Getting things done with Strategy Execution

Getting things done with Strategy Execution by Paul Docherty White Paper

Introduction This whitepaper examines the emerging discipline of Strategy Execution, understanding the need for it, covering all aspects of what it is and highlighting how it helps organizations to more consistently get things done. Alongside seeking to provide an understanding of the discipline itself, this paper also provides a brief overview of the capabilities executives should expect from the latest on-demand Strategy Execution software platforms. Strategy Execution: Is there really a need for it? Before we can start to look at answering the question What is Strategy Execution? it is helpful to quickly explore how well organizations are executing on their strategic goals today. Overall, the vast majority of organizations are struggling with execution. A recent HBR study by Kaplan and Norton the originators of the Balanced Scorecard, concludes that less than 10% of organizations consistently deliver on their financial goals. We all know that senior executives spend a large amount of time on strategy and planning yet key promises to external stakeholders are still missed. There s got to be a reason for this. It s not difficult to see that execution is something that is much easier to say than it is to do. Aligning and mobilizing many thousands of employees in pursuit of organizational goals is clearly no easy task. In a survey of Global 5000 CEOs, undertaken annually by The Conference Board, Excellence in Execution is cited by the majority of CEOs as their number one challenge, year in, year out. There is clearly an execution challenge to be overcome in organizations, so why is it so difficult? In addition to stressing the critical importance of execution, the available research provides some interesting clues as to why organizations are struggling so much with execution. According to Kaplan and Norton s HBR article, for example, only a very small proportion circa 5% - of employees actually profess to understand their company s strategy and only about a quarter of employees actually have access to their company s strategic plan. Based on this insight and experience, we can categorize the execution problems faced by CEOs, CFOs and senior executives into three key areas: 1. Lack of clarity within the organization of strategy, accountability and roles and responsibilities. 2. Lack of a formulized process for driving actions and monitoring/reporting back on execution. 3. Lack of visibility as to whether the actions, once delivered, will be sufficient to turn the dials and result in the planned and forecasted business outcome. To overcome these challenges, CEOs and executives at all levels need to be able to answer three questions about their organization: 1. Are we on track to deliver our objectives? 2. If not, are we doing anything to rectify the situation? 3. Ultimately, in aggregate, will the actions we have initiated get us to our targets? There are lots of management frameworks in existence today that will go a long way to help answering the first question in this list, such as the Balanced Scorecard, but to be able to answer the second and third questions, a closed-loop approach to planning and executing strategy is needed.

The following analogy of a football manager helps to stress just how important closing the loop is: Imagine you re the coach of a football team. On the face of it your job is pretty clear. You really only have to get three things right; firstly you need to recruit the best players you can find, secondly you have to tell them clearly which positions you want them to play in, and finally you have to decide the formations or plays that you want the team to execute. With the right team, well organized, doing the right things, then the results are sure to follow, and the expectations of the owners are easy to manage. Even if things don t go your way, you can adjust your team, or your tactics, according to whatever problems you see out on the pitch. However, imagine now that you re the coach of a football team, and neither you nor your staff is allowed to attend the games. All that happens is that at the end of the week you are told the result of the previous week s game. Well, that s fine for as long as the team keeps winning. There s no need to change a winning team, and there s no reason to assume that the formations, plays and tactics need to change either. You don t need to know why the team s playing well, you just take satisfaction in the fact that they are continuing to win. You can sit back and watch the results flow in. But what happens when you start to lose. What do you do then? You have not seen the game, you have no idea how individual players have performed, and you don t know which tactics worked and which ones didn t. In the same way that results don t tell you why you were winning, they don t tell you why you re losing either. Well so what? No football coach worth their salt would ever stay away from the game. In fact they d not only turn up to watch, they d be standing on the sideline getting actively involved as events on the pitch unfold. They adjust tactics throughout the game, they shout instructions, they change formations and they substitute players. Good coaches know that they need to be involved so that the team can react to the way that the game is progressing. And good business leaders know this as well. But do they really get the opportunity to put into practice what they believe? Not as much as they should. So let s take a look at why this is. The reality for senior executives in an organization There are two fundamental planning and review activities that occur in virtually all public and private sector organizations. Firstly, organizational goals are broken down into things that people need to do. This cascade process, whilst well intentioned, is often dysfunctional and inefficient typically taking the form of a series of performance appraisal discussions at each level of management captured in an annual performance review document. The result of this performance appraisal approach is typically a loss of coherence in the plan as it is cascaded as there is typically little or no visibility of the overall hierarchy of goals and whether, in aggregate, the plan is achievable given the budgeted allocation of financial resources. Secondly, operational performance is reviewed on a periodic basis. Typically these reviews happen monthly and focus, in the majority of cases, on the lagging, often financial, KPIs. These performance reviews essentially give executives only a historic rear view mirror perspective meaning that in many cases, the first time that they learn if a goal has, or hasn t, been achieved, is when the expected result fails to materialize in the financial numbers. The reality is that, as direct consequence of the dysfunctional cascade and review processes that exist in most large organizations, senior executives have little real opportunity, on a day to day basis, to directly impact results. They are forced, in effect, to refer to the earlier analogy, to pass instructions to the people on the pitch via chain of other people who put their own spin on their message whilst being only able to learn the results of the game after it has been played. In summary, to successfully execute we need to close the loop. We need to not just be able to connect the goals (instructions) to the actions (players) that realize them, but to be able to measure and forecast the impact those actions have on the dials we are using to track the achievement of our goals (i.e. we need to be able to see the game and watch it/take action as it unfolds). This closing of the loop is the essence of the Strategy Execution approach.

Strategy Execution At the heart of the Strategy Execution approach is the recognition that to consistently execute on our goals we need to integrate, through use of an integrated software platform, the six core planning and execution processes which form the basis of the closed-loop Strategy Execution cycle. The closed-loop Strategy Execution Cycle: Closed-loop Business Execution Cycle To build a robust execution system, organizations need to close the loop. This means integrating the planning and execution processes such that: The business goals are consistently translated to the right actions By capturing goals, the actions that realize them and the KPIs that measure them in a consistent integrated way, Strategy Execution platforms transform the ability of executives to align, motivate and hold to account their employees. They make it possible, for the first time, to visualize the cascade of goals as it is built out right down to the employee level and to understand in real-time whether the actions of many thousands of employees are moving the organization towards its goals. The right actions are consistently translated through effective implementation into positive impacts on the organization s ability to execute The cumulative impacts of these actions is consistently translated into insight into whether the goals set have been achieved. Achieving this means that there is a need to integrate the six core processes use to: Define and communicate business objectives; Translate these objectives into actions at all levels; Act with speed and focus to implement these actions; Embed new capabilities into the organization; Manage the performance of day to day operations; Measure the impact of the actions on achievement of business objectives; In many ways, the potential Strategy Execution platforms have to transform the way we plan and execute strategy is directly analogous to the way that ERP platforms revolutionized the planning and execution of manufacturing in the 1970s. Before ERP, production was managed in most organizations using a set of fragmented tools such as production planning systems, shop floor control systems, procurement systems, warehouse systems, distribution systems and so on. Now, it would be almost inconceivable that an organization wouldn t deploy an integrated ERP platform to drive production. The potential that modern Strategy Execution platforms have to transform organizational productivity through integrating the various fragmented tools currently used to articulate and communicate goals, manage and track projects and track and report performance has increasingly been recognized by leading IT analysts and commentators. Martin Butler, a leading IT analyst, for example, hails Strategy Execution platforms as one of the most significant opportunities to apply information technology to revolutionize business performance since the widespread adoption of Enterprise Resource Planning (ERP) applications. 1 1 Martin Butler, Making the Strategy Work

Implementing Strategy Execution Implementing Strategy Execution disciplines fundamentally requires senior executives to do three things. The first is to commit to fundamentally change the way the organization, or their part of the organization, cascades its goals, drives its programs and measures its operations. This takes both a leap of faith and a degree of will. The leap of faith lies in believing that something that has historically been done in a fragmented way (through the sheer logistical complexity of trying to do anything else), can fundamentally, with the right technology, be done in a truly joined-up way. The degree of will is required to overcome the inevitable resistance that this change in approach will bring through increased transparency and accountability. The second is to implement and integrate the core planning and execution processes that comprise the closed-loop strategy execution cycle. Here there is some good news in that the last 40 years has seen the introduction, refinement and widespread adoption of three core management frameworks that provide a sound basis for these core planning and execution processes. Leveraging Best Practices to Underpin Strategy Execution: Foundation Frameworks for Strategy Execution The following management frameworks are widely adopted in large organizations and provide a basic set of disciplines on which we can build a robust integrated Strategy Execution system. Hoshin Planning. First used by Bridgestone Tyres in Japan in 1965, Hoshin Planning is a systematic planning methodology used to define and drive implementation of breakthrough objectives over a period of two to five years. Hoshin Planning ensures that everyone in the organization works toward achieving the same breakthrough objectives. The plan cascades through a consensus building process known as catch-ball to the operational level where action plans are identified to implement the objectives. Hoshin Planning introduces an on-going review process which tracks the performance of the key indicators over time and causes counter-measures to be instigated if performance varies from targets to bring it back on track. Lean Six Sigma. Lean Six Sigma is an increasingly popular combined management approach that emphasizes use of Lean methodologies and tools to identify and remove waste and increase process velocity, followed by use of Six Sigma methodologies and tools to identify and reduce or remove process variation. Lean Six Sigma leverages stage-gate methodologies such as DMAIC to provide a structure for driving change in an organization whilst ensuring that the necessary controls are instituted to ensure the changes that are implemented are sustained. The first of these frameworks is Hoshin Planning a Japanese inspired methodology for defining, cascading and reviewing goals within an organization. The second is Lean Six Sigma - a powerful approach to systematically driving improvement in operational performance which has become the de facto approach to changing how processes operate within an organization. Finally, the third is the Balanced Scorecard. This approach has become the de facto way in which organizations articulate goals and identify and report on the indicators that track achievement of those goals. Collectively, these three management frameworks provide us with a basic blueprint for how each core planning and execution process in the closed-loop Strategy Execution cycle can work. Balanced Scorecard. The Balanced Scorecard is a strategic management and measurement system that links strategic objectives to a comprehensive range of key performance indicators, arranged in four key perspectives selected to provide a balanced view of performance. The Balanced Scorecard approach also features a visual approach to articulating strategic objectives and understanding the causal relationships between them known as Strategy Mapping. The Balanced Scorecard provides the basis in many organizations for monthly performance reviews in which the progress towards achieving strategic objectives is tracked via review of Balanced Scorecard indicators.

There is further good news when it comes to implementing the core processes needed to introduce Strategy Execution disciplines. Based on over a decade of experience of working with global organizations, i-nexus have developed, in conjunction with leading consultancies, a methodology which we call PACE (Prepare, Align, Cascade, Execute) which is designed to help organizations to rapidly build on their existing best practice frameworks to establish a robust Strategy Execution system. Further details of this methodology are available from www.i-nexus.com. Finally, the third thing that executives need to do to achieve the results is to implement an enabling technology platform. This platform needs to offer the scalability to support thousands, if not tens of thousands of people, to work in a coordinated way to define/refine goals, to collaborate together on actions and to track and forecast the impact of those actions on business performance. Strategy Execution Software As the business challenges involved in Strategy Execution have become clearer, leading software vendors such as i-nexus, have responded to these challenges by creating a new category of integrated on-demand platforms which bring together all of the previously fragmented tools and systems used to plan and drive execution of business goals into a comprehensive and robust execution system. These Strategy Execution software platforms typically combine capabilities to define and manage goals at all levels in the organization, with capabilities to plan and manage projects and programs and capabilities to track and aggregate performance the KPIs that track achievement of goals all within a single integrated system. These systems make it possible for the first time to visualize the cascade of goals from executives right down through the organization to front-line employees, and to see in real time the progress and impact of what can be in larger organizations many thousands of individual actions, projects and initiatives on the achievement of those goals. Put simply these systems augment the ability of an organization to do the heavy lifting needed to implement integrated strategy execution and essentially give each manager the ability, to use the earlier football analogy, to watch the game in real-time and adjust tactics as it unfolds. To learn more about the potential strategy execution software platforms have to transform your organizations ability to execute visit www.i-nexus.com. Modern strategy execution platforms like i-nexus enable managers to see how the execution is progressing in real-time. Benefits of Strategy Execution Leading global organizations such as Pfizer, Nestlé and Alstom are experiencing the benefits associated with the Strategy Execution approach to ensure delivery of their strategies by giving managers the framework to implement change and to engage workers in the process. 2 The main three benefits can be summarized as: Better alignment: Organizations implementing Strategy Execution are seeing dramatic increases in the percentage of employees that understand their contribution to achieving the goals of the organization and in terms of the degree of alignment between goals and the on-going actions that drive them. i-nexus customers have reporting up to a 60% improvement in alignment of operational actions with business goals as a result of implementing of an integrated Strategy Execution System. 2 Martin Butler Making the Strategy Work

Speed of execution: Organizations are able to focus the energy of employees to speed up and bring forward the delivery of their strategy. Execution cycle time reductions of 25% have been reported by i-nexus customers. Better agility: Organizations receive earlier warning signs that the actions in place are not moving the dials, which provides the opportunity to make timely changes and avoid impending failure. i-nexus customers have reported increases of 50% in the success rates of actions that can be directly attributed to the implementation of a Strategy Execution System. Ultimately, organizations that implement robust Strategy Execution systems dramatically raise the probability that they will achieve the goals they communicate to external stakeholders. Given the critical importance to all senior executives of delivering on their promises, understanding the potential of Strategy Execution should be on the immediate agenda of every leader. If you would like to find out more about what Strategy Execution could do for your organization please visit www.i-nexus.com.