Want to improve the odds of strategy execution? Ask any executive that question and they’re certain to nod in enthusiastic agreement. Well, I have one piece of can’t miss advice that will ensure you beat the oft-cited statistics of execution failure. Here it is: Have a well-understood strategy and communicate it widely.
This sounds laughably obvious, but in my experience many organizations, possibly even most, don’t have a real strategy. Strategy execution is predicated upon the existence of a strategy – one that clearly confronts the challenges you face, outlines how you plan to outperform your rivals and secure sustainable competitive advantage. Before you invest the considerable time, energy, and often substantial financial resources required for a Balanced Scorecard, or any other strategy execution system, take a step back and ensure you do in fact have a strategy.
Research consistently indicates that strategic planning is among the most popular of management tools. The global consulting firm Bain suggests that about 90 percent of all organizations engage in a planning process. However, I would argue that what results from these laborious efforts is frequently not a strategy. The end product is often one of two things:
1) Rather than an informed declaration of how the company plans to win, the “plan” is often comprised of what management guru Peter Drucker labeled “A Hero Sandwich of Good Intentions.” In other words the document is a lengthy recitation of every good and noble thing the organization dreams of accomplishing. When crafting these so-called strategies, many organizations simply brainstorm a wish list of things they’d like to do or accomplish, categorize them into like areas, put the whole thing into a binder and call it a strategic plan. I’ve seen this many times over the years, strategic plans that span fifty to one-hundred and fifty pages of bold ambition but an absence of solid reasoning.
2) Fluff. That’s author Richard Rumelt’s term for strategic plans that contain nothing but “A superficial restatement of the obvious combined with a generous sprinkling of buzzwords. Fluff masquerades as expertise, thought, and analysis.” We’ve all seen strategic plans, more akin to slogans, which contain an abundance of the latest buzzwords but have absolutely no foundation, and thus leave employees snickering rather than making more informed decisions. Rumelt cites the example of a major retail bank that declares their strategy as one of “Customer-centric intermediation.” He correctly asserts that “intermediation” is just a fancy word that means the bank accepts deposits and then lends them to others. And what bank wouldn’t want to be customer-centric? Yank back the fluffy curtain here and you realize the bank’s fundamental strategy is being a bank.
Executing a ‘strategy’ that is nothing more than a list of goals dressed in fluffy prose is virtually impossible. There are simply too many options, too many roads to travel, and not enough clear direction. Stymied by indecision and a profound lack of resources, organizations simply trod the comfortable path of the old and familiar, frustrating employees starving for direction as they face decisions on the front lines of the business that demand innovative and creative responses.
What’s missing from a lot of so-called strategy documents is something many executives, hoping to be all things to all customers, are loath to commit to: choice. That is the very essence of strategy; examining your environment, diagnosing your key challenge, and making reasoned choices about the best course of action. Strategy pundits ceaselessly remind us that strategy is as much about what not to do as it is about what to do, and therefore, clear choices, lines of distinct demarcation, must be present in a truly ‘strategic’ plan.
So what is a ‘real’ strategy? It’s one in which the organization has expended the time and considerable intellectual energy to critically examine its operating environment, make difficult choices, and come to agreement on some basic, bedrock items that form the foundation of a compelling plan:
• Which customer(s) do we choose to serve?
• What products and services will we provide?
• How do we propose to add value (why should people buy from us)?
Yes, those are very simple questions indeed, but they represent the literal tip of the proverbial iceberg of required analysis to craft a differentiating strategy. It will serve us all well to remember that simplicity doesn’t mean ignoring the important facts and circumstances surrounding the firm’s existence, it means acknowledging the complexity that exists, and conquering it, which is challenging, but ultimately more rewarding. As Steve Jobs said, “It takes a lot of hard work to make something simple, to truly understand the underlying challenges and come up with elegant solutions.” In order to answer the fundamental questions listed above the firm must (among myriad other challenges):
• Study its competitive landscape
• Diagnose the principal challenges it faces
• Wrestle with the trade-offs necessary in competing on the terms it chooses, and
• Meticulously carve out the value chain that will bring the strategy to life.
Even if you have a strategy in place, one that clearly and distinctly espouses the broad priorities you’ll pursue, acknowledges your challenges, takes into account the necessary trade-offs, and conquers complexity, you’re still not prepared for execution. Before you can embark on that task you must ensure that your entire executive team understands and buys into the strategy you’ve created. I’ve been in meetings with senior teams where they can’t even agree on the definition of the word strategy let alone agree on the future direction of the organization. Execution will be carried out in large part at the front lines of your organization, but it begins with executives each carrying a consistent message to their respective teams. Alignment drives execution, and therefore you must ensure your executive team is singing from the same songbook if you hope to impart a compelling and consistent message to your team. Employees can only execute the strategy through informed decision-making, which emerges from a deep knowledge of the strategy, and that comprehension is gained from crystal clear communication of the plan from executives.
One of the reasons strategy execution is such a popular concept is the undeniable fact that it will always be simpler to blame poor organizational results on execution than its much messier counterpart, strategy development. Who wants to plunge a net into the deep and muddied waters of strategy formation, when they can, in a single sentence attribute all of their problems to the logical villain, execution. Here’s a great excerpt from Phil Rosenzweig’s “The Halo Effect” that very eloquently and cogently argues this point:
“When my old company, Hewlett-Packard, announced disappointing results in August 2004, CEO Carly Fiorina stated, “The strategy is the right one. What we failed to do is execute the strategy.” Her explanation sounded reasonable, and no one questioned her when she swiftly replaced a few key executives — it looked like an appropriate step to improve execution and raise company performance. Curiously, when Fiorina herself was fired just six months later in February 2005, a company spokesperson repeated the same line: HP was following the right strategy, but the chief executive was replaced because the board of directors wanted better execution! Again, it all sounded reasonable, and no alarms were raised about the company’s basic choices. Six weeks later, when Mark Hurd was hired as the new CEO, Hewlett-Packard stuck to its message, announcing that it had “picked Mr. Hurd because of his execution skills.” And therein lies the problem: It’s always easier to bang the drum about execution than to address fundamental questions of strategy. It’s always easier to insist we’re going in the right direction but just need to run a little faster; it’s far more painful to admit that the direction may be flawed, because the remedies are much more consequential. On closer inspection, Hewlett-Packard was beset on all sides by strategic worries. It enjoyed a strong position in printing and imaging products, but in personal computers it was locked in a losing battle with Dell; in corporate computers it was squeezed between Dell and IBM; in corporate data storage systems it trailed EMC; its information technology services lagged behind IBM, Accenture, and EDS; and in consumer electronics, HP faced a range of tough competitors from Kodak to Sony. In fact, there were plenty of reasons to question HP’s strategy, but doing so raised serious issues that had far-reaching consequences. Managers quite naturally find it easier to keep the attention on execution, which everyone will always agree can be done better.
So before you call your next press conference to earnestly declare that greater execution is the only thing separating your company from indescribable success, take a step back and consider your strategy itself. Do you have a real strategy? Does your entire team understand and believe in the plan? Have you communicated it widely? Be bold, make the difficult choices, and share they strategy with your team at every opportunity. This is the only sure path to execution success.
Richard Rumelt, Good Strategy Bad Strategy, (New York: Crown Business, 2011). Kindle Edition
Walter Isaacson, “The Real Leadership Lessons of Steve Jobs,” Harvard Business Review, April 2012. PP. 92-102.
Phil Rosenzweig, The Halo Effect, (New York: The Free Press, 2011).
Everything look so obvious and simple, but … many times (as you pointed out) are only a “…pages of bold ambition but an absence of solid reasoning.”
Thank you, for the food for thinking.
Thanks very much for your comment on the article. Bold ambition without solid reasoning is certainly a recipe for poor results.
As you say, “It’s always easier to bang the drum about execution than to address fundamental questions of strategy. It’s always easier to insist we’re going in the right direction but just need to run a little faster; it’s far more painful to admit that the direction may be flawed, because the remedies are much more consequential.” Even today, in what we like to believe is a sophisticated business environment with sophisticated metrics and markets, businesses fall short of expectations all the time. Even the largest enterprise can falter and it is often because they ‘think’ they know where they are going and why and they ‘think’ they know what to measure to declare success and to gobble up market share.
It is crucial that every enterprise use business intelligence tools and key performance indicators to track and measure their success and it is crucial that they understand what they should be measuring. Beyond that, every business needs BI tools and KPI, balanced scorecards, forecasting, predictive analysis, impact and sensitivity analysis, and ‘what if’ analysis that is easy for every user. We need to hold our team members accountable and clearly and intuitively cascade strategy to the tactical and organizational levels so that everyone knows where they fit in the puzzle. If each person knows what they have to do to make the machine run, the enterprise will be more successful. Give them personalized, easy to use dashboards, and alert systems and clear KPIs and reports that are meaningful to them and watch them soar!
< href=”http://www.elegantjbi.com/bi_suite/key-performance-indicators-kpi.htm” title=”Business Intelligence Tool”>Business Intelligence Tool