When asked to define strategy execution, most managers respond with statements like, “It’s the successful implementation of a strategic plan” or “It’s getting your strategy done.” While these perspectives are certainly valid, they aren’t very helpful in terms of understanding what needs to be done to actually drive business results. Here’s a look at some mainstream approaches to strategy execution:
- Strategy execution as a process. The most notable book to date on strategy execution is Execution: The Discipline of Getting Things Done, by Larry Bossidy and Ram Charan. Bossidy, a retired CEO, and Charan, a renowned management consultant, make the case for execution as a discipline or “systematic way of exposing reality and acting on it.” They explain that “the heart of execution lies in three core processes":
They explain the processes and descriptions managers use to successfully drive business results.
- Strategy execution as a system. The information presented in Execution is certainly useful, but the authors don’t fully explain how an organization can implement their three core processes to achieve strategy success. There have been significant advancements in this area since Execution was published in 2002. In 2008, Harvard Business School Professor Robert S. Kaplan and his Palladium Group colleague David P. Norton wrote The Execution Premium: Linking Strategy to Operations for Competitive Advantage. In it they present their management system, which houses six sequential stages intended to help organizations capture what they call an “execution premium”—a measurable increase in value derived from successful strategy execution. They outline six stages in this system:
- Develop the strategy
- Plan the strategy
- Align the organization
- Plan operations
- Monitor and learn
- Test and adapt
What Matters Most to Strategy Execution
When a company fails to execute its strategy, the first thing managers often think to do is restructure. But our research shows that the fundamentals of good execution start with clarifying decision rights and making sure information flows where it needs to go. If you get those right, the correct structure and motivators often become obvious.
A brilliant strategy, blockbuster product, or breakthrough technology can put you on the competitive map, but only solid execution can keep you there. You have to be able to deliver on your intent. Unfortunately, the majority of companies aren’t very good at it, by their own admission. HBR invited many thousands of employees (about 25% of whom came from executive ranks) to complete an online assessment of their organizations’ capabilities, a process that generated a database of 125,000 profiles representing more than 1,000 companies, government agencies, and not-for-profits in over 50 countries. Employees at three out of every five companies rated their organization weak at execution—that is, when asked if they agreed with the statement “Important strategic and operational decisions are quickly translated into action,” the majority answered no.
Execution is the result of thousands of decisions made every day by employees acting according to the information they have and their own self-interest. HBR identified four fundamental building blocks executives can use to influence those actions—clarifying decision rights, designing information flows, aligning motivators, and making changes to structure. (For simplicity’s sake they are referred to as decision rights, information, motivators, and structure.)
In efforts to improve performance, most organizations go right to structural measures because moving lines around the org chart seems the most obvious solution and the changes are visible and concrete. Such steps generally reap some short-term efficiencies quickly, but in so doing address only the symptoms of dysfunction, not its root causes. Several years later, companies usually end up in the same place they started. Structural change can and should be part of the path to improved execution, but it’s best to think of it as the capstone, not the cornerstone, of any organizational transformation. In fact, our research shows that actions having to do with decision rights and information are far more important—about twice as effective—as improvements made to the other two building blocks. (See the exhibit above “What Matters Most to Strategy Execution.”)
The Strategy-to-Execution Process
The strategy-to-execution process provides a structured approach to clarifying, communicating, implementing, and managing strategy. The goal of this process is to ensure the organization focuses on developing high-value capabilities and making investments that optimize value. Implementing the strategy-to-execution process ensures that executive intent is translated throughout the entire organization consistently and results in focused, coordinated, and synergistic action. There are six basic steps to the process. You can think of these as defining the strategy-to-execution value stream. The six steps are:
- Clarify strategy: Clarify high-level strategy statements, separating and organizing goals, objectives, initiatives, aspirations, and strategies. Further identify valid approaches to strategy realization and offer guidance to the organization on how to operationalize strategy. Create a clear model that helps the organization understand the current strategies and differentiate them from operational improvements.
- Identify the organization’s capabilities: Capabilities encapsulate the organization’s ability to act through its people, processes, and technologies. Every organization – no matter how large or small – requires a set of capabilities to execute its business model or mission successfully. In this step, business architects help the organization discover its capabilities and organize them into a model that enables both strategic and operational analysis.
- Assess capabilities: While capability models provide a common framework for strategic discussion and creating shared understanding, their real value is in illuminating opportunities for organizational improvement. A capability assessment creates a structure for prioritizing investments and allocating resources against the backdrop of business value and strategic alignment. High-quality capability assessments focus on the relative importance of individual capabilities as well as the overall performance.
- Determine gaps: A capability assessment identifies high-value, high-need areas for improvement. This step uncovers root causes driving capability performance gaps. Savvy organizations avoid jumping directly to technology solutions or process improvements without thoroughly understanding the underlying issues. Multiple techniques support effective root cause analysis, including the five why analysis, tree diagrams, and change analysis.
- Choose investments: With high-value, high-need capability performance gaps clearly identified, create a slate of projects to close those – and only those – gaps. Manage non-strategy supporting projects independently. Sequence strategy investments in a way that creates the most value in the shortest amount of time.
- Monitor strategy progress: The last, and most important step, is ensuring that the strategy-to execution work is getting done. Strategies represent broad, long-term, cross-organizational initiatives. They can rarely be contained within a single project or even a well-defined set of projects. Strategies are also implemented through management directives, goal setting, policy changes, hiring decisions, and organizational modifications. Carefully monitoring the results of early strategic activities can provide critical guidance for the design of follow-on projects or strategy revision
Pillars of Strategy Execution
According to Gartner, Corporate strategists can bridge the strategy-to-execution gap and drive aligned execution in five ways.
- Strategy creation: History is littered with examples of organizations that hit severe growth stalls because of strategies based on flawed assumptions about customers, competitors or internal capabilities. A lack of clarity leads to unwanted surprises during execution and reduces managers’ ability to monitor uncertainties and respond accordingly. To get execution right, clarify and test relevant assumptions. This includes using mechanisms to both identify and challenge strategic assumptions so your organization can avoid unanticipated issues that derail implementation.
- Strategic planning: Large organizations typically conduct strategic planning sessions that cost millions of dollars and hundreds of employee hours each year. Despite these efforts, strategic goals are often unclear or misaligned, which then creates resourcing challenges that limit execution success. Focus the planning process on vertical alignment between the corporate center and the business units (BUs), and horizontal alignment across BUs and functions. To avoid confusion, begin by clarifying objectives and roles for those in the business tasked with execution.
- Performance management: Markets can shift between a firm’s strategic planning cycles, thus invalidating assumptions and the strategic plan. Without an effective system to monitor the performance of the strategy, organizations may execute the wrong plan for months — or even years — before correction. For timely course-correction, use performance management systems to hold employees accountable for key metric goals. Frequent reviews of the plan can determine if underperformance was the result of a bad market assessment, wrong strategy or poor execution.
- Communication: To effectively implement a new strategy, employees must understand and support it — both before and during execution. Yet Gartner research finds that more than 65% of employees lack an understanding of their roles when new initiatives are launched. What’s needed is a cohesive communication strategy. Without it, employee motivation goes down and resistance goes up, increasing the cost of execution. Engage critical employees with targeted communications to win support for the strategy. Start a two-way dialogue or take a page from your organization’s PR playbook to keep employees on board and actively engaged in achieving the company’s objectives.
- Organizational capacity: Many organizations fail to allocate resources (assets, time, people, etc.) for the actual implementation of new growth strategies. They rely too heavily on strategy creation, planning, performance metrics and communication. This is not surprising, as 80% of strategists, according to Gartner research, say they don’t have the tools and skills to carry out growth initiatives. Strategists must locate areas where the organization loses the ability to execute due to poor coordination. The net result of poor coordination is a reduction in the total capacity of the enterprise. In the current environment, capacity lost due to poor coordination is becoming a bigger issue. Despite most middle managers agreeing that their work is highly impacted by cross-silo business partners, Gartner research finds that fewer than half factor this into their decision making. Through increased cross-organizational dialogue and careful mapping of interdependencies, capacity conflicts can be identified before they occur. Also, consider whether strategic projects are a net gain or net loss to total capacity. Those that free up capacity should be evaluated differently than those that take organizational capacity away.
Barriers to Strategy Execution
The inability of organizations to effectively execute their corporate strategies is one of the major factors limiting their success. Recent management research and literature has thoroughly documented the importance of strategy execution in creating corporate value. Sound execution is critical—a focus on making strategy work results in a healthy organization. So if execution is so critically important, why don't more organizations develop a disciplined approach to it? Simply because it's very difficult to do. Turning strategies into reality requires constant investment in management resources. It's particularly difficult in large or more complex organizations, where the distance between those who formulate strategy and those who carry it out can be significant. Research has revealed numerous barriers to effective strategy execution, including the following:
- Inflexible processes and organizational structures – leads to difficulty in adapting to rapidly changing business environments (Process, Structure)
- Inadequate performance measurement tools – leads to poor improvement practices (Process, Information Technology)
- Poor communication of strategy and performance – leads to strategic mis-alignment (Process, Information Technology)
- No strategy-execution focus – leads to poor delivery of results (Culture, People)
- Poor change management practices – leads to execution failure (Culture)
- No execution roadmap – leads to inefficiencies and wasted effort (Process, Governance)
- No understanding by employees of their contribution to execution outcomes – leads to lack of motivation to succeed (People, Process, Information Technology)
- Poor resource allocation – leads to inefficiencies and lost opportunities (Process, Information Technology, Structure)
- Unclear strategy management policies – leads to confusion and poor decision making (Governance)
While strategy execution can be difficult, it is not impossible to achieve. A carefully planned approach to execution is needed to overcome these barriers to attain organizational strategic goals and objectives.
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