Performance-Driven Culture Must For Successful Pattern-Based Strategy

Performance-driven culture will be one of the four disciplines required to support a pattern-based strategy, according to Gartner. It predicts that through 2015, organisations that implement it supported by performance management applications will outperform their peers by at least 30 percent.

A pattern-based strategy provides a framework to proactively seek, model and adapt to leading indicators – often-termed ‘weak’ signals that form patterns in the marketplace. Not only will leading organisations excel at identifying new patterns and exploiting them for competitive advantage, but their own innovation will create new patterns of change within the marketplace that will force others to react.

A successful pattern-based strategy requires four disciplines to be implemented throughout the organisation: pattern seeking (seeking and exposing signals), optempo (operational tempo) advantage (improving the organisation’s competitive rhythm), a performance-driven culture (extending the traditional performance focus) and transparency (the demonstration of corporate health and strategic use of transparency for differentiation).

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“The new economic environment that has emerged from the global downturn increases the pressure for organisations to adopt a performance-driven culture to support pattern-based strategies,” said Yvonne Genovese, vice president and distinguished analyst at Gartner. “However, most organisations measure performance rather than managing it, but this clearly needs to change. They need to change the way they manage business performance, from a rear-view mirror perspective focused on financial measures to a perspective that focuses on leading performance and risk indicators. As a result, it provides a forward-looking focus that permeates all levels of the organisation, rather than just providing top-level measure.”

“Most organisations struggle to overcome the cultural and technology barriers to implementing a performance-driven culture, which limits their opportunity to leverage Pattern-Based Strategy. However, we predict that through 2015, organisations that implement a performance-driven culture supported by the right technologies will outperform their competitors by at least 30 per cent,” said Nigel Rayner, research vice president at Gartner.

Identifying the right indicators of performance is one of the key foundations for pattern-based strategies but is not, on its own, enough. The development of a metrics continuum, with its focus leading indicators and weak signals, needs to be incorporated into planning systems to drive day-to-day operations. Furthermore, Gartner advocates the use of linked planning systems where financial and operational targets are linked with specific strategic initiatives and shared performance information provides the context in which to make informed decisions.

“Moving to linked planning systems will be a major shift in enabling pattern-based strategies as it provides the management teams with the ability to dynamically create ‘what if’ scenarios and simulations to model the strategic impact of new and changing patterns,” said Rayner.

“The issue in all of this is not the technology – although it can help – the primary challenges are in changing the mindset of the business leaders to use these systems to formulate and manage strategy,” said Genovese. “Business leaders need to change their approach to the planning and budgeting process so that it becomes part of a linked planning system, rather than a stand-alone budget that is used to control costs.”