David Silverstein, president of South African advisory firm BMGI, discusses the importance of developing a sound business strategy, and making sure it is well implemented to yield robust results.
It’s the aspiration of countless businesses the world over: to dominate the market by offering a product or service that’s the best of its kind. Along with this aspiration comes the desire to operate at the highest level of efficiency and productivity, as well as the dream of being so attractive as an employer that the HR department has the luxury of cherry-picking only the brightest, most highly qualified and experienced candidates when filling vacancies.
Sadly, though, the majority of companies never fulfil these aspirations and instead must resort to ploughing along in mediocrity.
We’ve heard it many times: “We had a good strategy, but we didn’t execute.” Or, ”Our strategy was sound, but we failed to anticipate the challenge of change management.” I’m sure you’ve heard some version of these explanations for poor business performance before.
What do we say when we hear such statements? We ask one question: “How do you know?” To elaborate, how can you know with any certainty that you had a good, sound strategy, if it didn’t deliver results? The answer is obvious… you can’t.
To discover the true cause of poor business performance in the face of what was believed to be a sound strategy, we took a look at dozens of companies that struggled to realise the results they expected from their strategy. In nearly every case of failure, we found just a few simple explanations:
1. The executive team was responsible for developing the strategy, while middle managers were responsible for most of its execution.
2. Executives evaluate the performance of middle managers, not the other way around.
3. Rarely does anyone look in the mirror and say, “It didn’t work out because I made a bad plan,” when the blame can be placed at the feet of those the plan was delegated to.
Now, to be clear, it’s not as ugly as it sounds. We did not find that there was a conspiracy-like “blame game” going on. Rather we found that in general, executives genuinely believed their strategic direction was sound and that something else must have caused its failure. When they look around, poor execution is one of the only possible causes they can identify. The idea that the strategy itself was flawed simply isn’t seriously considered.
Where does poor strategy come from? We found that the biggest source of bad strategy is confusion between what it means to develop a strategy and what it means to plan, or implement it. That is to say, all too often, executives believe that strategic planning sessions are where the strategy is created. But that’s simply not the case. In fact, one of the prerequisites to effective strategic planning is having a robust strategy already in place.
Strategy should be enduring. It should be something that changes once in a generation. Core strategy change is IBM shifting from mainframes to services; it’s General Electric backing out of 20 years of financial services to focus on becoming an industrial energy company; or Apple shifting its primary focus from PCs to i-devices. Of course we have to evaluate our core strategy for adjustments each year, but the fundamental strategy shouldn’t need to change very often.
Developing strategy takes months, if not years. Research, analysis, dialogue… it happens bit by bit, over a cup of coffee with a colleague or when on a long run by yourself. It happens in the shower. In fact, most of it happens between about 10pm and 6am — when we’re sleeping. Real strategy doesn’t come from a two-day offsite retreat and some brainstorming. That’s just where we put the trimmings on the strategy tree. We’d better have the strategy itself figured out before we go to that retreat.
At BMGI, we place equal emphasis on the creation and the execution of strategy, recognising that the role of strategic planning is to translate strategy into action. This means that in larger organizations, an actual process and timeline are required to facilitate the strategic thinking and strategy development process. A strategic planning process alone is not enough.
Along the way, another frequent challenge is that senior executives tend to get bogged down and distracted by details, and as a result, lose their strategic perspective. Decision makers tend to think in operational terms, making it a major challenge to get them to think in strategic terms instead. They are always trying to get to the “doing”, often before the thinking is done.
Strategy creation: the thinking phase
Strategic thinking involves developing deep insights into every aspect of the business. Rather than setting off on that annual weekend “bosberaad,” where delegates are under pressure to swiftly conjure up ideas, strategic thinking demands the allocation of time and resources towards research, data analysis and incubation.
While most companies have some kind of strategic planning process, very few have a strategic thinking process. Strategic planning is about transcribing the strategy that has been built into an actionable plan. Strategy building, in turn, is informed by the insights born of strategic thinking.
Without the crucial first step of strategic thinking, no amount of planning will be able to comprehensively assess the opportunities for innovative approaches and sufficiently overcome obstacles and other eventualities.
A robust process is needed to engage an organisation’s executive team in thinking through the future of the business. Only through adherence to a strict regimen of saturating their minds with all the relevant information and allowing ideas to incubate can the team ultimately achieve illumination around problem statements and possible solutions.
By the end of the strategy creation phase the company’s strategy creators will have developed new and unique ways of looking at the business, its customers and its competitive environment – which will help validate the existing strategy or lead the way to the development of a new direction for the company.
Strategy building: the planning phase
Once the results of research, data analysis and incubation have been determined, the strategy can then be built to accommodate these findings and other insights gained during strategic thinking.
The best starting point for strategy building is to outline a variety of potential future scenarios based on those insights. Analysing these allows the strategy developers to identify the scenarios that will satisfy future needs. This provides guidelines for effective allocation of resources within the business.
If necessary, the strategy-building phase can include the creation of foundational elements such as vision and mission statements, guiding principles, core values and other such elements that will help to ensure that the organisation stays true to the strategy in all of its dealings. But don’t mistake vision and mission statements for strategy itself – the former are merely the guiding principles from which the multi-page strategy document will be developed.
Strategic planning also comes into play during the strategy-building phase. Essentially, strategic planning involves transposing the strategy into an action plan. But this is most often the point at which the intended plan gets lost in translation.
The reason that a lofty strategy often amounts to disappointing execution is that most organisations lack a way to connect their strategy with the resources they already have.
This disconnect invariably occurs because strategy development is usually done by the executive team, while actual execution is the role of the rest of the staff.
The fact is, an un-executable strategy isn’t a realistic strategy at all. Failing to account for the challenges of execution or change management means, at best, that your strategy wasn’t complete. Hence, “we failed to execute” is really more a failure of strategy creation than a failure of execution.
We’ve found that during strategic planning, the Hoshin Planning process (sometimes referred to as the X- matrix) offers the most effective method of establishing a well-ordered, metric-driven plan that bridges the gap between executives and operational staff. The Hoshin tool provides a method of capturing and cementing strategic goals and of developing the means to bring these into reality.
While strategic thinking is something that happens continuously and building strategy is something that happens from time to time, strategic planning is done with regularity, most often on an annual basis. It is a time for schedules, the assignment of specific accountability and a fair amount of problem solving to deal with real-world practicalities.
Strategy execution: implementation, transformation and daily management
Implementation and transformation are at the core of executing a strategic plan. They are the key aspects that determine how the strategic plan is executed by the entire organisation.
These two processes involve developing structured methods to manage the organisation in such a way that it achieves its short- and long-term goals. Here again, success requires involvement at all levels of the organisation.
Often the change associated with strategy execution demands adjusting deeply engrained patterns, such as organisational culture and structure. This can easily be as difficult as trying to change someone’s personality, but if it’s a question of the ultimate failure or success of the organisation, a certain degree of risk-taking is essential.
Finally, strategy execution is bound to go off track without effective daily management. It’s crucial to determine, on a daily basis, whether or not the plan that has been implemented is both effective and sustainable.
Daily management enables managers to spot when something isn’t working and take corrective action to ensure that the guiding principles established during strategy development are followed.
Strategic thinking, strategic planning and strategy execution are like legs of a tripod – remove just one and success will be elusive.
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