Keys to a Successful Strategy
Keys to a Successful Strategy
Michael Couch and Associates Inc.
In a recent survey conducted by international management consultants Marakon Associates and the Economist Intelligence Unit, senior executives at 197 large companies said their firms achieved only 63% of their strategy’s financial performance potential. The executives agreed that strategy execution is more important than strategy development but 66% said they were worse at execution than development.
So how can a company improve strategy development, deployment and execution?
The key lies in designing and delivering a robust strategy process that maximizes innovation, speed, decision-making effectiveness, and accountability. Strategy typically involves answering some seemingly simple questions:
- What kind of business are we?
- How and where will we grow?
- How will we compete? and,
- What capabilities do we need to support and sustain this kind of business?
How these questions are answered, however, is typically far from simple and requires that attention is paid to the process that is followed as much as the content that is discussed.
The following are six critical components to developing and executing a business strategy that achieves results.
- Use a condensed, focused process
With the right planning and design, the best tools, and expert facilitation, a comprehensive and innovative strategy can be developed in a much shorter time frame then typically expected.
Strategy work can be expensive and time consuming. To make sure there is a return on this investment, the time spent in strategic discussions should be fast-paced, inclusive, and consensus building. The design of the process and the techniques used to lead critical interactions must be spot-on.
Strategy is a human, “wet-ware” based problem solving and decision making process. As any experienced facilitator knows, the secret to effective planning sessions is comprehensive preparation and design. Expert facilitation is key but even a top-notch facilitator will struggle to overcome a flawed design for an intensive strategy process. A third party facilitator is the best option since company employees (and even worse, the CEO) cannot maintain the objectivity required and often lack the required process skills.
Strategy work takes time, but the time should be measured in days not months. I was trained in Compression Planning© techniques in the early 90’s. The intervening years, with hundreds of applications, have shown that this tool can reduce the time required for top-notch planning and decision making by 30% to 50%.
- Involve More Than The Senior Team
A study of innovation by IBM Global Services in 2006 showed that outperforming, high revenue growth companies’ most significant source of innovative ideas were (in order) employees, business partners, customers, consultants, and competitors. (Internal R & D and sales were further down the list.) This is reinforced by research which has shown that team diversity has an exponential impact on the quality of group output.
The key for strategy work? – include input from a diverse range of sources, particularly those not normally involved in business decisions. One CEO from the IBM study was quoted as saying, “If you think you have all the answers internally, you are wrong.” This input can be gathered in a variety of ways and is an important part of the design considerations mentioned in Key #1.
Both high potential and high professional (deep market and deep technical knowledge) employees can make a significant contribution to strategy development. Their involvement will not only improve the output but will contribute to building the commitment necessary for effective strategy deployment.
- Use both qualitative and quantitative input
Effective strategy work should answer two different basic questions: “How and where will we grow?” and “How will we compete?” Quantitative and qualitative data are key to answering both questions but with a different emphasis.
“How to grow” is best answered by effectively gathering and synthesizing the knowledge from a diverse audience of industry participants. This knowledge can be informed by data but, as we know, forecasting has its challenges. Expert opinion and quantitative data combined through a rational decision-making process will produce the best, most reliable growth answers.
Competitive advantage can be best determined through rigorously gathered market and customer data combined in a fashion that will reliably predict customer value. As Eric Reidenbach and Reg Goeke at Market Value Solutions point out, most market research data lacks evidence of reliability and validity. They have demonstrated that competitive advantage is built by measuring how customers define value, assessing your company’s drivers of value, and understanding how value interacts with price and company image. Focusing organization resources on the key drivers will build and sustain advantage.
The emphasis here should be on customer value, as opposed to satisfaction. Satisfaction is a useful operational measure but perceived customer value is much more critical to dominating a market and is linked to increased market share and profitability.
- Protect the Plan
No plan is perfect. No forecast is perfect. Every contingency can never be completely addressed. However, the right people and process can identify the potential threats to a plan, assess their likelihood and impact, and develop specific actions based on how likely the threats can be detected. This is like a Failure Modes and Effects Analysis (FMEA) for the Plan.
The same should be developed for the upside. What could potentially cause us to be above Plan and, if so, what can we do to try to capitalize on it? This often ends up being a resource allocation issue that is a great input to Key #5.
- Assure that the organization is capable
Key #2 assumes that you have a team that has the capability to handle strategic tasks and that you have identified your high potential and high professional employees. If you are unsure of these capabilities, this needs to be determined before strategy development begins.
Once the strategy is developed, senior leaders must assure that the organization has the capability to handle the demands placed on it by the strategy. The demand must be assessed (i.e., What are the mission critical functions and capabilities, What are the pivotal positions?, What type of work culture does it suggest), the organization capability must be analyzed (i.e., Do we have the right people in the right roles doing the right things, Are we filling the talent pipeline, Does our culture support the strategy?) and any gaps addressed by a detailed organization development action plan (i.e., reorganize, recruit, key talent retention and development, culture change initiative).
- Use A Comprehensive Deployment Process
For effective execution, the strategy and value drivers must be obvious to all key stakeholders. The best examples of this in action are in companies committed to Lean Manufacturing/Six Sigma. The Strategy Deployment techniques utilized by these firms assure a clear linkage from strategy to annual business plans to department/process objectives down to individual employee performance plans (What Toyota called the “catch ball” process). Key process and performance measures are prominent in all communications tools including company and process dashboards. Even the agendas for regular business review meetings are built around components of the strategy.
The key is the creation of a comprehensive deployment plan, using project and change management principles, with clear milestones, linkages, and accountabilities. Again, this does not need to take forever to create. Milestones should be short term to assure immediate application of the strategy and to demonstrate progress. The deployment plans should be regularly reviewed at the executive level and adjusted based on the performance measures. Strategy work should be viewed as an on going process, not a once a year event.
For more information, contact Michael Couch & Associates Inc. firstname.lastname@example.org or call us at (412) 952-9036