is not the ‘re’ development of all ‘services’ the businesses needs to operate; CRMS, CMS, email automation, chatbots, software popups, customer questionnaires, landing pages, custom support etc. This bakes in too much reliance on the technology team across the business, thus building technical debt in the form of slow moving growth and operational teams.
“You wouldn’t re-engineer a database, so why would you re-engineer an email automation platform?”
In my opinion, zero resources should be allocated to those services that can be ‘rented’ and that don’t add to a core/unique part of your business’ value proposition.
All your development resources should be on developing competitive advantage through technology. End of..
Therefore, the best product and technology leaders ask very hard questions when thinking about their technology strategy and ultimately what to build. They are guided by strategy, problems and commercial opportunities – not features that rank highly in their prioritisation frameworks.
Leverage a Service Oriented Architecture
Technology Strategies could take a Service Oriented (SOA) approach to system design (which I highly recommend for improving business agility).
Using this approach a business identifies all the ‘services’ across the business (i.e. what is being done to operate the business, from both a customer and company perspective) that leverage technology. Then it can make conscious decisions as to what ‘services’ to optimise, and how.
A SOA enables clear delineation of responsibilities across the business. Who is responsible for the application database, or the customer support platform, or the CRMS etc.
With ownership clear, 2 core things occur:
- Development teams add more strategic value
With development teams working on strategically prioritised technology and less ‘stuff’, they are going to improve their ROI to the business.
- Growth and data teams can increase pace of deployments
Growth, marketing and data teams are now [more] accountable for their own performance meaning they begin to test and deploy new capabilities to deliver better performance.
Development teams should be held to account for metrics relating to strategic attainment as much as growth or marketing teams. The software is what provides a customer interface, enables product and service delivery – making it a critical component to strategic attainment and growth more broadly.
Good technology leaders hold their teams to account for metrics relating to business, being both the most efficient in their development as well as deploying technology to improve organisational efficiency where strategy requires it.
Ultimately, technology, like all other departments, needs to show a ROI and align with the Competitive Strategy.
The alignment of both Technology and Strategy provides businesses a real opportunity to outperform their competition.
However, poor alignment provides your competitors with an opportunity to win.
Therefore tech leaders should ensure their strategies and development roadmaps are aligned with Competitive Strategy.
Technology leaders must ensure planned deployment have alignment with strategic objectives, leverage service oriented architecture to better delineate ownership of technology ‘services’, and hold tech teams to account for strategic KPIs.
If development teams stop trying to build it all, they can add a lot more value to the business.
“We used to ‘build everything’, now ‘we only build [insert your choice here]”
If you want more information, or you want to talk about how you can better align your technology strategy with your competitive strategy feel free to get in touch here or contact Logan (the author of this post) via his LinkedIn here – we would be happy to help in any way.