"Lag" - the scientific time between stimulus and response, is also a factor in business strategy execution. I call it Transformation-Lag and I define it as the time it takes for strategic thoughts to make impact. For our business at SAP Services - Professional Services in Tech - I estimate the transformation-lag to be around six quarters.
Why does it matter?
If you want to get change executed, you've got to know your Transformation-Lag and how to influence it. If you don't, strategy execution is at risk. Knowing your transformation-lag also helps in communication across your company. Other businesses might have different lag, and executives might not understand (or accept) why yours may be different.
At SAP Services, our business is an accumulation of IT implementation projects. They often have a duration of several quarters and once they're started, it's difficult to introduce strategic change into the contracts. Therefore change is mostly introduced in upcoming projects, not in currently running ones.
- Transformation Lag exemplified for an IT Services Business
The above illustration is a schematic representation of our transformation-lag. The flow of projects is the purple diagonal line, switching to blue for projects aligned to the new strategy. At a certain point 50% of the business is aligned (the red vertical bar). What are the hydraulics here?
Let's look above at the Strategy Phase:
- Yellow - In May, we start looking at key changes needed. This typically takes three months and includes a lot of decision making
- Green - Our determined changes are then translated into budgeting guidance for the organisation
- Grey - Finally, our local teams prepare for the execution phase in launch-sessions titled "Field Kick-Offs"
Next, let's examine the Execution Phase:Once the sales people are briefed at Field Kick-Offs, they will start to reflect the strategy in their sales cycles. If you take a short cycle of about three months, we will see the first projects aligned to the new strategy emerge after Q1. But, as you can see from the schematic,it won't be until October that we'll see more than 50% of our projects aligned to the new strategy.
That is why our Transformation Lag is labeled at 18 months.
Understanding and mastering your lag is key to your strategy execution success. For our business, I've learned to respect four critical success factors:
- Timing: Meeting corporate deadlines (like guidelines, budgets or comp plans) is key if you don't want to miss a whole year/cycle
- Customers: Pushing sales to inject the change as soon as possible for every new project will help shorten the lag. With a parallelisation approach, you can shorten this even more.
- Capacity: Hiring ahead of the curve is an investment too often postponed or omitted which then lengthens the lag.
- Enablement: Cascading the classic way takes time and the change gets diluted over time. Alternate approaches can densify this
Depending on your transformation lag, you might end up with an offset between strategy chatter and business reality. This can lead to tense conversations, and in certain cases frustration. In those cases, you will need to deploy smart mobilisation approaches to bridge this offset.
No matter what business you are in, transformation-lag is too often neglected - but understanding and mastering it is the key for getting results.
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