When Mark Hurd was Chief Executive at Hewlett-Packard, an information technology giant, he successfully contributed to the success of the legendary firm. He cut costs, focused the company’s strategy on a few core areas and created new product divisions. During an interview with The Economist publication he was quoted as: “Vision without execution is nothing. Whenever anyone asks me about vision, I get very nervous. You’ve got to be able to tie it back to strategy; you’ve got to tie accountability to things”.
This statement is a good summary of Thinking Dimensions point of view about strategy formulation and implementation.
Strategy formulation and implementation are an integrated process, or a series of steps activated by the CEO involving all employees at all the levels in the organization.
Adopting a robust and unique process for strategy formulation and implementation is a key capability that many successful companies invest in; it can make the difference between poor performance(s) and profitable sustainable growth. There are several causes that can prevent an organization from successfully implementing strategy including:
1. No balance between formulation and execution
Some leaders press for better execution when they actually need a better strategy or they change the strategy when they actually should focus the organization on execution. This is why from our perspective strategy formulation and implementation are steps within the same process.
2. Strategic goals not visible or not linked to metrics.
It is critical that strategic objectives are relevant, powerful, and simple to understand: they must have metrics, targets and data sources (see example in the table below); this means that the results for each metric need to be regularly updated, verified versus the definition targets and communicated within the organization.
|Increase share of proprietary products||% Revenues in proprietary products vs total sales||≥ 45%||Report 7121 from ERP system FI reporting module excluding FOREX impacts|
In addition the strategic goals need to be simple and easy to communicate. To verify this requirement you can use the “elevator test”; if you can explain the strategic goal clearly and precisely to any employee in the organization in a course of a 30 seconds elevator ride, you “passed the test”.
3. Poor focus
Ask your colleagues or to the members of your team to list the 2 or 3 main strategic goals he / she thinks the company is focusing on- you may be surprised how many different results and statements you will receive.
Focus is one of the most important aspects of successful strategy execution and we think that strategic plans should be linked to a maximum of 3 focus goals. Goals have to be clear to everyone in the organization. Only in this way each employee, at all levels within the organization understands the purpose of the strategy and the role he/she plays in its’ implementation.
4. Limited or no accountability
A robust strategy implementation process involves (directly or indirectly) all the employees within the company. This means that everyone knows what their role is in helping the company to achieve the strategic goals and is held accountable for results. In practical terms everyone should be able to easily convert the strategic focus goals into personal objectives and create a personal implementation plan linked to company strategy.
In our experience, when this doesn’t happen, too many decisions tend to pass to the more senior managers and ultimately the CEO, resulting in poor performance and lower motivation levels of the people who need to perform.
5. Poor operational execution
The best strategy possible is not valuable at all if the decisions are not transformed into actionable initiatives that are speedily implemented. In a world that is changing more and more rapidly, the ability to implement changes quickly is a very important capability.
6. Poor managerial capabilities
The companies that are best in class in executing their strategy have a strong and defined strategic leadership team. With this term I refer to a group of managers with the following characteristics:
- Ability to make decisions both individually and as a member of the team
- Adoption of common strategic decision making processes
- Each manager is to able to actively participate in establishing/enhancing the future Strategic Profile of the organization
- Company core values are known and followed by all to guide decision making
If you as a CEO or manager are asking yourself “Is our organization really effective in transforming strategic decision in positive financial and economic results for our company?” you can use the 6 above criteria to provide a first answer.