DM Review welcomes Barnaby Donlon as a new monthly columnist.
Remember when we could simply distinguish between strategy creation as thinking (analysis, planning, setting goals, etc.) and strategy implementation as doing (follow-through, top-to-bottom, operational, goal achieving, etc.)?1 In recent years, these worlds have merged as traditional planning efforts have proven too costly or time-consuming, and many major top-down strategy initiatives have failed. Today's challenge is how to build execution into strategy.2
How do you build execution into strategy? It starts with a recognition that all parts of the organization - and people at all levels - need to be involved in the process of setting goals. While many leaders accept the idea of making strategy everyone's job, they often fall into the same old routines of hiring outside experts to formulate their strategy or forcing their strategies from the top down without gaining bottom-up input during the formulation process.3
New research shows that the "many are smarter than the few" philosophy of management is catching on. Whether it is judging the weight of an ox at a county fair or solving more complex problems (such as "will company x's stock go up or down?"), collective judgment almost always outperforms the expert.4 Organizations can unleash the power of collective judgment by consulting broad groups of employees in the planning process; this approach has the added benefit of creating support for change, which is required for successful execution.
As the philosophy of strategy execution evolves and organizations seek to improve the link between strategy and execution, five major domains stand out as critical for any organization (see Figure 1).
Figure 1: Five Areas Where Organizations Need to Build Strategy Execution Capabilities
The focus is about ensuring organizational commitment and alignment to the strategy.
- Alignment occurs in three major dimensions: 1) forging a consensus among executive leadership teams, 2) creating a vertical line of sight between the corporate goals and those pursued by employees on the front lines, and 3) creating horizontal connections between functional teams and external partners who must collaborate to achieve shared goals associated with key customer-oriented processes.
- Measurement, which helps drive focus and commitment, must be linked to strategy; for as the expression goes, if you don't measure it, you can't manage it. Accordingly, if you don't manage it, don't measure it.
The resources domain involves allocating financial and other resources required to fund strategy and operations, and monitoring those resources continuously to ensure goal achievement.
- Once leaders have established their strategic objectives and scorecard measures, they can select a portfolio of initiatives that will address actual or expected performance gaps.
- Strategic initiatives are intervention projects treated as special expenditures easily distinguished from operational expenses (opex) and capital expenditures (capex), which are typically required to maintain normal business operations. The term "stratex" is becoming a common way to treat these special investments.5
The operations domain entails analyzing the drivers of business performance and linking operational processes to the execution of strategy.
- Key processes are the critical link between strategy and operations. For operations to support strategy, processes should be mapped to strategic objectives and continuously monitored through a set of measures.
- By modeling the cause-and-effect relationships between elements of a process, operational managers can determine the appropriate measures to attach to the process. (See the example from LoPrice Airlines as described in Veth's September 2006 column).6
The people domain is about ensuring employee readiness and personal goal alignment, and aligning HR processes and systems to support the strategy.
- Just as strategy is executed through initiatives and operations is executed through processes, the awareness and commitment of people in any organization can make or break success.
- Because strategy is about commitment and change and operations is about compliance with established processes, people need to be involved at both levels through continuous leadership communications, personal goal alignment, and employee reward and recognition systems.
The information domain involves developing a technology platform to enable core processes and support the analytic needs of the enterprise.
- In today's knowledge economy, business strategy cannot be executed without technology. The proliferation of business intelligence applications such as scorecards and dashboards is a reflection of the reality that information is the new gold.
- Every enterprise depends on the leadership of the IT organization to develop a platform and information architecture that support timely decision-making at both the strategic and operational level. This effort starts with a clear understanding of business requirements and must adapt as business needs change over time.
In future columns, I will continue where my predecessor George Veth left off and explore specific topics within these five domains of strategy execution. My next column will focus on strategy management and address the topic of the business performance review meeting - an organizational event and process that serves as a connecting point for all five domains.
- Harvard Business Essentials. Strategy: Create and Implement the Best Strategy for Your Business. Boston: Harvard Business School Press, 2005.
- W. Chan Kim and Renée Mauborgne. Blue Ocean Strategy. Boston: Harvard Business School Press, 2005.
- Robert Kaplan and David Norton. The Strategy Focused Organization. Boston: Harvard Business School Press, 2000.
- James Surowiecki. The Wisdom of Crowds. New York: Random House, 2004.
- David Norton. "Linking Strategy and Planning to Budgets." Balanced Scorecard Report, May-June 2006.
- George Veth. "Strategic Focus on Key Process Management." DM Review, September 2006.
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