Integral Planning and the Microsoft Case

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1 Integral Planning and the Microsoft Case By Albert Durig Planning within the modern enterprise in it s many forms; marketing, communications, financial, operations, manufacturing, etc., is by definition a strategic endeavor. And for decades the task of strategic planning in all its many forms has been performed as a purely technical exercise designed to; 1.) understand a current business environment, 2.) articulate a desired future business state, and 3.) chart direction and actions based on the optimization of resources. Planning is the exercise of expressing in explicit detail the steps, choices, and direction required to obtain a future desired state. All are activities that require a great deal of disciplined critical thinking and action. This in turn calls upon the individual within the enterprise to express self determination, strong values, and emotional competence, while confronting the brutal facts of competition. Collectively, planning requires interpersonal communications, conflict resolution, negotiations, shared vision, alignment and complex collaboration between numerous facets of business operations. For these reasons, it is necessary to create planning processes that truly integrate the technical requirements and aspects of planning with the human dimension of those people involved in, and who will be impacted by the design and execution of the plan. This paper will describe an innovative planning process that integrates both the technical and human dimensions of the enterprise, achieving operational guidance, business alignment, and collective empowerment. This new planning process called is based on the concatenation of the strategic planning work of Albert Durig, the Conscious Business work of Dr. Fred Kofman, and the Integral Theory work of Ken Wilber into a cogent synthesis of technical, collective and individual dimensions of the modern enterprise. In order to understand the meaning of the term integral in, we first turn to the work of Ken Wilber, founder of Integral Theory. Integral Theory in business Planning is the exercise of expressing in explicit detail the steps, choices, and direction required to obtain a future desired state. Integral planning is based on the theoretical framework of Integral Theory developed by one of the United States leading philosophers, Ken Wilber. Integral Theory describes a framework wherein all areas of human experience can be viewed within the context of three dimensions; the It dimension which refers to social systems and the external environment, the We dimension that refers to culture and the collective behavior of people, and the I dimension that refers to the self and individual consciousness. We begin with Wilber s Integral Theory in order to view the modern enterprise in the context of these three dimensions and integrate these dimensions into the planning process. Integral Theory provides the planning process with a guide as to how it can encompass and incorporate all dimensions of the enterprise, thus producing a more holistic, and less fragmented approach to planning. The chart below illustrates how each dimension exists within the enterprise and is comprised of three levels, the platform, process and product levels. Beginning with the platform level, each dimension has within it key components that are fundamental to any action, application or process that is derived from it. In the case of the technical dimension (referred to as the It dimension in Wilber s Integral Theory), the platform level refers to the infrastructure of a company, its offices, technology networks, and even organizational structure. In the case of the collective dimension (referred to as the We dimension in Wilber s Integral Theory) the 1

2 platform level refers to the culture of the organization via its shared vision, mission and practices. Finally, in the case of the individual dimension (referred to as the I dimension in Wilber s Integral Theory) the platform level refers to mental models that individuals utilize in order to interpret the world around them. These mental models drive attitudes towards learning, responsibility and emotional competence. Moving up one level in this chart, we see the process level. In the case of the technical dimension, processes refer to activities such as strategic planning, new product development, business operations, and so on. All activities whose existence is dependent on the platform level below. In the case of the collective dimension, the process level refers to collective behavior and social interaction such as communications, negotiations, and conflict resolution. In the case of the individual dimension, the process level refers to individual behaviors such as action, expression, and selfreflection. Once again, these behaviors are the result of the underlying platform in place. Based on viewing the modern enterprise in the context of these three dimensions, we begin by applying what we will describe as Level Order Planning. This methodology is specifically geared towards the technical dimension of a planning approach within the enterprise. We will then explore the application of Conscious Business principles to the planning process. As the process of what will be described as Level Order Planning unfolds, all three dimensions (the I, the We, and the It ) are continuously addressed and incorporated. Let us first look at the framework of Level Order Planning. Level Order Planning the process level refers to individual behaviors such as action, expression, and self-reflection. Finally, moving up one more level in the model, we see the product level. Within the technical dimension, product refers to the outcomes of the platform and process levels. This includes items such as revenues, profits and mission fulfillment. Within the collective dimension, the product level refers to the outcome of the platform and process levels that yield alignment, solidarity and trust. Within the individual dimension, the product level refers to things such as individual effectiveness, consciousness, awareness, and attitude. Level Order Planning is a planning model based on the formal logic of cascading goals and strategies throughout an organization in order to drive action towards the creation of a future desired business state. Level Order Planning divides an organization according to its business operation functions and arranges them based on their proximity to customer interaction. The proximity to customers is then mapped out accordingly and decisions are made whether to build the planning process from a bottom up approach, wherein those closest to the customer drive the planning process, or instead to pursue a top down approach wherein a central vision is driven throughout the organization from the corporate center. The choice to drive planning from either a bottom up approach versus a top down approach is often the result of market economics and company priorities. For example, during highly robust economic conditions as were experienced during the dot com boom of the nineties, bottom up planning allowed organizations to maximize local business opportunities, thus taking advantage of the flow of capital in local markets wherein the enterprise services customers on a daily basis. Bottom up planning is a choice of revenue maximization for the short term over the incorporation of vision for the long term. In the chart above, the formal logic of goal oriented planning is illustrated. An organization based on a matrix structure wherein business divisions exist as well as individual 2

3 geographies is used for this example. Goals and strategies are cascaded throughout the organization based on the transference of strategies from one level to the goals of the next level. This simple model describes how alignment of direction is achieved throughout different levels of an organization. As one begins the planning process according to levels, it is important to understand the definitions of goals, strategies and tactics. As one begins the planning process according to levels, it is important to understand the definitions of goals, strategies and tactics. First and foremost, the definition of a goal, strategy or tactic can be answered best in the context of the level within which it is being defined. One level s goals may be another level s strategies. For example, in the chart above, a second level s goals are derived directly from the first level s strategies and so on. When defining goals for the first level of planning within an enterprise, careful attention must be given to how a goal is defined. Take for example a company that decides to set as a goal, profit through cost reduction. Their strategy for fulfilling this goal is to reduce compensation. This goal and strategy were set by the CEO and his/her leadership team which corresponds to level one in Level Order Planning. The strategy of reducing compensation then is translated to the next level of the organization as a goal stated perhaps precisely the same way, or with a specific metric attached such as; reduce compensation by 10%. Now that this is stated as a goal at Level 2 of the organization, it is now necessary to create a strategy that drives direction from that level within the company. A strategy for Level 2 that addresses the goal of reducing compensation by 10% may read as follows: cut management by 5%. This would in turn cascade as a goal to Level 3 within the organization, that would then create a Level 3 strategy that described how this would be accomplished such as: conduct assessments of management and make reduction based on results. In this simple example, we can see how the original goal of profit through cost reduction, can eventually translate into specific actions to conduct assessment of management and make decisions to drive attrition of management according to assessment results. Although simple in example, the reality of planning goals and driving direction throughout an organization operates under the same principles. Goals define a future desired business state relative to the part of the organization that is defining the goal. Goals can be stated as measurement and this is often a clear way to define their intended purpose. Goals are the end to which effort is directed. Goals begin the process of providing strategic direction. Goals must also be mutually exclusive, meaning that the definition and statement of a goal must stand alone and not overlap with other goals. Within the first level of planning, goals are commonly stated as broad but need to encompass both business performance metrics such as revenue and profit, and also specific market positioning, organizational structure, and people development. Strategies are a statement of how to accomplish a goal. Strategies further define action for the organization. Strategies also define where accountability will be located within an organization. It is important to keep in mind, that in the context of Level Order Planning, one level s strategy can become the next level s goals. Once again, the definition of strategy at the first level of planning within an organization sets the direction for all other levels that proceed. Goals define a future desired business state relative to the part of the organization that is defining the goal. Tactics are most important at the level of planning closest to the customer. Although tactics can exist at each level within the enterprise, tactics always describe what actions need to be taken to fulfill a particular strategy. Not all tactics need transfer from level to level. Some levels may have tactics specific to the execution of their strategy that do not cascade to other levels in the organization. Now that we have outlined the basic model of Level Order Planning, let us take this concept further via the introduction of the Level Order Planning pyramid. Continuing with the same organizational structure as from our previous example, this pyramid is divided into three parts. The top portion of the pyramid refers to level one of the organization. According to our example, this level corresponds to the C suite of a company. This is the level wherein strategic direction is provided from the top and corporate center. 3

4 The middle portion of the pyramid corresponds to the second level of management between the C suite, and the geographies where execution of business occurs. This level is often occupied by the heads of business divisions, or large regional geographies. The third level of this pyramid is occupied by those areas of the enterprise that are closest to the customer. These are the local operations of business units, sales, etc., wherein daily contacts with customers occur. This level is where the proverbial rubber meets the ever present road. As can be seen by the color of the top of the pyramid, level one defines the core strategic direction for the organization. These are goals and strategies that will cascade throughout the entire organization as is illustrated by the continuation of this core and its color throughout all other levels of the pyramid. In the second level of the pyramid, an additional color is seen on the right and left hand sides. This color corresponds to what are termed level specific goals. These are goals that are not from the core as set by level one, but are additional goals specific to this level. For example, a business division may have several goals directly related to the overall strategic direction of the company as set by level one, but may also need to have additional goals that are specific to the operations and business of their division. In the third level of the pyramid, another color is added on the right and left hand sides. This new color indicates level specific goals that correspond only to the parts of the organization existing at this level. The third level will have goals that are the direct result of goals and strategies set at level one, as well as possibly having goals that transfer from level two. However, this third part of the pyramid may also have goals specific to their level. For example, in a matrix organization, level three often corresponds to local geographies. A local geography will have goals that are directly in line with goals and strategies set at level one, and may have goals that are the reflection of division strategies set at level two. However, the local geography will also have to have goals that are specific to that geography and are not relevant to the goals set at Level 1 and 2. An example of level 3 specific goals may include the management of local brand image and government relations. The use of the triangle provides the planning process with a convenient visual tool that illustrates enormous flexibility and control over an organization. For example, as each level determines their goals, they also work on the determination of the level specific goals for the proceeding level. In doing so, management continuously controls the width of the pyramid which is in turn a direct reflection of business focus. Different business and competitive environments require pyramids with different widths that maximize the opportunities of the marketplace, yet yield the necessary focus required to maintain competitive advantage. Control over the width of the pyramid, and in turn over the direction and focus of the enterprise is a fundamental benefit of Level Order Planning. Now that we have reviewed the fundamentals of Level Order Planning, let us now turn to the incorporation of the Conscious Business principles in order to balance the technical planning process with the requirements of the human dimension. Conscious Business As stated earlier, integral planning is the combination of Level Order Planning mechanics with the principles of Conscious Business and all within the framework of Integral Theory. In order to understand how Level Order Planning can be applied to the framework of Integral Theory, we turn to the work of Dr. Fred Kofman, who developed Conscious Business. Conscious Business is a discipline for the development of consciousness, awareness and improvement of human interaction within the modern enterprise. Conscious Business focuses on principles of learning and responsibility while addressing numerous areas of human interaction including inquiry, advocacy, commitments, conflicts, negotiations, and much more. It is through the use of Conscious Business principles that an enterprise can effectively carry out Level Order Planning. As we will see, Level Order Planning leads to a network of commitments. The success of Level Order Planning is directly proportional not only to the care and discipline of the planning process, but also care, discipline and clarity of commitments that are made as a result of the planning process. No planning is complete, without careful attention to the human dimension of the planning process. Too often, planning is seen as a purely technical endeavor. Conscious Business provides the tools necessary to integrate the collective and individual dimensions, thus creating a more holistic approach to planning. No planning is complete, without careful attention to the human dimension of the planning process. Towards an integral planning model We have seen thus far, that integral planning is designed to encompass three fundamental dimensions of human experience as described by the framework of Integral Theory. The mechanics of the planning process are described by a formal logic model known herein as Level Order Planning. This planning model then incorporates Conscious Business in order to address all dimensions of the enterprise based on an integral view and approach. 4

5 There are two ways in which can be implemented. These two ways can be conducted independent of one another, or together for optimal results. For the sake of description, we will break into these two approaches, each of which can be implemented separately. The first way in which can be achieved is to build planning for the technical, collective and individual dimensions into the goal and strategy setting from the top of the pyramid down. This requires a comprehensive look at an organization, and will incorporate the role and function of numerous departments in order to achieve such a holistic approach to planning. In this case, goals and strategies would be set not only for the desired business outcome in terms of revenues, profits, and positioning, but also in terms of the desired future culture of the organization, and the desired future fulfillment of the individuals working within the enterprise. This is often achieved with the creation of multiple plans that are aligned with common purpose and vision. This would include business operations plans, human resource development plans, communications plans, and internal cultural development plans. The second way in which can be achieved is to conduct business planning with great attention and detail to the collective and individual dimensions of those people involved in the planning process. Beyond traditional planning for a desired future business state, this type of Integral Planning conducts Level Order Planning on a collective cultural foundation of shared values, vision and practices. Additionally, planning is conducted with clear expectations for individual participation and unconditional responsibility. In this way, the behaviors of the collective group as well as of the individuals participating in the planning process are aligned. Clear and impeccable behaviors are developed and shared that drive commitments, conflict resolution, and negotiations throughout the planning process. Clear and impeccable behaviors are developed and shared that drive commitments, conflict resolution, and negotiations... Planning within the matrix In today s modern enterprise, matrix structures have come to define the contemporary state of business architecture. Matrix organizations are designed to provide a more horizontal structure to operations, wherein flexibility, agility and decision making power is de centralized, allowing businesses to more rapidly adjust to dynamic market conditions. Additionally, matrix structures drive shared accountability amongst multiple groups/departments within the business architecture. The result is often a complex operational structure that requires a great deal of coordination, communications, and collaboration. The Microsoft case The Situation: In the summer of 2003, Microsoft embarked on the largest organizational restructuring since its inception in Always a company based on geographic P&Ls, Microsoft managed its business by empowering local country operations with decision making regarding product mix, goto market strategies, customer relationship management, and customer segmentation. Although all product development was held in Redmond, Washington (Worldwide Headquarters for Microsoft) the marketing and sales of Microsoft products were decided by local geographies. The result was a sales quota driven management culture. One of Steve Balmer s strategies was to create a more customer focused company, with greater agility, globality, and shared responsibility that would move Microsoft from a products driven approach to a solutions driven approach. The answer and perhaps what history will view as the greatest legacy of Steve Balmer s term as CEO, is the new matrix organizational structure of Microsoft. Microsoft created a matrix wherein there were global business groups in charge of the products, their development, production, marketing and sales. These business groups are: Windows Client, including the Microsoft Windows XP desktop operating system, Windows 2000, and Windows Embedded operating system. Information Worker, including Microsoft Office, Microsoft Publisher, Microsoft Visio, Microsoft Project, and other stand alone desktop applications. Microsoft Business Solutions, encompassing Great Plains and Navision business process applications, and bcentral business services. Server and Tools, including the Microsoft Windows Server System integrated server software, software developer tools, and MSDN. Mobile and Embedded Devices, featuring mobile devices including the Windows Powered Pocket PC, the Mobile Explorer micro browser, and the Windows Powered Smartphone software platform. MSN, including the MSN network, MSN Internet Access, MSNTV, MSN Hotmail and other Web based services. And Home and Entertainment, including Microsoft Xbox, consumer hardware and software, online games, and our TV platform. Additionally, global segments were created that reflected the customer segmentation that best suited the sales channels of their different products and solutions. These segment groups are: the Enterprise Products Group, including Public Sector and Services. And the Small and Medium Business Solutions 5

6 and Partners Group. These segment groups join forces with the individual business product groups to market and sell Microsoft software products and solutions. Finally, Microsoft operated in numerous geographies around the world. These geographies now became the center of intersection between product groups and segments. As Microsoft embarked on this historic structural change, Microsoft Latin America hired Axialent to provide a 3 year program of cultural change management. Axialent was hired to deal with all aspects of the human dimension as it pertained to this cultural transformation. Not long into the process of change, numerous operational aspects of Microsoft Latin America were also needing to unfold in the context of their new matrix structure. These operational aspects included, strategic planning, financial planning, resource allocation, headcount rebalancing and business operations alignment. The Problem: Microsoft had traditionally set financial targets for all aspects of their organization, and these targets were the responsibility of local geographies to fulfill. However, in the new matrix structure, financial targets required complex interdependencies between regional and local product and segment groups. Additionally, Microsoft needed to address new competitive threats from Linux and the Open Source movement. This required more than financial target setting. It required a fundamental look at what Microsoft endeavored to be in the region. Just how would Microsoft achieve deeper, long term planning while addressing the short term business targets within the new matrix organization? This is precisely the question posed to Axialent in January of Based on Axialent s successful transformational work with Microsoft s Latin America leadership team as well as numerous levels of management below and throughout the organization, Axialent was asked to provide direction with regards to strategic planning within the new matrix environment. It was at this time, that Axialent introduced Microsoft to the concept of. The Solution: Axialent began by mapping out a comprehensive planning process based on Level Order Planning and Conscious Business. The entire planning process brought together more than 250 executives and required more than 30 planning exercises, templates, and execution tools. This process outlined five phases. These phases were as follows: the leadership team (was) given a series of exercises designed to capture their experience while structuring their analysis in such as way as to generate clear business implications. Phase I: Level one Latin America regional goal and strategy setting by regional CEO and leadership team. Work for this phase began prior to the actual leadership team meeting. All members of the leadership team were given a series of exercises designed to capture their experience while structuring their analysis in such as way as to generate clear business implications. A total of five exercises were created for the leadership team s pre work: A business implications analysis that looked into the political, economic, socio-cultural, and technological trends impacting Microsoft s business. A competitive threats analysis that considered current threats impacting Microsoft s business as well as the barriers and drivers Microsoft could leverage to address competitive threats. A customer satisfaction gap analysis in which pricing, ontime delivery, product performance and service were analyzed. An internal S.W.O.T. Analysis of the strengths, weaknesses, opportunities and threats presented by Microsoft s new internal matrix structure as well as their current culture s ability to deal with market opportunity and competition. Finally, a leadership team introspection exercise was produced to analyze each member s perception of the team s human dimension development and skillful communications required for sustainable execution. Once leadership team members had completed their individual pre work exercises, it was time for the team to meet in person to develop FY05 goals and strategies for the region as a collective business operation. This work required 4 days of offsite meetings wherein the following exercises were facilitated by trained Axialent facilitators these meeting included: a check in process for the expression of concerns and expectations for the meeting, a statement of ground rules that would guide the behavior and interaction of all participants during the meeting, an exercise called Back from the Future wherein participants were asked to imagine success and the attributes necessary for achievement of future success, an introduction to strategic planning methodology and strategic planning alignment in order to level all members on the planning process, an exercise designed to place all business unit and segment executives in a common regional frame of mind 6

7 called Lost in Space, a review of business implications based on the pre work assignments, an exercise designed to refine all implications into a common set of implications, a goalsetting exercise complete with Goal Strategy templates, a How to strategy development exercise wherein regional strategies were developed to support each goal with an evaluation and a drop exercise designed to drive focus into the business, an exercise for regional business group and segment goal setting, and finally, a strategies initiatives reconciliation exercise in order to align proposed strategies with existing initiatives already begun in FY04. These exercises completed the work performed during the leadership team s 4 day offsite meeting. Microsoft was now ready for Phase II. Phase II: Level two regional goal and strategy creation by the individual product groups and segment groups. In order to perform this phase, it was necessary for all regional business group heads and segment leaders to come together for a 2 day planning meeting wherein each business group and segment would begin work on individual business and segment group goals and strategies. This work was carried out via the following exercises created by Axialent s strategic planning team. First, regional business and segment groups met in what were termed intra group meetings to define regional business and segment group goals and strategies. Each business and segment group then prepared for cross group meetings wherein all areas of crossgroup collaboration were defined by each group and meetings requested. The next series of meetings were crossgroup collaboration meetings wherein participants from each business and segment group met with one another guided by a commitment template created by Axialent wherein regional inter group dependencies and requirements were discussed, negotiated and commitments made. At the conclusion of the cross group collaboration meetings, all regional business and segment group goals and strategies had been created as well as the preliminary level specific goals for the subsequent level of planning by local geographies in Phase III. Phase III: Level three goal and strategy creation by the local geographies comprised of the local leaders of each product and segment group. During this phase of the planning process, local geographic business segment group leaders were gathered together with local geography general managers, in order to further cascade regional goals and strategies as well as create Level 3 specific goals and strategies. This work required the creation and execution of several exercises by Axialent. Local business and segment groups were then gathered for a 3 day meeting wherein all regional business and segment group goals were determined. Local business and segment groups were first aligned on the strategic planning process as well as presented all regional business and segment group goals and strategies thus far created. Individual geographic subsidiary teams met and were led by geography general managers in order to first determine overarching goals for each geographic subsidiary. At the conclusion of these meetings, local subsidiary overarching goals as well as local business and segment group goals and strategies had been defined. It was now time to enter the final two stages of the planning process. Phase IV: Continued level three action planning at the local level by the sub divisions of each local product and segment group. It was now time to further the cascading process down into the local business and segment group teams responsible for local execution of strategies. These meetings took place in each individual geographic subsidiary and mirrored the intragroup and cross group collaboration meetings that had occurred previously in phase II of the planning process. Crossgroup collaboration was key at the local level so that local business and segment groups could collaborate, define interdependencies as well as structure the commitments that would be required for successful execution of a plan. Additionally all local business and segment group teams now utilized tactic planning and measurement templates in order to create local action plans. Each template and planning exercise outlined local goals, strategies and tactics, as well as the interdependencies required, their timing and measurement. It was now time for the final stage of the planning process that would determine management s performance objectives. Cross-group collaboration was key at the local level for successful execution of a plan. Phase V: The setting of individual manager performance objectives. Axialent created detailed management performance objectives templates for all management positions throughout the region. Performance objectives were based on different categories of performance including business financial targets, cross group collaboration, people development and local image and positioning. Parallel to this process development, Axialent worked with all levels of management within the product groups, the segment groups and the geographies in order to drive a new culture of learning and unconditional responsibility. Additionally, management was trained in the principles of Conscious Business and how to conduct skillful interactions regarding commitments, conflict resolution and negotiations. It was known that the process of planning would require clarity of meaning, authentic communications, confrontation of the brutal facts, negotiations between business units and geographies, and the resolution of conflict as it arose during 7

8 the planning process. In the end, all strategic planning processes yield a complex network of commitments. The Result: At the end of a 4 month planning process period, more than 250 managers from across Latin America had participated in numerous planning and cross group collaboration meetings. Microsoft had completed strategic business planning for all levels of its Latin American operations, across all product groups, segments and geographies. All levels of the organization were aligned with common goals, interdependent strategies, and detailed action plans. Additionally, every manager throughout the entire Microsoft Latin America operation had detailed manager performance objectives tied to flexible compensation. The region was aligned with clear objectives, and a focus on their commercial software initiative to combat the Open Source movement was front and center. Additionally, programs for continued people development were at the forefront of their activities throughout the region for From the CEO of the region to individual product managers in the field of operations, Microsoft Latin America was aligned with a common vision for their business going into their fiscal year 2005 that began July 1, Axialent Inc. All rights reserved. 8

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