The Strategy-to-Execution Process: A Critical Component of Transient Competitive Advantage

It’s not simply having a good idea that separates marketplace winners from losers – it’s possessing the ability to execute. In fact, it’s no longer about having just one good idea – it’s about having a stream of them – coupled with an operating model that fosters new ideas and is not afraid to cannibalise itself to take advantage of them.

Winners leverage an explicit and repeatable process that most organisations don’t – a Strategy-to-Execution (S2E) process designed to identify and implement the business capabilities they need to deliver on their value propositions and targeted customer experiences. They also know how to continuously review, refresh, and package their people, processes, and technology investments to pursue new opportunities while continuing to run the existing business.

As Rita McGrath correctly asserts through her notion of Transient Competitive Advantage, a position of market advantage is fleeting, and executives must be able to run and transform their existing business models concurrently. Not easy to do – but you can achieve it by implementing a formal Strategy-to-Execution process along with a management team that is both ambitious and agile.

In recent years, CEO surveys by HBR, Robert Kaplan, The Conference Board, and the Journal of Change Management identify strategy execution as one of their respondents’ top challenges. In fact, many agree that executing a strategy is more important than formulating that strategy initially. Interesting findings from these studies include:

• Only 37% of executives say their companies are ‘very good or excellent’ at strategy execution.¹
• 53% of implementers cannot state their company’s strategy in its entirety.
• 66% of HR and IT organisations develop strategic plans that are not linked to the enterprise strategy.
• 70% of typical organisations do not link their strategic priorities to their budget.²
• 75% of managers DO NOT have incentives linked to strategy.³
• 85% of executive teams spend less than one hour per month discussing strategy.⁴
• 95% of employees in most organisations do not understand their organisation’s strategy.⁵

So why is strategy execution so hard for most organisations? The biggest obstacle is the lack of a well-defined process to manage the translation of strategy into targeted and synchronised cross-functional execution.

In most organisations the translation of strategy into execution occurs through the establishment of priorities, budgets, and projects at a functional level within the organisation. This approach doesn’t work.

First, as managers translate strategy down and across their organisation, strategy loses cohesion as managers interpret and communicate strategy from their own professional discipline or functional points-of-view. If an explicit process doesn’t bring managers together to expose and resolve these disparate perspectives, strategy diffuses into a set of functionally optimised and largely independent work efforts – not a set of integrated, cross-functional, and properly sequenced work designed to make strategy real for customers and the company.

Additionally, most organisations’ operating models support project conception based on organisational function and hierarchy – not a shared cross-functional view of the company’s business processes. The lack of a business capability view of an organisation’s holistic operating model means that projects emanate from a functional optimisation perspective not a strategy execution perspective. To make matters worse, as the organisation translates strategy into ‘the work to be performed’, it follows existing project planning and budgeting processes, which it originally designed primarily to manage scope, contain cost, and mitigate risk – not to execute on strategy.

Most enterprise project agendas become trapped in a state of functional optimisation NOT strategy execution.

Successful strategy execution requires a significant paradigm shift for most organisations. It requires they organise work around opportunity as defined by customer value, time-to-market, and the urgency to build or source the capabilities needed to deliver. They must plan strategic projects from the customer’s point of view. And they must implement as quickly as possible to ‘learn by doing’, which will inform and guide future investments based on enterprise strategy, not functional priorities. ‘Fast and roughly right’ wins almost every time when pitted against ‘slow and perfect’ in the Strategy-to-Execution game.

Six Steps to Excel at Strategy Execution

Our experience with clients indicates a compelling need for an explicit and repeatable Strategy-to-Execution (S2E) process to guide a structured approach for clarifying, communicating, implementing, and managing strategy and its results. The goal of implementing an S2E process is to ensure the organisation invests in developing high-value capabilities that optimise value.

The S2E process ensures that every individual in an organisation understands strategic intent consistently, which leads to concentrated, coordinated, and synergistic action. Follow these six steps to focus the entire organisation on executing your strategy:

1. Clarify the Strategy – create a high-fidelity strategy that provides a clear vision, long-term goals, and specific short-term/measurable objectives. Unpack the strategy into explicit value propositions and target experiences for key constituents (customers, shareholders, and employees). And establish a set of ‘guardrails’ about what the organisation will and will not do as it executes the strategy. Ask yourself: How did RIM go from a market leader with a 43% share of the U.S. cell phone market in 2010 to less than 3% today and no chance of the Blackberry competing with iPhones and Androids? Make your strategy crystal clear.

2. Build a Contemporary Capability-Based Operating Model – business capabilities encapsulate the organisation’s ability to act through its people, processes, and technologies. Capability-managed organisations shift their focus from functional optimisation to overall value chain effectiveness through capability improvement. Every organisation – no matter how large or small – requires a set of capabilities to execute its business model and mission successfully. Leaders should create and use a future-facing capability model to build a common language, drive organisational collaboration, and get people to think outside of their functionally oriented boxes and focus on the most important value chain elements the company needs to execute on its strategy.

3. Assess Business Capability Performance – after identifying the critical capabilities that support strategy execution, leaders must conduct a candid, cross-functional assessment of the organisation’s ability (effectiveness and efficiency) to deliver these capabilities. This capability ‘heat map’ forces management to be on the same page focused on the most important business capability performance gaps. It helps focus the company’s attention and limited resources on the things that matter most for successful strategy execution.

4. Clearly Identify the Reasons for Capability Per-formance Gaps – savvy organisations don’t jump directly to technology solutions, process improvements, or organisational redesign without thoroughly understanding the root cause of a capability performance gap. They don’t define a performance problem prematurely through the language of a proposed solution or current system – a problem that has become endemic in many companies. Companies that excel at strategy execution challenge the status quo, invite a broader range of constituents into the strategy process to develop options, and aggressively look both inside and outside for possible solutions. They adopt the simplest and most direct approach to getting something done now as opposed to initiating a prolonged evaluation of more elegant options. Purpose with utility and a sense of urgency prevail.

5. Construct an Execution Roadmap for Strategy Delivery – with the highest-value, most-needed capabilities identified, develop an explicit roadmap for strategy delivery from the customer’s point-of-view. Construct packages of strategy-based value propositions and target experiences and align, sequence, and allocate the people, process, and technology work to implement the needed capabilities and deliver each package as quickly as possible. Make sure to schedule package implementations or releases to address the most important and compelling needs of your customer – don’t miss a window of opportunity or significant event that will help you deliver on your strategic intent quickly. Don’t forget, however, that every organisational portfolio must represent a combination of ‘run the business’ and ‘change the business’ initiatives.

6. Measure and Monitor the Strategy Execution Progress – ensure Strategy-to-Execution work is getting done. Senior managers erroneously believe that once a strategy is defined, the organisation will automatically support it. This is rarely the case. Three essential metrics for measuring and monitoring effective strategy execution are:

• Organisational buy-in – do our internal constituents or employees understand, support, and rally around the most important work to implement the capabilities needed for strategic success?
• Execution roadmap progress – are we able to organise and manage cross-functional engagement to deliver the strategy in a focused, agile, and incremental way?
• Strategy release impact – are the releases of strategy delivering high-impact customer value and expected business results?Strategy-to-Execution management presents a new opportunity to ensure an organisation’s clarification, communication, coordinated execution, and achievement of strategic intent. Implementation of a formal, repeatable Strategy-to-Execution process facilitates a cross-functional discussion by aligning the organisation on the capabilities needed to deliver on strategy and providing the organisation with a clear roadmap for strategic success.

About the Author
Jack Calhoun is CEO of Accelare, Inc., a firm dedicated to helping executive teams implement the Strategy-to-Execution Process. Accelare is also the creator of WhatFirst a new, breakthrough tool for managing Business Architecture. For more information, please visit www.accelare.com.

References
1. 2010 HBR survey of 1,000 executives
2. Mark Hughes, Journal of Change Management
3. The Conference Board
4. Charlesmore Partners International
5. Robert Kaplan, Harvard Business Review