TxM 020 Section 2.3 What is a strategic taxonomy? Created by James on 6/26/2013 7:24:07 PM
In a previous section I introduced you to the concept of taxonomies and coined the phrase "Strategic Engineered Precision Taxonomy" (or SEPT) and coupled this to configuration.
What IS a strategic taxonomy?
1. Strategy is "the essence of why the organization exists and how it thrives"
In order to answer the question "what is a strategic taxonomy?" we need to define strategy.
In 1990, having discovered that I could not define strategy in one sentence, I set out to find that definition. I quickly found that the guru's had diverse definitions that did not fully meet my need but that Macdonald came closer than most.
Over the next ten years I eventually came to the point where I concluded that strategy is "the essence of why the organization exists and how it thrives", strategy is NOT invented, it is discovered, it is the end result of intuitive deduction by the founders of the organization as to a need in society which the founders set out to meet and succeeded in meeting. The essential strategy changes little or not at all over decades. Changing this strategy can break the business.
Thus we see that a strategic taxonomy focuses attention on how the organization thrives taking account of the essence of the organization.
2. In order to thrive "do the right things well"
Macdonald postulates that strategy is "doing the right things as determined by the customer" and that tactics are "doing things right as determined by the customer".
He goes on to say that if your organization does the right things well it WILL thrive. This has been the essence of my corporate objective for more than fifteen years – bringing engineering disciplines to the IT and ERP industry in order to assist clients to thrive.
Thus, when we say that strategy relates to "how it thrives" we are saying it relates to how you do the right things well.
Thus we see that a strategic taxonomy is a taxonomy that focuses attention on the right things.
3. High quality executive decisions are the essence of what is required to thrive
I have also come to understand that high quality, strategic executive decisions well executed are the essence of what is required in order for an organization to thrive.
Thus a strategic taxonomy must be designed in such a way that it facilitates, supports and underpins high quality executive strategic decisions – this requires that the essence of the business is always at the forefront of the thinking of executives (and the business).
4. Focus on fundamental first principles "the essence"
In order to do this a strategic taxonomy must focus on the fundamental first principles building blocks of the business – what is the information that is essential to the success of the business?
Put that information at the top of every list in your integrated business information systems à your ERP, DW and BI and you will have all who use that data automatically focussing on the essence of the business.
It is a simple concept but extremely powerful.
How do you communicate the strategy, the essence, the thrive focus of the business to all staff? Populate every drop down list, every master data file with catalogued, hierarchically organized taxonomies that put those parameters at the TOP of the list.
Remember that most people start reading at the top of a list or the front of a book. As they run out of time or their attention wanes they tend to skim and scan until most never reach the end of the list or the end of the book.
Accordingly, put the most important information at the top of the list, the 20% of the information that will support 80% of the thrive decision making. This is a strategic taxonomy.
5. A top down strategic executive view of your information
In order to do this start with a top down strategic executive view of the organization AND the information.
The correct place to start designing your Chart of Accounts, Materials Master List, Item Master, etc is IN THE BOARD ROOM with the Executive Committee with appropriate facilitation and education.
If you do this you will NEVER have an executive tell you they do not understand the system, the system will be configured from their point of view.
Think about it, how can you expect to facilitate executive decision making if you do not involve executives in the high level configuration of your systems?
6. Strategic intelligence in taxonomies drives a universal strategic view
Once you have incorporated these high level strategic taxonomies in your systems, whether the overall taxonomy or the individual segments of the hierarchy then the default position is that EVERY person who uses those systems will automatically see the executive strategic view of the business.
To do this you must have appropriate high level strategic facilitation starting in the executive suite – understand that you cannot use mid-level personnel to facilitate strategic taxonomies, you must use an executive level facilitator with strong strategic insight into the essence of the business and what is required for it to thrive.
7. High strategic effectiveness leads to high operational effectiveness
An interesting observation that I have made over the last twenty plus years is that high strategic effectiveness leads to high operational effectiveness and efficiency.
Once everybody is seeing the strategic view and information is highly classified and highly structured executives, managers and supervisors ALL have a more accurate, more dependable, more accessible view of the operations of the business at every level and they are therefore able to take better operational decisions as well as better strategic decisions.
This is TRUE EMPOWERMENT!
The organization just runs better, leaner, faster, more profitably because the right measures are in place to assist managers to ensure they are doing the right things well.
When I first encountered reduced headcounts, reduced audit time and cost and diverse other operational efficiencies I was unsure as to why they occurred, I started out focussed on high level strategic decision support and found that unintentionally I had ALSO delivered operational efficiencies!
It is a massive opportunity and one you should not let pass you by.
8. Exploit cognitive span to enhance decision making
A strategic taxonomy is a taxonomy that is designed from the ground up to facilitate decision making – it is structured such that as far as practical there are between five and nine items at every level of every branch of every hierarchy thus enabling viewers to "just get it" cognitively almost instantaneously.
This number – seven plus or minus two is the cognitive span of the average human being. Lower level staff are likely to have a span of around five while the more intellectually gifted may have a span of nine. All will start to choke on ten or more and no intelligent interpretation becomes slower and slower as the number increases – visualize making sense of a pie chart with thirty slices – it is impossible.
Working within the constraints of cognitive span we find that posting is MUCH faster and MUCH more accurate, interpretation of reports, dashboards, graphs, etc is much faster and more accurate, drill down is built into the underlying data and query, reporting and analytical software tools FLY over the information facilitating swift and agile inquiry and opening the door to sophisticated models and analysis that are totally outside the realms of possibility with more mundane information lists.
Better, faster decisions enable better more profitable more effective organizations and enhance and accelerate competitive gain and strategic growth – this is the way if you want to be the leader and not the follower in your industry segment.
Notice that the essence of your business is NOT necessarily the essence of your competitors business in the same industry – if it was you would have merged long ago – so their strategic taxonomies are NOT the strategic taxonomies of others in your industry. Poaching other peoples taxonomies, while seductive is really FALSE ECONOMY!
Your strategic taxonomies will form the basis of information presentation for decades to come and so it behoves executives to make the investment necessary to CRAFT a solution unique to your organization with the most highly trained team possible.
9. A long term long range view of direction
For this reason strategic taxonomies are crafted with a five, ten or even twenty year view of where the organization is going.
"How can you say that?" I hear you ask.
Well, truth is, in my experience, when you get an executive team in a boardroom in the right state of mind they DO have a long term view – it does NOT have to be exact BUT they can usually give you broad brush strokes of where growth and acquisitions might occur and where they are unlikely to occur – then just leave gaps in your code schemes in the logical places to accommodate this growth – it really is that easy J
So, in short, strategic taxonomies are an essential element of the information resources of any organization that in any way aspires to be a major player in the years ahead.
Do you want to be the target of an acquisition or the organization doing the acquisition? It could have a profound impact on your future!
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