How to move from strategy to execution
Three out of five companies rate their organization as weak on strategy execution. When exploring potential impediments to implementation, there is a general lack of understanding of the various factors at play, resulting in the inevitable managerial justifications – ‘poor leadership’, ‘inadequate talent’, ‘lack of staff excellence’. process”, etc. This article offers three key steps to building the right execution system: 1) good strategy, 2) good organization, and 3) effective management. With these three ingredients in place, human ingenuity can be unleashed and employees can collectively achieve strategic business goals.
strategy in Greek (strategylisten)) means “the art of the general” and, since ancient times, implied the ability to achieve a complex battle objective. In the modern business world, common “battles” can include executing a digital transformation strategy, winning the talent war, or disrupting yourself before others do. Whatever it is, the only valid strategy is the one that can be executed. As Thomas Edison noted, “a vision without implementation is just a hallucination”.
While it’s hard to distinguish faulty ambition from faulty execution, we know that most companies aren’t great at the latter, with one study noting that employees at three in five companies rate their organization as weak in matter of execution. Many leaders think their strategy is “correct,” but lament that implementation is the problem. We have yet to meet a single leader who reports that his strategy is bad but he is excellent at execution. Similarly, when exploring potential impediments to implementation, there is a general lack of understanding of the various factors at play, leading to the inevitable managerial justifications – ‘poor leadership’, ‘inadequate talent’, ‘lack of ‘process excellence’, or the ever-popular ‘culture eats strategy for breakfast’.
As organizational designers, we know the desire of many leaders to tackle execution challenges head-on, and suggest three key steps to creating the right execution system:
1) Achieve Strategic Clarity
The first challenge is to have the strategy that both box and should be executed. What counts as a good strategy in a certain environment is difficult to determine and depends on a large number of factors, including the industry and the competitive landscape. Although the suitability of your strategy is beyond the scope of this article, a strategy that can be executed well will match your aspirations and capabilities. Therefore, two key questions to ask are:
Is your strategy at the right level of ambition?
We can say that there are two major errors related to the ambition of the strategy: a type 1 error, fundamentally inaccurate optimism, is an unrealistic or overambitious strategy, which raises a question: “How can this work?” and a type 2 error, irrational pessimism, is an unambitious or oversimplified strategy that elicits a “meh” reaction. Type 1 errors are currently more popular in the world of unicorns and activist hedge funds, but that may just be a matter of current fashion and risk appetite, not to mention the fact that such Grandiose aspirations are more likely to be rewarded with big investments. Both errors should be avoided.
Do you know which capabilities are essential for your strategy?
Strategic clarity requires an extra step – understanding what it will take to execute the strategy. The first step is to clearly identify the essential organizational capabilities required by the new strategy—develop capabilities that others cannot easily imitate. The second step is to know if these abilities are something you can expect to develop. Established businesses will be more conservative here than entrepreneurs (there’s a reason Professor Howard Stevenson defined entrepreneurship as “the pursuit of opportunity beyond the control of resources”). One way to achieve this clarity is to perform a pre-mortem exercise, which allows leaders to identify the soft underbelly of their strategy, and therefore their key execution risks.
2) Achieve organizational clarity
Once you have selected the right level of ambition and understood the key capabilities required to achieve it, you can steer your organization towards the key challenges to execute it. An operating model can provide you with a high-level model of how the pursuit of your strategy will be delegated to the management team. Three questions are useful to build your operational model:
Have you specified which unit owns which part of your strategy?
While the operational choices are specific to each strategy, we can group the key choices facing each organization around two axes that together create a set of high-level organizational units:
- What is the key subset of strategic objectives, based on your ambition, that your organization needs to achieve? How best to combine them? Often, complex organizations consist of a number of different business units, grouped by geography, product type, or customer type. How can you make this logic work for your strategy?
- What strategic capabilities do you need these groups to be shared? How will these shared resources be pooled and managed?
When done correctly, all key strategic objectives and capabilities will have clear owners, achieving the “mutually exclusive, collectively comprehensive” level of clarity.
Have you built the right interactions between these key units?
Once the main organizational choices have been made, the main interdependencies must be recognized and actively managed. Different business sub-goals will create different compromise that will need to be managed. Clear governance how scarce resources will be distributed and how shared support and capabilities will be allocated are crucial to aligning the entire organization.
It is very important that these trade-offs are managed proactively and explicitly – the whole art of strategy will be to balance well different sub-goals to achieve a distant goal.
Did you assign the right talent to the right roles?
Your leadership team will drive your operating model – your top leaders own the main sub-goals of your strategy and they need to be up to the task.
The first task is to build the right roles. Roles are just big groupings of goals, decision rights, and incentives. The second task is to map executive talent to key roles. It’s best to build the operating model you need and then check to see if your current talent matches your needs. You can probably make a few risky bets and manage with a few spreads, but if the spread is too big, you either need new talent or a new strategy.
3) Build a management system
Once the strategy and operating model are defined, they must be implemented in countless daily decisions. For that, you need a management system. In this process, the main guardians of execution become the managers — the hierarchy being a key tool for the execution of a complex strategy on a large number of individuals. Hierarchy is not very fashionable these days, in part because stories of top-down strategies gone wrong and leaders behaving badly have become well known, leading to a loss of trust in everyone’s institutions. kinds.
We believe that new management approaches (eg, agile, customer feedback driven, with empowered employees) are an understandable reaction to a top-down management style. The logical expression of such an old-fashioned system is bureaucracy, which can be described as a proud obsession with form over function and process over efficiency. In this regard, British historian Robert Conquest’s Third Law of Politics is still correct: “The easiest way to explain the behavior of any bureaucratic organization is to assume that it is controlled by a cabal of its enemies. .”
However, we also believe that the idea of hierarchy and management disappearing goes too far – any complex strategy will require organization and structure to achieve collective coordination. The concepts of self-organizing communities and markets, and the collective intelligence they create, are the right models for many of the outcomes we care about in the world, but they’re just not good for executing complex strategies. . In other words, as a general, you don’t arrive at a Normandy landing with a bottom-up process.
Our approach combines the management hierarchy with two key conditions that allow a successful adaptation of the strategy to local conditions and avoid bureaucracy:
How have you empowered your staff?
Your strategy and operating model aim to provide sufficient clarity across the organization about what is expected of each employee and how they can be supported to achieve what they need. Beyond that, employees will need wide latitude to adapt these goals and the approach needed to adapt to local specifics. Good management systems explicitly ensure that there is enough accountability and flexibility in their design to avoid the ‘bureaucracy trap’ and allow for sufficient levels of empowerment. One example is Ritz-Carlton’s famous $2,000 rule, which states that employees can spend up to that amount to make a customer happy without asking for management approval.
How did you integrate self-correcting feedback into your system?
The importance of local context and the value of collective intelligence, customer and employee feedback imply the need to create a feedback loop that enables leaders to quickly understand and react to local developments. Simply put, leaders need to understand what works well and what doesn’t, in the fastest, clearest way imaginable, and be able to quickly share best practices. Take the example of Ford, where a new CEO faced a culture where issues were generally not brought to the executive table and certainly not explored openly and addressed in depth. By instituting a business review process, the leadership team was able to collectively focus on the aspects of the strategy that weren’t working and fix them quickly and efficiently, creating a key link to successful execution.
In sum, collective action, that is to say cooperation on a large scale, is a major competitive advantage of humanity: to manufacture a fiction and make it become reality. For this, three elements must be met: 1) a good strategy, 2) good organization and 3) effective management. With these three ingredients in place, human ingenuity can be unleashed and we can collectively achieve what we do our best: achieve our dreams.