Editor's note: DM Review warmly welcomes George Veth as a monthly columnist. He will share his experience on the successful formation and execution of competitive corporate strategy.
Strategy consultants George Stalk and Rob Lachenauer recently wrote the business book, Hardball - Are You Playing or Playing to Win? The book outlines a set of competitive strategies for gaining and sustaining market leadership. The flavor of the book surfaces in the authors' depiction of a premeditated, almost single-minded intentionality that each of the case study protagonists portrays when deriving and executing their strategies. The book piqued some controversy, but it captured some simple truths. First, the execution of strategy is precalculated and intentionally executed. Strategy execution is not left to chance. Second, good execution, like good strategy, is fact based and results driven. The capabilities required to identify, use and act on information are fundamental to achieving a high level of sustainable performance.
To step back, the discussion of successful business performance involves both strategy formulation and strategy execution. Both processes are core to attaining the lead position within a given market. However, more and more, executives are pointing to strategy execution as the obstacle to their success. As Michael Porter stated, "A poor strategy executed well is always better than a great strategy executed poorly." There are three foundational capabilities that enable corporations to successfully execute their strategies: visibility, leverage and responsiveness.
Visibility is a corporation's insight into past business results and foresight into future business performance. Visibility transcends space as well as time. The business must have both the depth to see from the top of the organization all the way down to a specific department or individual and the breadth to see from one business unit or division to another. By maintaining a clear and timely view of business results and the drivers of performance, executives can see what's happening. This clarity enables them to take action, commit resources to optimize existing processes and explore new business opportunities. To enhance visibility, companies equip knowledge workers with performance dashboards and other analytical tools. Many companies also construct models that simulate future performance based on varied assumptions about the key drivers of their operations and marketplace. Visibility is fully enabled by the development of an analytical culture empowered by a robust information platform.
Leverage is a corporation's command of its business model. This mastery begins with an understanding of the core business processes and leads to the identification of the cause-and-effect relationships that drive business performance - i.e., how business operations contribute to economic and customer outcomes. Several different forms of cause-and-effect driver models have been developed to assist in this process of identifying the upstream levers to downstream business results. These models support systems thinking and allow corporations to make focused investments of time, resources and money that effectively and efficiently drive their desired outcomes. Leverage is having the knowledge of how the business and industry really work so focus can be applied to maximize the impact of one's actions. Leverage is the required backdrop to effective strategic management.
Responsiveness is the ability to respond to the internal needs of the corporation and the external stimulus of the market. The response cycle starts with the detection and recognition of a potential need for change. The cycle continues with the analysis of the suggested change and the acknowledgement that a reinforcing action, a modifying action or a new initiative beyond business as usual should be taken. The cycle ends with the enacted change being fully embraced and assimilated into normal business operations. Responsiveness is built upon a strong knowledge-sharing network and a tailored process for governance and resource allocation. A company's responsiveness should be graceful and always one step ahead of its competition.
The challenge for most companies is how to equip their business with these three capabilities. Many recently published business management books seek to demonstrate leading practices in one area or another of strategy execution. Execution - The Discipline of Getting Things Done by Larry Bossidy and Ram Charan delineates the rhythm or cadence behind the governance cycle that GE and Honeywell have used to monitor and fund their execution of strategy. Proven management processes have been effective in formally running the response cycle for years at these global companies. Similarly, Robert Kaplan and David Norton, in their books Strategy Maps: Converting Intangible Assets into Tangible Outcomes and The Balanced Scorecard: Translating Strategy into Action, have shown how leverage and visibility are critical to execution. Furthermore, Moneyball: The Art of Winning an Unfair Game by Michael Lewis illustrates how information is utilized by the Oakland A's to validate their business model and to direct their investment in an optimized roster of lesser-paid athletes. Unfortunately for the Oakland A's, the Boston Red Sox are now applying similar leverage models while remaining committed to a higher level of financial investment. These books and many others highlight the use of leverage, visibility and responsiveness to compete in the 21st century.
The next decade will be marked by an increased focus on strategy execution as the key determinant of market leadership. In future columns, we will dissect the new science of strategy execution and explore the corporate processes and infrastructure that make leverage, visibility and responsiveness into tools for competitive advantage.
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