Flexible IT, better strategy

For many CEOs, the topic is mysterious. Even for those who understand technology better, it is a sore subject because today's IT architectures, arcane as they may be, are the biggest roadblocks most companies face when making strategic moves. Strategists have largely discredited classical notions of strategy formation. The empty biennial reviews of yesteryear are gone, superseded by "radical incrementalism," which emphasizes rapid waves of near-term (six- to 12-month) operational and organizational initiatives brought into focus by a shared view of a company's much longer-term (five- to 10-year) strategic direction. A quick sequence of focused incremental shifts can produce cumulative and radical change that isn't easy to copy. Radical incrementalism has helped companies such as Charles Schwab, Dell, Microsoft, and Wal-Mart Stores reshape industries and deliver superior returns to shareholders.

Yet radical incrementalism is notoriously difficult to accomplish. Operational shortcomings and organizational inertia hinder companies from making near-term innovations in business practice and process. Technology can be an even bigger hindrance--in part because it's so deeply embedded in operations and organization, in part because information systems are rigid.

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