Strategic Execution Part 1: Introduction
Strategic Execution Part 1: Introduction
What are strategy and strategic execution? In my strategy practice and in operating roles I’ve taken over the years, there seems to be a wide variance in depth of understanding of what strategy is, how it is developed, why it is developed, and how it is executed. For many of my clients, this creates an opportunity for me to help; for some, it means the difference between success and failure. For this reason, it seems appropriate to dive into the topic of strategy in a holistic way.
In order to be successful in business, you have to find a customer and solve a critical problem, need, or desire for them in a way that creates value that can be shared between the customer and yourself. If the share of value captured is substantially greater than the cost to obtain that customer and this process can be repeated sufficiently, you have a business. If you can repeat this sufficiently often, accelerate that process, retain most of those customers, and find a way to sustain that accelerated growth, you might have an institutional-investor backable business. Reading through those three statements, there are several challenges and quite a few relativistic statements that require greater exploration. To keep a growing group of people moving in a coherent way to define and achieve those results, they need a plan. That plan is called a strategy and the process of implementing and evolving that plan is called strategic execution.
Strategy has always needed to be dynamic and evolving, and it has always involved both a development and evolution activity, the plan for execution, and a way to manage that execution in a complete cycle with the evolution of the plan. That cycle must be sufficiently agile to the environment in which the company operates and its place in that environment. It has also always needed to be prescriptive to the Goldilocks level of guidance to the organization. Over-prescription drives planning cycles that are too long and restricts operating freedom when interacting with customers, prospects, product/service development, and operations. Under-prescription allows development of honest crossed agendas, confusion, wasted resources, and a host of other issues.
Many Fortune 1000 companies are talking about the fallacy of strategy and the business challenge of operating in a world filled with others disrupting their well-established business dominance. General Electric has been often-cited lately in the media speaking about how the acceleration of disruptive cycles and forces and the challenges they have with their strategic planning process in the presence of this reality are driving a massive rethink of the business. As a result, there has been some discussion in the mid-market and even in startups about strategic planning and execution processes needing a radical transformation to somehow keep up. It really shouldn’t be a surprise that companies of the size and scale of GE are suffering from a lack of strategic agility. Having worked the first half of my career in the Fortune 100 and having since had many customers in this end of the economy, I can say with experience that such companies have strategic planning processes that take nearly the entire year to perform, are not tuned and adjusted substantially between cycles, are overprescribed, and are developed without a disruptive mindset. A part of strategy is the purposeful erection of barriers to entry of competitors and purposeful positioning of products and services in contrast to known competitors. The most common barriers to entry in manufacturing-intensive businesses are scale, capital-intensity, regulation, and intellectual property. In a world in which manufacturing capability and flexibility is much more global, agile, intelligent, and available; these barriers become less formidable. Many other companies of this scale rely on similar barriers. It should be absolutely no surprise that when exposed to a new intensity of competition by those barriers lowering that such processes and methods aren’t sufficiently agile to keep pace with the environment in which they must operate. However, this hardly means that strategy is a failed concept or should be abandoned.
Google’s approach to strategy is to use OKR, Objectives and Key-Results, and let their teams operate in highly-agile independent units alleviating the need for any strategy whatsoever, and they are the very definition of entrepreneurial agility at large scale. This is a somewhat common belief that substantiates the need to abandon strategy and do what’s simple; unfortunately, it is an inaccurate fallacy. Google does use OKR and it’s a perfectly fine system for the execution management portion of strategic planning and execution; it’s simply new terminology and tailored thinking for what has always been known as objectives, initiatives, and measures; i.e. the execution part of the strategic plan. The essence of strategy execution is to delegate to teams a set of objectives and measures by which to judge success. Some companies parse out initiatives as cross-organizational activities required to drive changes in the business to support a given team’s capacity to achieve their objectives. It’s perfectly legitimate to capture these in objectives, especially when the changes are driven by a single holistic team with well-defined and/or relatively few touch-points with other teams; these are both true within Google’s product architecture as well as its organizational architecture. Further, what is less well advertised is that Google most certainly develops, executes, and evolves a strategic plan. Its core business and core strategy are to build a web-based platform that is so useful in so many ways that it attracts the world in order to leverage advertising, data collection and exploitation, and an ecosystem of SaaS products and services that can enrich the overall platform and be profitable in themselves. This strategy is certainly well aligned with creating agile and fairly independent teams to chase new product/service concepts. Further, the core business evolves as the platform is built and expanded and each individual product/service is evolved, improved, and exploited. The fact that this approach enables rapid growth through inspiring agile teams to create, attracts talent to drive this entrepreneurialism, and generates tremendous revenue and profit is not evidence of the success of not having strategy; rather it is evidence of the value of a well-defined strategy with constant evolution built into the process and the fabric of the organization.
Strategic planning and execution are not going away; it is the primary tool for businesses and even non-business organizations to achieve their goals. It is worth noting that there are some core reasons why this is true. First and foremost, every organization must achieve its results with resource constraints and it is simply true that most-often, planning yields better results with a given set of constraints than not planning. Second, every organization has stakeholders with expectations. They might be customers, investors, regulatory bodies, owners, employees, or the community at large. There simply is no way to produce and meet expectations in a reliable way without a reasonable planning and execution process. Finally, nearly every organization has more than one person involved. Every incoherency of direction between the people working in that organization has the capacity to waste resources or produce crossed expectations with a stakeholder and for this reason, that organization needs a process of unifying in direction and purpose to minimize those negative effects.
How then to address the need for agility in strategic planning? Agility is simply achieved in strategic planning through a combination of techniques and thinking. First, planning should take on the horizon planning concepts of the agile product design method; a blend of long-term thinking for coherent long-term direction with short-term measure and responsive iterative processes. These processes and their cycles must be sensitive to the state of maturity of the company and the dynamics of the industry and market in which the company operates. Second, a real focus on hitting the right level of strategic prescription for the organization as it currently exists and will exist into the planning horizon future is required. Finally, a disruptive mindset is required. The truth is that companies that successfully disrupt established markets and companies owe that capacity to thinking differently. The great challenge is to sustain the ability to think differently as the company grows and its culture becomes more process-driven and less entrepreneurial. That means creating and sustaining some function or group within the company that must think and act differently; while the rest of the company figures out how to build barriers to entry, they must think of ways to break or go around them.
In subsequent blogs, I will address the components and processes of strategic execution and planning and offer some insights into tailoring them to individual organizations and needed level of agility, some observations of common pitfalls and problems with the process that I’ve seen, and finally offer some cases studies on companies that have had both success and failure with strategic planning and execution.
For most companies, the usage of external parties to facilitate the strategic planning and execution process produces superior results. The process typically involves a great deal of information processing that is not core to running the business on a daily basis and a facilitator in planning sessions frees up the team to focus on the critical questions rather than the process and can inject highly productive objectivity into the discussion and decisions. If you would like to discuss where your company is in the evolution of strategic planning and execution or would like some assistance in setting up or performing this critical process or just have a question please contact us.