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
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
Strategic Prioritisation
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.
Accountability
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.
Conclusion
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.
To state the obvious, a winning competitive strategy positions the company in a competitive position in relation to its competitors. To know ‘where’ your competitors are means you need to be ‘watching’ them all the time. This requires companies to have a formal approach to ‘watching’, aka – Competitive Analysis (or Competitive Intelligence).
Competitive Analysis is a component of the bigger process required to develop a Competitive Strategy. Ultimately we’re talking about the collection and synthesising of data relating to the competition, enabling strategists to evaluate and take appropriate action.
Competitive Analysis done well, is an ongoing process of collecting, organising, evaluating, synthesising and communicating data to relevant stakeholders for the purposes of developing and evolving competitive strategies.
These are significant programmes for a business to undertake, meaning the organisation needs to fully understand the necessity of strategy and its role in developing ongoing organisational success – and wholly commit to it.
To be successful (delivering high quality information and strategic insights for the organisation) takes executive support, allocation of resources, long time horizons, planning and infrastructure. This post gives summaries on each of these.
Customer Analysis Programmes need Executive Support
For any programme [of strategic importance] to be successful it requires support from senior decision makers who judge on return on capital investment (ROCI), which typically means executives and directors. Therefore any Competitive Analysis programme will require their support, primarily due to the cost component.
Although Competitive Strategies are vitally important for businesses to win over the longer term (or enter more crowded markets) the lack of a quantifiable return will be a concern to some. Therefore you need more foundational buy-in from a senior executive/director – someone that will support this programme over the longer term, even in the face of early hiccups and costly learnings.
Something important to think about, on a practical level, is that you need to ensure your internal supporters look good and can show their support is delivering value. Therefore, always clarify what success looks like for them, and work hard to deliver a version of it, even if an MVP. If you’re able to show success quickly, this higher-level support will grow over time and you might even recruit more executives to your side of the table.
Recruit the right team to deliver
In order to deliver a strong Competitive Analysis programme you need to recruit the right people to deliver on it. This team will require a diverse set of skills, some of which are likely better ‘rented’ (ie contracted) than ‘bought’ (ie employed).
If you need to build a data pipeline you probably need a data engineer, if you need dashboards to be built using SQL queries you probably want an analyst, if you lack someone to make sense of the information collected you need a competitive strategist.
Once you understand what skills you need to deliver on the programme, you can easily evaluate those you’re lacking and need to recruit. This is the beginning of your functional strategy, and you should consider both consultants and employees to deliver on it.
At Daleth we often advocate for a hybrid approach, meaning you get all the speed and experience of consulting teams, whilst training and developing an internal team of employees to take full ownership at some point in the future. But this decision will largely fall based on velocity desired and resources available.
It’s worth stating there are clear pros and cons associated with both consultants and employees. In general recruiting externally (i.e. using consultants, agencies or freelancers) lets you move very quickly as you can ‘rent’ high quality experience immediately without any legal/employment constraints, but the costs will likely be higher.
Employment, although a far longer process means the business is building its competencies internally thus reducing costs over the longer term and making Competitive Analysis a longer term competitive competency. But, the lack of experience of employees (when compared with consultants) can result in higher costs in the shorter term, whilst the employees up skill.
Either way, you need to resource the requirements – otherwise it will fail.
Long time horizons
Above I stated you need to show results reasonably quickly for tactical reasons – but your own time horizons will need to be longer. Ultimately the process of competitive intelligence does not stop, and so should be delivering value to commercial, data, growth, marketing, software and physical product strategies over time.
The value of Competitive Analysis also compounds over time meaning those with longer term time horizons will produce the biggest results for the organisation. Building strong Competitive Analysis foundations will result in faster reactions to competitor moves (simply put, you will see them earlier), strategies that more successfully intersect strong market trends and produce better results by being positioned in markets and industries with less competition. After all, this is the main focus of a Competitive Strategy.
It’s all about position, and in the words of Wayne Gretzky you need to
‘skate to where the puck is going’…
Because your competition is never static, and always trying to out compete you – you need a long term ‘always on’ approach to Competitive Analysis.
Planning
You might have all the support and resources you need, mixed with very long time horizons – but if you don’t plan your approach to developing a Competitive Analysis programme you will not deliver much of anything.
Planning is simply agreeing on the timing of effort, focus and spend to deliver on agreed deployments. I won’t teach you how to plan a project, but here are some things you should be considering.
1) Who are your competitors?
2) What information do you want to have?
3) What questions do you want answered about your competition’s strategies?
4) What can you deliver quickly that does not require much effort (i.e. the low hanging fruit)?
5) What opportunities can you unlock with certain ‘bits’ of information?
6) What infrastructure components are not deployed within the organisation?
Below are a few general comments about planning these programmes:
What does success look like?
Ensure you have sourced all the questions being asked around the organisation, at all levels of the organisation.
Make sure this vision of success is shared across the organisation, especially if you have any internal sponsors and advocates.
Be very clear on the definition of this success. Don’t be fluffy, be precise – fluffiness can get you killed out here!
Tackle the low hanging fruit first
Understand what data sources, data points and information already exist in the business? Start here, as there are typically so many valuable insights sitting on the other side of an hour of concerted analysis.
Don’t be afraid to challenge existing truths within the business, I would actually say this is a core component of Competitive Analysis. If it’s clear any axioms are false it’s your responsibility to bring them to the table.
Build a roadmap
Understand what infrastructure is required to answer certain questions, and the value of answering those questions. Quantifying the resources required and the value of the outputs helps you more easily prioritise the deployments of new capabilities.
Build clear development requirements, and ensure costs are wholly understood. Take your time here, there is no value in hurrying to start a project or deployment only to find out the problem is less understood and more complex to resolve. Slow down, take a breath, and focus on planning. As was drilled into me when I was younger – ‘piss poor planning leads to piss poor performance’. Amen to that.
Make sure you allocate ownership of projects and deployments to individuals. These ‘responsible persons’ (RPs) have the autonomy to make decisions, but also can and should be held to account for their decisions. This means A+ players can thrive and deliver quality results.
Remain agile
(Although not a part of the planning process) the programme needs to remain agile. As the business navigates forward things will change; competitors will make strategic moves, markets and cost of capital will fluctuate, technology will evolve – meaning the deployment of the plan should remain flexible. We recommend an agile management approach, enabling the core team to re-evaluate priorities and workload periodically.
Working within an agile methodology facilities regular communication and feedback, which reinforces efficient resource allocation. If you’re getting regular, quality feedback on what is and is not working then you can course correct more accurately over time, thus saving time and money.
Data Strategy Infrastructure
You can’t deliver on any sizeable data project without infrastructure. As they say ‘junk in equals junk out’, so a keen awareness of data quality from source to strategy is key.
Mapping the current and planned data pipeline, i.e. what data goes where and how, is vital to ensure team wide understanding on what the vision is, the stages of deployment are, and anticipated outputs at each stage.
Therefore when thinking about infrastructure you should ask at minimum:
What data sources do you need to answer your questions?
Are you looking at structured proprietary data, or unstructured publicly available data?
Are there costs for any relevant API access?
Does your data need converting and merging to something more valuable (this is modelling)?
What are your timescales for reaching certain milestones?
Data management tools
The business should build a Single Source of Truth (SSOT) – a single repository of customer (and other data) meaning the rest of the stack is downstream to this SSOT.
This means all integrated systems and teams are working from the same, up to date view of the business’ data, and prevents silos (which ultimately means teams can be working from fundamentally different data sets and building inconsistent axioms across the business).
Below are the core components of any SSOT data stack:
Data sources
There are many types of data source to leverage, so think about what you need to evaluate performance and strategy.
We recommend only building into those you need. Only collect what you plan on using, as it costs to collect and house data.
Are you wanting structured or unstructured data, is it proprietary or nonproprietary etc?
Extract Transfer Load (ETL)
Extract, transfer, load – aka data loaders. Essentially we’re talking about moving data from one source to another without corruption.
Integration is key here, so APIs are your core tool. Unless APIs are your core competency, don’t try to build and maintain proprietary APIs. Instead use an API platform – whose role is to maintain a range of APIs used by the business.
Data Warehouses
Data will need to be securely stored in a structured format. Typically on a database, but there are many occasions when a Google Drive/Dropbox will suffice (typically used when data is unstructured).
Data Modelling Platform
If you’re pulling structured data (and to some extent unstructured data) you will need to model it – which effectively means convert it to something of more value. This requires conceptual, physical and logical data models – meaning what calculations do we want to process of our data?
These new outputs can then be stored in another table or warehouse, providing consistent company wide data points and metrics for further use and evaluation.
Business Intelligence Platforms
With consistent, relevant, data points across the organisation analysts can build both dashboards and run ad hoc analysis. This can provide both consistent performance reporting and a drip feed of constant new insights for synthesis.
With the right tools it is possible for all team members to analyse the data. This is called self-authorship, and although it requires a little more investment to set up, it delivers huge gains across the organisation because anyone can chase their instincts and run highly local (aka relevant) analysis on reliable data points.
And so, summary…
Running ongoing Competitive Analysis enables businesses to remain current, and ‘on-point’ with its Competitive Strategy. Once established they require ongoing resources and development – but the value they provide far outweighs any costs. Before undertaking any Competitive Analysis programme you need higher up executive support to increase the chances of success, to recruit to fill the requirements using either consultants or employees, ensure you have long term time horizons to deliver the value inherent in these programmes, plan plan and plan some more, and new be aware new data infrastructure will likely be required.
So, if you’re ready to take your Competitive Strategy ‘game’ to the next level seriously consider improving your Competitive Analysis. If you’re not 100% sure where to start or you need support or just want a discussion please get in touch, we’d be happy to help.
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