CHAPTER 5 EXECUTION OF STRATEGIES

1. CHAPTER 5EXECUTION OF STRATEGIES

2. Defination • A strategy is a plan of action designed to achieve a particular goal. The word strategy has military connotations, because it derives from the Greek word for general.[1] • Strategy is different from tactics. In military terms, tactics is concerned with the conduct of an engagement while strategy is concerned with how different engagements are linked. In other words, how a battle is fought is a matter of tactics: the terms that it is fought on and whether it should be fought at all is a matter of strategy.

3. Strategies in game theory • In game theory, a strategy refers to one of the options that a player can choose. That is, every player in a non-cooperative game has a set of possible strategies, and must choose one of them. • A strategy must specify what action will happen in each contingent state of the game - e.g. if the opponent does A, then take action B, whereas if the opponent does C, take action D. • Strategies in game theory may be random (mixed) or deterministic (pure). That is, in some games, players choose mixed strategies. Pure strategies can be thought of as a special case of mixed strategies, in which only probabilities 0 or 1 are assigned to actions.

4. Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. Various business analysis techniques can be used in strategic planning, including SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats ) and PEST analysis (Political, Economic, Social, and Technological analysis) or STEER analysis (Socio-cultural, Technological, Economic, Ecological, and Regulatory factors) and EPISTEL (Environment, Political, Informatic, Social, Technological, Economic and Legal).

5. Strategic planning is the formal consideration of an organization's future course. All strategic planning deals with at least one of three key questions: • "What do we do?" • "For whom do we do it?" • "How do we excel?"

6. In business strategic planning, the third question is better phrased "How can we beat or avoid competition?". (Bradford and Duncan, page 1). • In many organizations, this is viewed as a process for determining where an organization is going over the next year or more -typically 3 to 5 years, although some extend their vision to 20 years.

7. Execution of strategies • But good strategies fail too, and when that happens, it's often harder to pinpoint the reasons. Yet despite the obvious importance of good planning and execution, relatively few management thinkers have focused on what kinds of processes and leadership are best for turning a strategy into results.

8. Cont’d • But can better execution be taught? • You can develop a model.... If people know what the key variables are, they know what to look for and what questions to ask."

9. While execution can go wrong for a variety of reasons, one of the most basic may be allowing the focus of the strategy to shift over time.

10. Goal- shifting • The attempt by Hewlett-Packard, after it acquired Compaq, to compete with Dell in PCs through scale is a classic example of goal-shifting -- competing on price one week, service the next, while trying to sell through often conflicting, high-cost channels. The result: CEO Carly Fiorina lost her job and HP still must resolve some key strategic issues.

11. Another classic example of mis-synchronization: United Air Lines' TED, which attempted to set up a competitive subsidiary to compete against upstarts such as Southwest. This was a good idea as far as it went, but United tried to compete using its same old cost structure -- the main reason it was losing markets to the low-cost airlines in the first place.

12. At other times, plans fail simply because they don't get communicated to all the people involved. • Strategies also flop because individuals resist the change. For example, headquarters might want more standardization in a product, but a local marketing executive disagrees with the idea. "He might say, 'I need more nuts in my chocolate bar' or 'I need a different pack size,'"

13. Many times, there can be sound reasons for resistance. Sometimes a strategy might make sense at the highest level, but its full impact on the whole organization has not been fully considered, • For example, imagine that the general strategy calls for promoting one brand throughout the company while taking resources away from another brand. That might make sense in one market, yet be completely counterproductive elsewhere

14. Cultural factors can also hinder execution. Companies sometimes try to apply a tried-and-true strategy without realizing that they are operating in markets that require a different approach. Even such a world-beater at execution as Wal-Mart, for instance, has sometimes made some missteps because of culture. One example: When Wal-Mart first moved in to Brazil, it tried to lay down terms with suppliers in the same way it does in the U.S., where it carries huge weight in the market. Suppliers simply refused to play, and the company was forced to reevaluate its strategy.

15. Yet the biggest factor of all may be executive inattention. Once a plan is decided upon, there is often surprisingly little follow-through to ensure that it is executed,

16. "Less than 15% of companies routinely track how they perform over how they thought they were going to perform,“ • Instead, only the first year's goals are measured -- and executives often set first-year goals deliberately low in order to meet a threshold for a bonus.

17. One school emphasizes people: Just put the right people in place and the right things will get done. However, within the people school, there are also divisions. Some experts insist that the right people are hired, not made. • the key is to improve executive performance through training, and improve the average employee's performance through the creation of a culture of accountability.

18. For example, W. James McNerney, Jr., the chairman and CEO of 3M, argues that by improving the average performance of every individual by 15%, irrespective of what his or her role is, a company can achieve and sustain consistently superior performance.

19. Five Keys to Getting the Job Done • Develop a model for execution. • - Michael Porter's theory of comparative advantage • Choose the right metrics. • - sales and market share are always going to be the dominant metrics of business

20. Don't forget the plan.  • - plans are often simply agreed to and then forgotten ! • Assess performance frequently. • - Performance monitoring is still an annual affair at most companies. The reason why Wal-Mart is so good at execution is it knows daily if what it is doing in each of its stores gets results or not

21. By shortening the performance monitoring cycle -- from quarter-by-quarter to month-by-month or week-by-week -- top management can get more "real-time" feedback on the quality of execution down the line.   • Communicate.  • - companies often go wrong by creating a cultural distinction between the executives who design a strategy and people lower down in the corporate hierarchy who carry it out.

22. WYDIWYG • Strategy is Execution. Another way of saying this is WYDIWG – What You DO Is What You Get. • Strategy Is . . . • Strategy is many things: plan, pattern, position, ploy and perspective. As plan, strategy relates how we intend realizing our goals.

23. As position, strategy is the stance we take: to literally take the high ground, to be the low-cost provider, to compete on the basis of value, to price to what the market will bear, to match or beat the price offered by any competitor, • As ploy, strategy is a ruse, it relies on secrecy and often on deception

24. As perspective, strategy is part vantage point and part the view from that vantage point, particularly the way this view shapes and guides decisions and actions.

25. Strategy is Execution • Strategy is Execution • Strategy is getting it right and doing it right. On the one hand, we have to envision the right course of action. On the other hand, once chosen, we have to carry it out properly

26. If our strategy and its execution are both flawed, the effort is "doomed from the beginning." Our chances of success are zero, nil • If our strategy is sound but its execution is flawed, we are guilty of muffing it

27. Only when our envisioned strategy and its execution are sound do we stand a pretty good chance of success. Even then success is not guaranteed • So, even if we get the strategy right and even if we carry it out efficiently and effectively, all we can really say is that the odds are in our favor, that we have "a pretty good chance.

28. In the early 1980s, Tom Peters made a presentation to a group of senior managers at AT&T in which he used a slide that read, "Execution is strategy." We can turn that around and also say that strategy is execution. In simpler terms, we adapt to changing circumstances and so does our strategy. Thus it is that strategy as envisioned or contemplated becomes strategy as executed or realized

29. Organizations that successfully execute even mediocre strategies far outperform those that fail to execute the most brilliant of plans! According to Fortune Magazine, "less than 10% of strategies effectively formulated are effectively executed." • Enterprise Strategy Execution (ESE) is a proven methodology for driving better business results that encompasses a continuous process of prioritization, improvement, and control. ESE focuses and empowers every employee toward the common strategy.

30. How to Get There From Where You Are Today? • When an organization commits to ESE, it must do so in steps or stages. Tackling all of the various components at once -- no matter how focused and motivated an organization is -- is simply not feasible. New skills must be learned, new behaviors encouraged, cultural changes fostered -- all of which must occur over time to be successful.

31. Many managers are comfortable planning, but lag when it comes to actually putting the plan into action. • The Execution Challenge • There are eight areas of obstacles or challenges to strategy execution. Or, to put it positively, there are eight areas of opportunity: Handling them well will guarantee execution success. The areas relating to the success of execution are as follows:

32. Developing a model to guide execution decisions or actions • Understanding how the creation of strategy affects the execution of strategy • Managing change effectively, including culture change • Understanding power or influence and using it for execution success

33. Developing organizational structures that foster information sharing, coordination, and clear accountability • Developing effective controls and feedback mechanisms • Knowing how to create an execution-supportive culture • Exercising execution-biased leadership

34. Without guidance, individuals do the things they think are important, often resulting in uncoordinated, divergent, even conflicting decisions and actions. • Having a model or roadmap positively affects execution success. • It all begins with strategy. Execution cannot occur until one has something to execute. Bad strategy begets poor execution and poor outcomes, so it's important to focus first on a sound strategy.

35. It is vital to get the "right people on the bus, the wrong people off the bus," so to speak. But it's also important to know where the bus is going and why. • It drives the development of capabilities and which people with what skills sit in what seats on the bus.

36. Strategy defines the arena (customers, markets, technologies, products, logistics) in which the execution game is played. Execution is an empty effort without the guidance of strategy and short-term objectives related to strategy. • Execution or strategy implementation often involves change. Not handling change well will spell disaster for execution efforts.

37. Power reflects strategy, structure, and critical dependencies on capabilities and scarce resources. Knowing what power is and how to create and use influence can spell the difference between execution success and failure. • Yet managers are often motivated not to share information or work with their colleagues to coordinate activities and achieve strategic and short-term goals. Why? The answer to this question is vital to the successful execution of strategy.

38. Clear Responsibility and Accountability • This is one of the most important prerequisites for successful execution, as basic as it sounds. • Managers must know who's doing what, when, and why, as well as who's accountable for key steps in the execution process. Without clear responsibility and accountability, execution programs will go nowhere. Knowing how to achieve this clarity is central to execution success.

39. The Right Culture • Organizations must develop execution-supportive cultures. Execution demands a culture of achievement, discipline, and ownership • But developing or changing culture is no easy task. Rock climbing, white-water rafting, paint-gun battles, and other activities with the management team are fun. They rarely, however, produce lasting cultural change.

40. Leadership • Leadership must be execution biased. It must drive the organization to execution success. It must motivate ownership of and commitment to the execution process. • Controls, Feedback, and Adaptation • Strategy execution processes support organizational change and adaptation. Making strategy work requires feedback about organizational performance and then using that information to fine-tune strategy, objectives, and the execution process itself.

41. Tackling too many execution decisions or actions at once will surely create problems. "When everything is important, then nothing is important," is a clear but simple way of expressing the issue. Priorities must be set and a logical order to execution actions adequately defined if execution is to succeed. • Planning requires anticipating early on what must be done to make strategy work.

42. Managers cannot act in a helter-skelter fashion when executing strategy. They can't focus one day on organizational structure, the next on culture, and then on to "good people," only to find out that strategy is vague or severely flawed. • Managers require a "big picture" as well as an understanding of the "nitty-gritty," the key elements that comprise the big picture.

43. Strategy Development and Execution (Strategy) • Assess your strategy on three levels (enterprise, operational, tactical) to be sure they are working together in an integrated way • Diagnose whether you should create a new plan, or if something else is getting in the way • Link current initiatives to your strategy, suggest alternatives, or recommend deletions • Ensure key leaders understand the strategy and their roles in a

44. Organizational Effectiveness (People) • Assess whether you have the capabilities – and capacity – required to achieve defined objectives • Determine if your current capabilities are being used in the most productive ways or if they might be redeployed or refocused to better advantage • Analyze the organizational structure to determine if it supports effective business practices and management behaviors • Coach leaders to help their teams maintain focus on the most critical issues • Help employees to work effectively across organizational boundaries (geographies, functional areas, business units, etc.)

45. Process Management (Process) • Focus on core business processes, from ‘end to end’ (e.g. those that are critical to your business, yet are not the core purpose of your business) • Assess where it ‘hurts’ to improve performance and better manage critical touch points, inputs, and outputs along the process • Evaluate current metrics and key indicators to ensure they are providing the right information to monitor the effectiveness of the process • Ensure everyone knows who is responsible (and accountable) for what – and why

46. ‘‘If you know both yourself and your enemy, you can come out of hundreds of battles without danger’’, to a higher ground of defeating an enemy without even fighting, better strategy by exploring ‘blue oceans’ – untapped and untargeted markets which hold tremendous growth potential – rather than going head-to-head against rivals for a share of the existing market. The latter scenario is akin to a ‘red ocean’ where competition is based on outperforming the existing competitive benchmark. In other words, the best approach to earn a competitive edge is to gain the first mover advantage over competitors.

47. While competitors are the ones who set the agenda and rule of the game in red oceans, competition becomes insignificant in blue oceans.

48. Twelve strategies for instilling a culture of execution in your organization: • Build accountability into meetings • Be realistic. Many strategies fail because leaders don't make a realistic assessment of whether the organization can execute the plan. • Focus on a few priorities. I've seen organizations with strategic plans that detail twenty large strategies for one year.

49. Ensure employees understand priorities. This may sound simple, but my experience is that most employees are not brought into the loop about what is important to the organization. • Set milestones. Break down every organizational project into specific milestones with action items and dates. Communicate these milestones to employees and review the status at each project meeting.

50. Use your business plan. Is your business plan collecting dust? Many organizations go through the motions of spending two days every year developing strategic and business plans, only to stick them in the bottom of the drawer untouched