“I have to do everything myself, and I don’t have time to fix all of this.”
The CEO who said that to me was a successful entrepreneur who had grown his startup into a 25-person marketing company serving hundreds of brands. Our technology gap analysis had turned into more of a venting session about the growing pains he was seeing in his organization. He was losing sleep about his company’s challenges arising from:
A week later I found myself in a similar conversation, this time with a VP of Engineering looking for an outside perspective. By most measures, his 350-person SAAS (Software as a Service) company was a success. But behind the scenes lurked dysfunction common to many companies, especially those that have grown by acquiring other companies. My friend was aware of these issues but was struggling to make a business case that would persuade his fellow executives to address:
What did these executives have in common?
They had accumulated strategic debt.
If “strategy” is how you define and implement a framework for success, strategic debt is what accrues when you neglect the necessary maintenance of that framework.
strategy = framework for success
strategic debt = deferred maintenance of that framework
I often speak with leaders struggling with strategic debt, and I’ve faced it myself: stuck in a cycle of endless meetings, fighting fires, continuously being in reactive mode. Or struggling to get work done across departments, each with their own competing priorities.
As a leader, at one time you may have invested a fair amount of time and thought in your organization’s strategy. Over time, that initial investment loses value. Your original framework for success drifts from the framework your organization needs today. You accumulate strategic debt.
You know you have strategic debt when:
What examples from your organization would you add to that list?
Strategic debt is comprised of the structural inefficiencies and gaps that grow over time by prioritizing short-term needs over long-term needs. Each decision may have been locally optimal — but the accumulation of these decisions suffocates your organization’s ability to perform. That’s because your people/process/priority infrastructure is no longer organized optimally for your current needs.
What gets measured gets managed
Strategic debt can be difficult to address because it is squishy and hard to quantify. To quantify strategic debt you have to measure decision-making and operational performance across the organization over a long period.
Because it’s hard to quantify most strategic debt, it can be hard to justify spending time to address it. But not all strategic debt is hard to quantify. There is a type of strategic debt commonly found in software development that is highly quantified. Not surprisingly, there is also a commonly adopted approach to addressing it.
Even though software development is creative work, that work is typically decomposed into discrete tasks. Software teams estimate each task’s size independently and log their workflow from initiation to completion. They track productivity and efficiency through metrics that are a natural byproduct of this process. (The “Accelerate metrics”, such as deployment frequency and lead time to deploy, are a popular example.)
Because software development workflows are highly quantified, it’s easier to recognize the effect of strategic debt on productivity — the drag as debt accumulates, and the boost with its elimination. In turn, that makes it easier to persuade individuals and organizations to address strategic debt, or as it’s commonly called in technology organizations, “technical debt.”
In fact, the prevalent approach to addressing “technical debt” can be used to address any strategic debt. That approach is to stop addressing strategic debt as a crisis — and allocate a recurring budget for it.
In software development, 15-30% of a team’s capacity is typically reserved for technical debt. An appropriate budget for your organization’s strategic debt may or may not be in that range. Instead of a percentage, your “budget” might be a requirement for managers to include one strategic debt OKR Objective in their quarterly OKRs. However you allot time and resources for strategic debt, what’s important is that your budget is greater than zero.
Let’s say you’ve decided to reserve a budget for your organization’s strategic debt. How can you spend your budget effectively to reduce that debt? Here are some examples:
Also published on CTO Vision.