Addressing the Fundamental Challenge of Strategy Implementation
The fundamental execution challenge is ensuring that the actions of people in the organization are adding up to the strategy, not to something else. And since whatever people are doing today is rational, to them, a deliberate change effort is always needed.
The four components of the process for linking execution to strategy are summarized below:
- Translate the strategy into an “actionable plan,” the cornerstone of which is milestones that can serve as leading indicators of performance.Contrary to the views of some managers, a plan is not a strategy. A strategy says where you are going and why you, not others, will win. It starts with the future and works back. It requires a critical mass of knowledge, foresight, creativity and aggressiveness. In contrast, a plan starts from the present and works forward. Its development process and content increase the odds that the strategy will happen. It enables both direction and control.
- Engage the implementers and make the plan their plan.People can’t execute what they don’t understand and won’t execute well what they don’t agree with. This critical step is where managers often balk, complaining that people don’t accept change. The problem isn’t change. The problem is engagement. People will change for a cause that’s important to them. What people want is to work on something that matters.
- Define and monitor leading and lagging metrics that link to the strategy.Most businesses place overwhelming emphasis on financial indicators. While important, they are a grossly incomplete slate of performance measures. The problem is that financial metrics measure last year’s decisions, not today’s. They say very little about the strategic health of a business and, most serious of all, say very little about strategy execution progress. Lagging financial metrics must be supplemented with metrics that are leading indicators of future performance and desired strategic positioning. Examples of useful leading indicators are achievement of tangible program milestones, such as a product up-grade, a signed contract or a new incentive system; measures of process excellence that link to future financial performance, such as delivery cycle time; market share in a target market segment, account or product area; and results of won-lost order analysis. When chosen wisely, and worked into the management process with the agreement of those who can influence and will be measured on them, leading indicator metrics are a powerful driver of execution. In contrast, over-emphasis on financial, lagging indicators is the number one cause for people executing something other than the stated strategy.
- Create a routine closed-loop review process with an emphasis on plan changes.This accelerates progress by shortening the learning loop. However, unlike most operational reviews, the emphasis is not financial performance. It is non-financial goal achievement — specifically, the plan milestones, and the needed future actions either to stay on track or to adjust the track. This process makes the plan a living, changing tool for direction and control.