George would like to thank Scot MacGillvray from Palladium Group, Inc. for his helpful input to this column.Most organizations have not developed a robust strategy execution capability. According to Fortune magazine, less than 10 percent of strategies effectively formulated are effectively executed. The inverse implies that 90 percent of companies are missing a significant opportunity to create competitive advantage.1 Our firm's research indicates that organizations with a formal strategy execution process are dramatically outperforming organizations without such a process at a ratio of greater than two to one.2 So, the opportunity is clear. The question is, what methods are at our disposal for taking advantage of this opportunity?
In my September DM Review column, I talked about an overall model for managing strategy execution, and I highlighted key process management as a critical link between strategy and operations. Subsequently, I demonstrated how a strategy map can be used as a tool for mapping key processes to strategic objectives. In this month's column, I will provide insight into the important next steps of modeling the core drivers of your key processes and moving your organization to enact the change to more effectively execute its strategy.
As mentioned, key process management begins by identifying the strategic objectives of the organization via a strategy mapping exercise. The next step is to determine the key processes and relevant business drivers that support the achievement of the particular strategic objectives. This can be accomplished by a combination of logic tree analysis and dynamic business modeling. Having established a simple yet logical model for how the business works, it can be tested for causality via quantitative analysis and statistical modeling. In this way, we move from a hypothesis of how the business works based upon instinct and judgment to a proven model based upon facts and analysis.
Once we have a clearer understanding of the strategic drivers and their cause-and-effect relationship on performance, we must act to mobilize and empower the organization, or move the organization, to execute its strategy. In order to do so, the combination of a performance measurement system (or dashboard) and a change management plan should be leveraged. The dashboard should be manifest at two different levels - strategic and operational. The strategic dashboard is designed to provide top executives with a view of high-level performance metrics that indicate progress toward the longer-term strategic objective. The operational dashboard is designed to provide line management with real-time analysis and insight to actively manage the processes that support the strategic objective. If corrective action is required to improve a key process, a comprehensive change plan should be utilized. This plan should include a "theme" team sponsored by a senior executive, a detailed communication plan to mobilize and coordinate the participants, a mechanism to share best practices among the process owners, a strategic competency assessment to identify gaps in key skills and related professional development activities and a supporting compensation analysis to determine the explicit and intrinsic levers to reinforce the desired change.
To illustrate the process, let's return to the LoPrice Airline case study from last month's column. From the mapping exercise in the last column, I highlighted "fast ground turnaround" as an important strategic objective in helping to execute the airline's operational excellence theme. In order to put this objective into action, LoPrice has undertaken a time-series study to analyze the various components of nonmaintenance activities that affect turnaround time between flights and have compared it to their understanding of best practices. Based on this gap analysis, a series of steps has been developed to improve this key process at LoPrice. From this analysis, they can develop an operational dashboard and a change plan to support the operations manager at each airport. This dashboard would allow the operations manager to track performance against best practices as he or she seeks to improve total nonmaintenance cycle time for their location. In addition, a training plan for the strategic job family, ramp personnel, could be developed; including a series of new procedures to be followed and a modified compensation plan. At the executive level, total nonmaintenance cycle time across the system can now be monitored with alerts to proactively highlight underperforming and outperforming airports.3,4
Although this is a simplified example, Figure 1 clearly shows how to leverage a theme from the broader strategy map and build a logical bridge to the detailed operational activities of the business. This case also shows that intentional key process management can put organizational focus on those select business processes that will have the greatest impact in ultimately delivering the strategy promise. It is through the systematic practice of map, model and move that an organization will create the competitive advantage anticipated in their strategic vision.
- R. Charan & G. Colvin. "Why CEOs Fail." Fortune Magazine, 21 June 1999.
- The Balanced Scorecard Collaborative. Survey of BSCol Online Community. Palladium/Cognos, March 2006.
- Robert Kaplan and David Norton. "Strategy Maps." Strategic Finance, March 2005.
- Stephen J. Doig, Adam Howard and Ronald C. Ritter. "The Hidden Value in Airline Operations." The McKinsey Quarterly, Number 4, 2003.
George Veth is a co-founder and executive vice president of Palladium. You may contact him at george.veth@palladiumES.com.
This article originally appeared in DM Review.
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