What often keeps CEOs up at night is the gap between the execution of their strategy and the actual results. So how are CEOs of top-performing companies able to achieve their expected results? How do they quickly and successfully adapt to events and rapid changes in their business environment or those that are necessary to grow their business? Let’s take a look at new best practices for effective execution.
Why Execution Doesn’t Always Deliver Expected Results
According to a survey by the Harvard Business Review, only “20% of organizations achieve 80% or more of their strategic targets.” Companies invest a lot of energy into formulating their strategy, often hiring specialized consulting firms in the process. Unfortunately, they often do not invest the same degree of energy into the execution phase.
Every company is characterized by a body of know-how called the company’s “RUN.” By replicating this know-how year after year, a company is able to generally achieve the same results. Therefore, to improve its results, a company must formulate a strategy that defines everything it wants to do differently from its present RUN (new products, new markets, new processes).
Next, many companies think that breaking their strategic objectives down into individual objectives for employees (strategic alignment) then tracking the progress of the transformation projects that support those strategic objectives is enough to bring the strategy to fruition. This is a mistake. In my experience, and the results of the above-mentioned survey support this, while aligning projects with the company’s strategy and tracking those projects as well as conducting annual reviews of the strategy are certainly essential steps, they are incomplete and, therefore, ineffective if one hopes to see their strategy successfully executed in the real world.
Three Challenges That Hinder Execution
Here are three difficulties that contribute to an inability to reach one’s strategic objectives.
• Distributing resources between “the RUN” (to reach short-term and annual objectives) and strategy “the BUILD” (to reach medium-term/three- to five-year objectives): To be more competitive, companies often have just enough resources for the RUN. This means resources are limited and rarely available, which makes freeing up resources to work on strategic projects difficult.
• Prioritizing strategic objectives: Since strategy is established over a three- to five-year period, strategic objectives must naturally be prioritized over time; however, this must be done while taking into account the availability of key resources depending on the strategic objectives. Coordinating this prioritization with resource availability is, therefore, the second difficulty.
• Taking steps to resolve the first two difficulties by continuously adapting them to an ever-changing environment: This is the most important lever to successfully steer strategy execution. Since the distribution of resources must be dynamic, prioritization of objectives must also be dynamic; therefore, execution of the strategy must become dynamic.
A Fixed Or Dynamic Strategy
It is clear that keeping to a fixed strategy is no longer suited to an environment that has become increasingly dynamic. Therefore, an annual strategic review, such as those conducted at most companies, is no longer viable. On the contrary, a strategy must be continuously updated based both on the results obtained as well as on the changes that have taken place in the corresponding markets.
This is particularly true, for example, during the current economic crisis brought about by Covid-19, which has upended many of the rules of the game. An economic downturn forces the CEO and the executive team to focus on the short-term (even the very short-term) in order for the company to survive. At the same time, the markets continue to transform, players continue to disappear and customer expectations continue to change. This means that while it works to ensure short-term survival, the company must simultaneously prepare for the near future by transforming its RUN to adapt to the new changes demanded by its customers and markets.
Furthermore, the uncertainties of the environment that company leaders are faced with make projections difficult. At present, making a five-year plan is a considerable challenge, but that shouldn’t prevent it from being a goal to strive for, with the understanding that it is a target that can change over time based on reality. Given the uncertain times we face, this adaptation process must be continuous.
How To Minimize Execution Shortcomings
The key lies in the execution steering phase, a phase still largely unknown in many organizations. Steering the execution means successfully (re-)linking the strategy to short-term operations (the RUN), in order to continuously adapt it to both results obtained and market changes. Thus, the company must have a management system that is capable of making this link.
But a management system that doesn’t include the involvement of the executive management is insufficient of itself. Teams are too often focused on the RUN and not enough on the strategy execution in parallel; they find it hard to handle unspoken objectives, collaborative participation is almost non-existent and, most importantly, they are not involved enough in the decision-making process, putting a damper on their willingness to execute. This means that without the involvement of executive management, the execution is bound to fail.
The dynamics of the executive management team must be reinforced to facilitate collaborative behavior, as a company’s key to success will be the speed of execution of its strategic changes and the adaptations resulting therefrom.
A management system that links strategy with short-term operations and is optimized to improve the way executive management works, provides effective decision support and steering of strategy execution, thus making your strategy dynamic. This is what will help your company become one of the 20% who reaches 80% or more of your strategic objectives.
Source: Forbes, 2020