THOSE THAT CAN, DO. THOSE WHO SIMPLY TALK... MAKE ANOTHER FINE MESS
||Many top executives are good at devising strategy but often not so great at making it work. John Lawson examines the reasons behind such failure and outlines the right approach to successful implementation.|
Mergers often look good on paper. But what makes great sense on the drawing board often turns out very differently in the cold light of reality. Mercedes-Benz's merger with Chrysler, HP and Compaq, or the marriage between Time Warner and AOL show that there can be a massive gulf between expectations and execution of strategy.
The $3.8 million merger of Adidas and Reebok this year is a logical strategic decision. But its success will depend on how well that strategy is implemented. Herbert Hainer, Chairman and CEO of the merged group states: “We want to grow both brands together faster than the individual brands and of course, grow faster than our competitors."
As a marketing and brand management strategy the merger is seen by analysts as an attempt to beat Nike in the global sports goods market. But success will ultimately lie in the combined company’s ability to harmonise and overcome barriers to strategy implementation.
At the operational level, the strategy is translated into projects such as the consolidation of business processes and systems. The successful implementation of these projects will ultimately determine the attainment of Hainer’s goal.
It is commonly accepted that developing a sound business strategy is one thing whilst executing it quite another. It is also clear that some companies excel at delivering strategy while others do not. With this in mind, what are the barriers that inhibit strategy implementation and what are the factors that make some companies so much better at implementation than others?
Business leaders must be able to translate business strategy into actions. This involves orchestrating and integrating all parts of the organisation for the common good. The alignment of organisational capability, governance mechanisms, business processes and systems is a fundamental part of this. So too are the core disciplines of programme management, change management and financial control. Just as execution is key to every project, execution is also the key to strategy delivery.
There are many barriers to success and several key factors that contribute to efficient strategy execution. In his 2005 book, ‘Making Strategy Work’, Wharton Business School professor Lawrence Hrebiniak states that many of today's top executives are far better at developing strategy than executing it or overcoming the political and organisational barriers in their way.
He states that strategy execution is directly linked to change, which often stands in the way of successful implementation, especially if it is major and fast. If a company undertakes too many changes and makes too many of them simultaneously, it risks creating additional problems for execution.
This is not the only factor hindering implementation. I conducted a recent Strategy Implementation survey, taking input from more than 100 business professionals from a range of different industries, disciplines, countries and management levels. The findings reveal several major barriers:
l Lack of data and information flow due to inadequate information sharing among individuals or business units
l Unclear communication of responsibility
l Poor or vaguely defined strategy
l An inability to manage change effectively and overcome internal resistance
l Lack of accountability for execution decisions and actions
l Lack of ownership of the strategy
l Lack of guidelines or framework for strategy execution
l Lack of understanding of the role of organisational structure in the strategy execution process
l Lack of incentives to support strategy execution objectives
The factors that ensure that strategy execution is as efficient as possible are key to understanding what can be done to overcome these barriers. My Strategy Implementation survey explored such factors as executive sponsorship, communication, technology support, skills, agility and governance and their importance in converting strategy into reality. The key results of this are discussed below:
It is critical to ensure that the right projects are undertaken at the right time. Haider Rashid, group CIO of ABB, the Swiss based engineering company, comments that choosing the right projects and correct prioritisation of those projects is critical: “Our initial goal is always to implement small projects and achieve quick wins – this helps to establish credibility, increases confidence… and then we can move onto the bigger projects with more substantial benefits and bigger rewards."
The People Factor
Having the right mix of strategists and 'do-ers’, the people who make it happen, in the organisation ranked very highly as perhaps the most critical factor in the survey, with almost 80 per cent of respondents ranking it as an ‘extremely important’ factor.
However, in many companies the strategists outweigh the do-ers. Several years ago this was acknowledged by a division of the oil field services group Schlumberger, within its IT management workforce. A formal action plan incorporating a revised recruitment policy and advanced training for its managers was credited with having an outstanding effect on project execution capability.
Having a strong relationship with strategic partners and consultants was also acknowledged as a factor in strategy delivery, with 50 per cent of respondents ranking it as important and 30 per cent as extremely so. The resource pool of many large organisations is increasingly becoming a network of employees, service providers and trusted consultants. Having strong relationships with these third parties is a critical success factor for business managers. The benefits of this are directly related to high performance, quality and value, which can be directly linked to strategy delivery.
Fit for Purpose Governance Processes
All too often governance processes can hinder the dynamic environment of programme implementation, causing delays in decision making and generally hampering progress. When designing governance processes the amount of administration involved must be considered. Too much will lead to frustration on the part of the individuals involved and ultimately can lead to misuse or avoidance of the processes.
Strategies set expectations and thus need to be carefully monitored to see if they are being fulfilled. One method is to identify a specific metric to capture project/strategy success during the project design process. For example, if the strategic objective involved expanding client business, then metrics could be the number of repeat orders, size of repeat orders, number of buyers and perhaps the number of returns. There are several sophisticated methods to put an entire business strategy into the context of metrics. Robert Kaplan and David Norton’s book, "Strategy Maps: Converting Intangible Assets Into Tangible Outcomes", is one such example of this concept.
The results of the survey showed that whilst over 60 per cent of managers highlighted project governance mechanisms as extremely important, 20 per cent of the respondents believed these were only partly important.
Perhaps the most surprising finding of my survey was the fact that only half of the respondents considered ‘productivity tools’ such as MS Project, email, instant messaging and web-conferencing, to be either important or extremely important as a contributory factor in strategy delivery. A significant minority - 36 per cent - considered these tools to be partly important and 12 per cent did not consider them important at all.
Productivity tools have of course increasingly become an integral part of our daily lives over the past decade or so and it could be that their ubiquitous nature is now taken for granted.
Having senior management regularly communicate with employees about how projects help to deliver strategy is vital. Enterprise solution implementation projects such as SAP initiatives are notorious for creating mammoth programmes at the corporate level that fail to engage at the user level. It is essential to focus on communication and ways of integrating and engaging throughout the organisation.
In the survey 80 per cent of respondents agreed that this topic was important or extremely important, but 20 per cent did not, perhaps indicating that there is still some room for education on the benefits of effective communication. In the words of one of the anonymous respondents to my survey, “The fastest and most effective action to make any improvement in strategy implementation is to fix the internal communications problem.”
It is clear that management of change and all of its aspects related to people and culture is a critical component in strategy delivery. However, it is not the only factor. Managers face many other barriers to strategy implementation. They require a solid understanding of what these barriers may be, coupled with a thorough appreciation of the factors that influence an organisation's ability to deliver. These are the differentiators that will determine whether an organisation excels at strategy delivery or fails.
John Lawson is Senior Engagement Leader at Infosys Consulting, Inc.