Translating Strategy into Action - The Missing Link
George would like to thank Michael Contrada and Bhavana Devulapally from Palladium Group, Inc. for their helpful input to this column.
Strategic initiatives are the currency of strategic management. They are the programs and projects undertaken to transform "business as usual" to capture new markets or exploit productivity gains. Strategic initiatives demand corporate funding and boardroom visibility. Most corporations maintain a portfolio of strategic initiatives, or calculated bets on the future, that they actively manage in an attempt to control their destiny.
I will review some leading practices in the management of strategic initiatives in my next few columns. This month, I will focus on the leading practices in the management of strategic initiatives. Next month, I will explore the process for selecting and prioritizing a portfolio of strategic initiatives.
I advocate a strategy management framework that begins with the articulation of the corporation's strategic objectives (the strategy map). I then suggest that performance measures are tracked and targets are clarified for these same strategic objectives (the balanced scorecard). I suggest that a set of programs or action plans are established to attain the performance targets as outlined in the scorecard (the strategic initiatives). This process runs counter to management literature that advocates moving from strategy to initiatives to measurement. My advocated approach is documented in detail in the literature of Robert Kaplan and David Norton.
The use of strategic initiatives within the context of an overall strategy management framework formalizes their role as a means rather than an end. Several elements go into the successful management of strategic initiatives: funding, management and measurement.
Funding: Today, many corporations have begun to adopt a formal process to govern the financial investment in strategic initiatives as a separate and distinct process from other spending. In this way, spending for strategic initiatives can be managed explicitly. Drawing on the nomenclature for capital expenditures known as "capex," strategic expenditures have begun to be referred to as "stratex." While stratex represents at most only 10 to 15 percent of total spending for any company, it represents the incremental investment that the company is making toward executing its strategy.
Figure 1: Strategy Management Framework
Managing: The selection of an optimized portfolio of initiatives is the first step to good initiative management. Getting the most out of each initiative in the portfolio requires active management. Strategic initiatives tend to be large, complex efforts that require collaboration and resources across various functions and many years. Therefore, formal program management techniques are vital to successful strategic initiative management.
The first telltale sign of success is an active and fully supportive executive owner for each strategic initiative. This key sponsor is invaluable to an initiative's success. Each initiative should have a charter that clearly defines the objective and business benefits, expected business performance outcomes, key milestones and timeline, and required resources. Each initiative should have a budget to ensure that the funds and the people needed to deliver the initiative are allocated to the effort. Formal project management methodologies, such as those associated with the Project Management Institute (PMI) and Six Sigma, can be used to provide the required structure.
Figure 2: Analysis and Review
In addition, a well-run initiative management process will establish a program management office (PMO) to oversee, coordinate and manage the full set of strategic initiatives. According to Kaplan and Norton, initiative management information is as important as measures in a balanced scorecard.
Measuring: Establishing clear measurement criteria and maintaining a regularly scheduled review process will provide consistent visibility to progress. Initiatives are measured against project milestones to ensure that the initiatives are moving forward as planned. The business impact is measured to gauge if the initiatives are having the desired business performance effect. This twofold analysis allows management to correlate initiatives to performance improvements. This measurement review process closes the loop, providing continuous feedback to assess how effectively the portfolio of strategic initiatives is in executing the strategy. Effective management of this portfolio of strategic initiatives is paramount to success.