Great business performance requires good strategy and flawless execution. In today’s fast-paced world with increased competition and uncertainty, defining a plan over many years and executing it is no longer viable. Leaders need to revisit their approach to strategy formulation and execution.
Strategy execution may be difficult in practice for many reasons, but a key impediment to success is that many leaders don’t understand the implications around strategy execution and how they should approach it.
In this article, we clarify what is strategy execution and explore ideas from research and practice that could help you and your team be on top of the game.
What is strategy execution?
“Strategy execution” or “strategy implementation” are the terms used to describe the activities your team or organisation undertake to deliver your corporate strategic plan.
Strategy execution was mostly described as a “Plan-then-do” approach that was first disseminated by GE and others in the 1970s. In 2002, in their book “Execution: The Discipline of Getting Things Done”, Lawrence Bossidy - former GE and AlliedSignal CEO - and Ram Charan - a renowned management consultant - explained that strategy execution is a discipline or “systematic way of exposing reality and acting on it”. They explain that the strategic planning process at “the heart of execution lies in 3 core processes”: (i) People, (ii) Strategy and (iii) Operations.
In 2008, Harvard Business School Professor Robert S. Kaplan and David P. Norton from Palladium Group wrote “The Execution Premium: Linking Strategy to Operations for Competitive Advantage”. They introduced their own vision of a management system with 6 sequential stages for successful strategy execution: (i) Develop the strategy, (ii) Plan the strategy, (iii) Align the organisation, (iv) Planning execution and implementation, (v) Monitor and learn and (vi) Test execution strategy and adapt.
Ed Barrows from the American Management Association synthesized the best of both approaches into 10 steps: (i) Visualize the strategy, (ii) Measure of success, (iii) Report progress, (iv) Make decisions, (v) Identify strategy projects, (vi) Align strategy projects, (vii) Manage projects, (viii) Communicate strategy, (ix) Align individual roles and (x) Reward performance. By including communication and employee alignment and performance reward into the loop, Ed Barrows addressed two common flaws into strategy execution.
These well-defined step-by-step methodologies of strategy execution endorsed by renowned CEOs and experts may well sound inspiring for leaders. But alone they won’t guarantee success, particularly in the current environment where we observed increased customer expectations, competition and uncertainty.
A necessary shift in strategy execution
In his recent article “5 ways the best companies close the strategy - execution gap” Michael Mankins from Bain & Company explained that in response to a change in their environment, successful companies have moved away from the “Plan-then-Do” approach to a new one he described as “Decide-Do/Refine-Do”.
He then shared 5 lessons from what they saw the best companies doing with strategy planning:
- Treat strategy as evergreen - less as a plan and more as a direction and agenda of decisions.
- Value flexibility - There is no single path forward and your team needs ability to steer around potential roadblocks.
- Think of strategy as a portfolio of options, not bonds - when volatility is high, strategic decisions should be treated more like call options and management should focus on investing resources on initiatives as a call on potential profits. If the strategy becomes “out of the money”, leadership should stop investing, cut its losses, and move on.
- Create response mechanisms to react quickly and effectively to unplanned changes.
- Adopt agile planning using time-boxed sprints (similar to the method used for agile development) or micro-battles to constantly move forward by testing the waters, learning and refining the strategy based on results.
Our team has worked for more than 25 years with international SMEs and enterprises in the water, electricity, manufacturing, transportation, software and electronics industries. We learnt the above five best practices are more often implemented in fast growing small and medium-size companies than larger organisations.
Personally, working at the top level of a multinational environmental and utility group and in several of its subsidiaries in multiple countries, I learnt that strategy and its execution are often left to the initiative of local management.
There is a common issue with strategic alignment between the corporate and its subsidiaries: I saw investments done outside the group strategy scope. Executives at local level were following a different strategy because they argued that the local market required flexibility. They justified those investments because there were opportunities to generate revenue and possibly some profit. But they diverted group resources that should have been dedicated to support the group strategy. Flexibility and agile planning don’t mean that executives must follow any opportunity of growth. Sharing and enforcing the group strategy within a large organisation is a challenge. Controlling strategy execution is an imperative.
We also observed that enterprises that benefit from an environment relatively favourable to growth tend to underestimate the importance of adapting their strategy execution approach, and may react too late to shift their leadership practice. Providing flexibility in the execution at operational level is critical. There are opportunities to discover more efficient and agile ways of achieving strategic outcomes. But it is also important to share best practices across the organisation - those strategy executions that are working well - and ensure that no executive is “reinventing the wheel”.
It is time to ask yourself:
- Is your organisation more on the side of the “Plan-then-Do” or “Decide-Do/Refine-Do”?
- How far have you changed your business strategy execution approach to adopt some of the 5 best practices mentioned above?
- How do you enforce strategic alignment at the same time you allow for flexibility and agility in its execution?
- How do you share practices that are most successful in delivering strategic outcomes?
How to excel at both strategy and execution?
In an article called “How to Excel at both Strategy and Execution?”, Paul Leinwand and Joachim Rotering from PWC Strategy & Consulting suggested that “leaders who master both strategy and execution start by building a bold but executable strategy. Next, they ensure that the company is investing behind the change. And last, they make sure the entire organisation is motivated to go the journey”. They proposed a 3-stage strategy-to-execution continuum.
An article entitled “How The Most Successful Teams Bridge the Strategy Execution Gap” by Nathan Wiita and Orla Leonard from RHR International addressed the same topic from a different angle. N Wiita and O Leonard explained that they examined how 49 enterprise leadership teams spend their time and their perceived effectiveness on critical behaviours.
In an attempt to summarise the two articles, let’s take away 4 key points:
1. Strategy must be built by committing to an identity
Senior leaders need to come with a shared understanding of the company value proposition and distinctive capabilities: clarity about “how you add value to customers in a way that others don’t”[3:1]. “The organisation must commit to focus on what it is good at and then go after it”[4:1].
The key differentiators for high-performing teams were that they spent:
- “nearly 20% more time (compared to low performing teams) defining strategy i.e. translating a high-level vision into clear actionable goals.
- 12% more time aligning the organisation around the strategy through frequent internal communication and driving a consistent message downward into the organisation.”[4:2]
P Leinwand and J Rotering suggested to ask yourself two important questions:
- “Do you have the capabilities needed - or can you build the capabilities needed - to execute the strategy?”.
- “Are you shaping the world around you with your given strengths, or are you waiting for change to happen, and therefore playing by someone else’s rules?”[3:2]
2. Translate the strategy into everyday processes and capabilities
N Wiita and O Leonard discovered that “the most successful senior teams create a permeable membrane between the organisation's mission and its day-to-day activities. They are also agile in course-correcting when the needs of the business change, and are more easily prepared to shift organisational resources to ensure that the strategy is executed.”[4:3]
Their research showed that high-performing teams spent:
- “over 25% more time focusing the enterprise - establishing financial and operational metrics, aligning goals with overarching strategy, allocating resources, and reviewing key metrics.
- 14% more time checking their progress against strategic goals by reviewing key metrics and shifting resources accordingly.”[4:4]
In addition, P Leinwand and J Rotering suggest to ensure that “you have mechanisms in place that translate the strategy into personal goals and rewards for managers and employees.”[3:3]
3. Concentrate on the unique people capabilities that fuel success
RHR International consultants suggested that simply focusing on strengths and implementing change programmes to address gaps or weaknesses is not enough anymore. They said that “the approach of leveraging cultural strengths is both commendable and efficient, but organisations that continue to monitor and challenge their cultural and leadership biais are those that have the edge.”[4:5]
Their research highlighted that high-performing teams spend:
- “28% more time engaging the organisation in ongoing dialogue about cultural enablers and barriers to execution.”
- “Almost 1/3 more time in optimising talent capabilities by reviewing development plans, ensuring that succession plans are in place, and evaluating compensation plans to be competitive.”[4:6]
PWC consultants were suggesting to ensure that your organisation is “enabling employees to work together across organisational silos to tackle the cross-functional challenges that allow the company to win.”[3:4]
4. Working on executing your good strategy versus fire-fighting
RHR International research also showed that “high-performing teams spend 54% more time first setting direction, crafting a vision that serves as a guiding light for decision regarding resources,” whereas “lower-performing teams spend an astounding 83% more time fire-fighting and dealing with issues at a tactical rather than strategic level.”[4:7]
“High-performing teams successfully shape the future, rather than always being in reactive mode in the present”. In particular they spend “25.3% more time influencing high-level stakeholders by identifying their needs and managing their expectations.”[4:8]
As a matter of facts, I remember one of the challenges I was assigned to few years ago: to lead a finance shared service team of 35 people and to bring its performance back on track. There was a lot of backlog in the Account Payable process. Business Unit finance controllers were blaming the poor AP team performance for not being able to produce reliable monthly accounts. The procurement team was complaining of difficulties to source goods and services as providers where paid late. And the AP team was with reason claiming that the problem was originated because accounts holders in the business didn’t follow the procurement process and didn’t raise purchase orders in the system!
The audit unveiled that the main issue was a lack of trust and coordination between the AP team and the business account holders. We provided additional resources to ensure that the backlog was progressively resolved. But most importantly, I spend most of my time engaging with managers, finance controllers and account holders in the business and providers, to share a common understanding of the issue and agree on an ad-hoc action plan.
We insisted in the AP team members to meet face-to-face with their counterparts in the business in order to build rapport, discuss the issues and agree on the corrective actions. Within 4 months, not only the AP team was back on track but they had developed a relationship with people in the business and providers that help them to “shape the future” together rather than fire-fighting constantly. The approach proved to be critical to help switch to a more proactive management of the relationship with internal clients and providers.
In a nutshell, compared with other organisations, companies that excel at executing their strategy:
- Dedicate more time and thinking to the strategy elaboration and planning phases,
- Focus on developing people capabilities to be successful and
- Check progress more regularly and adjust plans with an agile approach.
7 Behaviours to Master Strategy Execution
In an article titled “4 Ways to Be More Effective at Execution”, Jack Zenger and Joseph Folkman, leadership development experts, gained insight into the leadership behaviours required to improve execution by researching tens of thousands of 360-degree performance review.
They looked at thousands of leaders who were rated as being highly effective at execution and investigated the coinciding behaviours that improve execution.
According to J Zenger and J Folkman, 4 behaviours in particular are critical and balancing them is the strategy that will improve execution most of all:
- Be clear and methodical: although it seems obvious that defining clearly the objectives and sharing them across the team, as well as preparing and planning the activities can significantly improve the odds of success, they said that “many people who are energetic about execution tend to jump into activities and take action before they get organised”.
- Set stretch goals and deadlines: the authors suggested to set stretching goals and deadlines, “as a way to help the group achieve their objectives and generate greater engagement and satisfaction in team members”. Although they warned us of not pushing too much as this could erode trust and motivation, and will hurt execution on the long run.
- Give more feedback, especially more positive feedback: According to the authors, feedback increases intrinsic motivation and therefore execution. They insisted in the importance of listening to and understanding employees’ perspective and in providing critical feedback. They saw a major difference in execution with leaders who give a lot more positive feedback and positive recognition.
- Resolve conflict and build team unity: They observed that creating a high-performance team culture is an important element of good execution. This probably requires implementing all or most of the above, but they found that “perhaps the biggest single thing for leaders to focus on is resolving conflicts .../... because many of the problems within a team come from differences and conflict between team members; on high-performing teams, team members trust each other and conflict is constructive, not destructive or personal.”
Based on our practitioners’ experience leading multiple strategic initiatives and complex transformation programmes, we would also mention the following leadership capabilities as critical for success:
- Work collaboratively in planning execution: your team members and other colleagues involved in the initiatives may come up with more effective ways of executing the strategy and, by being consulted in the first place, will feel more engaged into its execution.
- Listen to the stakeholders and engage them early in the process of strategy planning. Win their support because if they do not collaborate, they may well slow or block your plans.
- Secure the outcomes: at the end of the year your performance will be assessed on outcomes, not on how you diligently executed the strategy. Assess risks, diversify ways of generating the outcomes, prepare contingency plans, review your strategic initiatives portfolio and monitor progress regularly, and be prepared to swiftly change your plans.
In conclusion, companies and leaders that excel at strategy execution are focusing their efforts on:
- Successful strategic differentiation: They generate value for their customers in an unique way; how they can translate the strategic vision into unique everyday processes and capabilities, as well as clear actionable goals.
- A more agile way of executing their strategy. They treat strategy more as evergreen, value flexibility and create response mechanisms to steer around potential roadblocks and achieve their expected outcomes.
- Developing their people unique capabilities. They foster open discussions about cultural enablers and barriers to execution, optimise talent capabilities, and translate the strategy into personal goals and rewards for managers and employees.
- Encouraging good behaviours such as team building, collaborative working, transparency, positive feedback, etc. - with the example coming from the top.
Ask yourself “how did I performed in terms of strategy execution?”. Test some of the suggestions above to improve it!