Strategy formulation draws from the brightest company leaders and external functional and domain consultants. As powerful as the resulting strategy may be, it’s often let down by poor execution. According to a study by the economist, 44% of strategy execution fails to be successful.
To be competitive in today’s marketplace, companies must improve day-to-day strategy implementation. For those organisations that do execute well, the financial rewards do follow, with 65% of good implementers having better financial performance than their industry peers.
What drives successful strategy execution? In our experience it’s a focus on four key principles:
- Developing a plan and then sticking to it
- Relentless focus on driving business value through benefits realisation
- Leadership involvement and communication
- Realism in organisational capacity and capability
Developing a plan and then sticking to it
Strategy formulation is an ongoing activity that seeks to answer questions of how a business will meet its objectives. In many cases this is a continuation of existing operations within existing markets but often it requires some form of change to be implemented. Change comes in many forms but in all cases thinking through and planning an approach to the change is better than being at the mercy of forces outside your control.
Planning an approach is distinct from planning the specific initiatives to achieve the change and it should be thought about during strategy formulation. Planning the portfolio of initiatives and individual changes picks up the proposed approach and looks at how to build this into the implementation effort through roadmaps, governance mechanisms and detailed plans. Approaches sit on a spectrum of planning everything up front through to iterative planning and on to adaptive experimentation.
Take the example of a strategy that suggests moving into a new market with an existing product. The new market will require new product features to be developed to satisfy some need that existing market segments don’t have. This might be a software product needing new fields and workflows or it might be a craft beer product needing to develop taste, brand and pricing elements to attract a certain market segment. In both cases the development of these features will benefit greatly from iterative development and feedback from the marketplace, allowing the team to adapt their design before settling on a final recipe / build that will go to market. So here the strategy execution approach should be an adaptive one and any organisation setup to deliver it should be designed accordingly.
Another example could be a retailer losing customers to global retailer moving into their local market. In this situation the retailer might decide to build a digital loyalty program to engage and retain customers as well as collect customer intelligence data. This move will require careful observation of customer behaviour and interaction with the program. Making small bets on loyalty features and adapting to a combination of feedback and data will clearly lead to a more successful strategy outcome than planning every offering up front and sticking to it regardless of market response.
Other strategies will be more successful taking a planning up front approach. Imagine an airplane manufacturer moving into a new market segment with an existing plane, for example offering an existing commercial plane to the private plane market. In a situation where the majority of the difference is internal, the majority of the change will be in the supply chain and build specifications. Here the strategy requires the development and/or confirmation of all of the possible options that will be available for sale and in turn creation of requirements and specifications for repeated up front build cycles to focus on accurately meeting that specification. Here it’s clear that although customer input will go into developing the purchase options, the majority of the business change required to execute the strategy and deliver planes to market cost effectively will be best delivered through a structured plan and in turn the development of build specifications that can be repeated.
Once an approach is decided, we come to the part where a plan is built that the organisation can stick to.
In a plan-up-front approach the business will develop business cases, benefits studies, requirements, governance approaches, budgets, schedules, teams and assignment plans and then monitor and control the execution against these plans. In an iterative / adaptive approach the business will develop benefits targets, budgets, teams and assignment plans with perhaps some delivery timing. However, the team will work with customers (internal and/or external) to build, inspect and adapt the product as well as their own approach within the confines of the budget and benefit targets set.
Relentless focus on driving business value through benefits realisation
It’s a given that any strategy worth pursuing is focussed on bringing about a benefit for the organisation that’s executing it and/or the stakeholders of that organisation. Whether the benefit being pursued is financial or non-financial, the execution will drive a set of deliverables and business changes (the “what”) that enable the business outcomes and benefits (the “why”). A useful tool for visualising and documenting the linkages between particular strategies and the enabling project & program benefits are Benefits Dependency Network Diagrams as shown below in figure 1 below. If the tool can’t show how a particular deliverable or feature is contributing or enabling the desired benefit, then it shouldn’t be funded.
Fig 1. benefits dependency network diagram
Many organisations mistakenly put all benefits responsibility into the hands of project management. Business benefits are ultimately the responsibility of the Project and Program Sponsors and the relevant Steering Committee(s). A useful way to think about the role of the Sponsor and Steering Committees is as the stewards of the value to be created through their initiatives. Decisions made during execution should assess how they will impact particular benefits. With good governance and benefits / value driven decision making, you have a better chance of staying aligned with strategy.
Senior leadership involvement and communication
In the same economist study mentioned above, 28% of respondents say that “projects to implement strategy do not typically obtain the necessary senior-level sponsorship”. Couple this with Executive Sponsorship being identified as the #1 driver of project success by the 2018 Pulse of the Profession Report by Project Management Institute (PMI) and it becomes evident there is a big opportunity for many organisations to improve their strategy execution.
Senior leadership is at the centre of setting strategy, top-down planning and direction setting. They have just as important a role to play in supporting bottom-up planning and protecting business value during implementation and beyond.
The role of senior leadership in setting strategy is usually acknowledged as a core part of the job. There are many great sources of information on how to establish or improve strategy design and direction setting. In our experience the part that often lets down strategy execution is adequate realism and ongoing leadership. Realism in strategy doesn’t mean not taking calculated risks, but it does mean that risks need to be taken into account when making bets on certain cost / benefit scenarios and then these risks need to be actively managed as part of stewarding the business benefits.
Senior leadership involvement is critical to success as the strategic directions go through bottom-up planning through to execution. Bottom-up planning has two objectives. Firstly, bottom-up planning must elaborate the approaches, plans, financial & other resources as well as people required to deliver the change. These plans need to be realistic and deliverable with the people and resources that can be made available. The second objective is to gain buy-in and commitment from the people that will be executing the change. In our experience the relationship between and transition from top-down to bottom-up planning is where many well-formed strategies start to misfire. This is either through a lack of focus on benefits or how they will be realised, or lack of realism in organisational capacity, or lack of leadership to attain the required buy-in and energy towards the strategy.
Once in the execution phase, there’s three leadership issues that senior leadership should focus on to improve the odds of success.
Senior leadership should continue to communicate the vision and actively lead people through the changes taking place in the organisation. In some cases, a servant leadership approach works and in other a charismatic or transformational approach works best. Different people will have varying roles in the change, be impacted by change differently and/or may have differing reactions to change going on around them and leaders must tailor their approach appropriately. Change management approaches coupled with appropriate leadership approaches, are proven to improve execution outcomes.
One of the key things to communicate across the business are the strategic priorities. It’s a reality that many organisations and their people are at any one time taking on a multitude of concurrent initiatives and business-as-usual activities. In the absence of clearly and consistently communicated priorities, people across an organisation take signals from the limited visibility they have of senior leadership involvement in the various initiatives. This is a poor proxy for good communication as people often only have visibility of what’s close to them and what they hear around the organisation.
If priorities across initiatives are important, then decisions within initiatives are just as important. Here senior leadership has a role to play through their participation in governance or other execution decision forums. A culture of business value creation through change delivery is not a natural state of play for many organisations, who have long achieved success through being great at operations. Senior leadership must model the way for the rest of the organisation to succeed. Within governance and decision forums, senior leadership should continually guide group decisions through the lens of outcome and business benefits achievement. These groups should see themselves as stewards of delivering the business benefits / value and not enforcers of process and forms (although these do have role to play as well).
Realism in organisational capacity and capability
We’ve covered a little about realism in planning and execution above. Delving deeper, there are a few common issues related to realism that contribute to the success of strategic execution. Many organisations simply take on too many business change projects and programs within particular planning windows. Taking on too much work is then exacerbated by the issues already covered earlier such as poor prioritisation, poor communication and insufficient senior leadership involvement. Adding fuel to the various change fires are severe capability gaps in many organisations. Many organisations do not embrace external capability enough due to cost concerns or due to not seeing the gap realistically.
Capacity in organisations is affected by a multitude of factors including simply taking on too much work, poor prioritisation and project sequencing during top-down planning, poor work breakdown and estimation during bottom-up planning, lack of back-fill during project secondment leading to multi-tasking and overwhelm and slow decision-making leading to unproductive project elapsed time. Also, the lack of capabilities required to manage projects and programs as well as vendors can often lead to the strategy execution vehicles themselves bogging the organisation down in unproductive time. There are other intra-project and program factors that can also derail the best laid plans.
Organisations generally have a poor handle on what the available capacity is at any one time. This can be addressed through better capacity planning and tracking as well as changing delivery approaches where appropriate. It must be acknowledged that change is now a constant and that if people are fully allocated within business-as-usual (BAU) work, then they are not available for projects and programs for business change. There are two possible ways out of this business-as-usual allocation. Workforce management can plan for a workforce that is only partially allocated to BAU activity, or all projects and programs need to be staffed via external labour (vendor or contract). Delivery approaches can also help simplify planning needed capacity better when using approaches that encourage single-tasking or serial project delivery within the portfolio. This can be achieved in traditional project management environments or by switching to approaches designed for this, such as some Agile or Critical Chain methods that seek to limit work-in-progress for individuals and teams.
Pick up any productivity guide today and you’ll read that “multi-tasking is bad”. Just as this is true at the individual level, it is also true at the team and organisation level. Some of the reasons that multi-tasking is bad are switching costs and task overwhelm as well as planned and emergent complexity as it relates to project, program and benefits inter-dependencies. Studies and practical implementations show benefits of approaches that limit work in progress and encourage serial tasking at team and resource level lead to a 30%-60% improvement in on-time performance and that durations can be cut by 25% or more without sacrificing scope, quality or individual workload.
Capability gaps in organisations can either be in specific capabilities required to deliver a change or they can be in the management, governance and leadership of the business change. Specific capabilities required to deliver a change can be particular technical, regulatory, business process or systems knowledge and ability. Specific capabilities are often acquired from an external vendor, or bought in to the organisation, or developed internally. These capabilities are often retained to some extent beyond the change project or program period. Implementation capability is often wrongly assumed to be an innate extension of general management and leadership capabilities. Whilst there are some overlaps, there is specialist process and technical knowledge as well as experience in delivery management that many business-as-usual managers do not possess.
Strategy execution requires very different capabilities and commitments to strategy development. Often they don't go hand in hand and organisations find themselves struggling to realise their strategic goals. To become more competitive in today's marketplace, organisations must develop plans and stick to them, relentlessly focus on value and benefits, engage senior leadership in change and be realistic about capacity and capability.
If you’re looking to accelerate your results, or for expert advice around any of the above principles, Intuity Consulting specialises in Project, Program & PMO Delivery, Training and Advice.
Partner, Strategy Execution at Intuity Consulting
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