Jeremy Tozer is Visiting Fellow at Henley Business School. Here he wins constantly new insights in the topic Strategy Execution. In his blog post – published September 27, 2016 – he describes capabilities that are necessary to execute strategies.
Strategy articulates a decision to complete an organizational-level task, or achieve a defined ‘end-state’. It provides coherence between external context, actual capability, investment and strategic objectives. It outlines how those strategic objectives will be achieved —how businesses will compete and how public sector organizations will optimize service delivery. Strategy development is merely an intellectual exercise if it is not implemented; even ‘the best’ strategy may be worthless if it is not well executed.
What does the research say? Will it build investors’ confidence?
- 61% of businesses struggle to bridge the strategy/implementation gap.
- In the last 3 years, only 56% of strategic initiatives have been successful.
- Developing ‘strategy execution leadership’ is high priority for the best executors.
- Companies with ‘strategy execution leadership’ implement 20% more strategic initiatives than others.
- Companies investing in ‘strategy execution leadership’ report significantly better financial performance than their peers.
- 62% fail to lead change effectively.
- Strategy execution quality is more important than quality of the strategy itself.
- Organizations using a strategy execution system are 7.5 times more likely to be high performing than low performing.
- 67% of Board members and CEOs did not believe that their current leadership development approach was enabling leaders to successfully execute strategy.
- Only 26% of companies integrate leadership development with strategy execution. Those that do are 22.7 times more likely to be high performing organizations.
Research also shows that:
- Up to 70% of behaviour in organizations is shaped by ‘environment’. (The behavioural consequences of structure, policies, processes, systems and notably leaders’ behaviour —especially the example of your immediate boss).
- People (and especially ‘clever people’) have three key needs to be satisfied to ensure intrinsic motivation —Autonomy (trusting people with control over their work), Mastery (regular feedback, formal development, and opportunity to use their full capability) and Meaning (sense of purpose and belonging).
Prof Andrew Kakabadse’s global research project into 12,500 top teams and 5,000 boards shows:
- Organizations adopt one of these differing philosophies —either ‘rationalist, strategy-led’ (strategy is defined; others must follow); or ‘strategy is contextualised, and value-delivery led’ (engagement and alignment are optimized, and context questioned, on a dynamic basis). The latter type outperforms the former.
- The long-term sustainable future lies with the purpose/mission based enterprise supported by deeply held values.
- Effective decision-making requires diversity and evidence-led dialogue to overcome the distorting effects of “personality”, secure engagement and align thinking
- 34% of top team members are divided on mission/purpose, value and strategy.
- 85% of boards are out of touch with no common view on what constitutes competitive advantage.
- 82% of organizations do not engage business unit general managers in strategy development, usually resulting in half-hearted execution of plans that they do not believe in
- Where engagement is highest, organizations enjoy predictable gains.
‘Strategy’ has been the focus for both business schools and large consultancies for many years; meanwhile ‘execution’ has received relatively little attention. Research of 10 and 20 years ago produced similar results to the above so it seems that little of practical value has been learned about strategy execution and building and embedding ‘strategy execution capability’ as an organizational, systemic capability and source of competitive advantage.
How many executives have worked in an organization which has a systemic, systematic, scalable and dynamic approach to the development and seamless execution of strategy? If few have, then that would explain why some find it hard to conceive of what such a ‘system’ could look, sound and feel like to work in. This is reinforced by many leadership development programmes which focus on ‘individual leadership behaviour’ but which offer little by way of ‘systemic approaches’ for consideration.
Research and all practical experience shows that the most rapid performance gains are made by “creating clarity” and “emotional engagement”.
Clarity itself builds confidence, and is the understanding of and alignment to ‘higher intent’ + clear priorities/role + delegated accountability, and authority aligned to that accountability.
Alignment means direction and priorities are those that the CEO would give if he/she was there to advise —alignment of thinking, systems, structure, protocols, plans, objectives, tasks. Understanding results from insights (awareness and analysis), and foresight (deductive reasoning and judgement). Unfortunately ‘clarity’ is a relative concept —many people think they are ‘clear’ but probing what ‘strategy’ really means and comparing that understanding to others, shows that ‘clarity’ has not been created.
Emotional engagement is a combination of inspiration, and a sense of confidence, responsibility, belonging and pride; and the discretionary effort to think, act, follow up and follow through.
Emotional engagement is mostly secured through your immediate leader’s behaviour (the team’s immediate environment) — a display of shared values, regular interaction, meaningful dialogue, using team members full capability, trusting people and so on. Only in part is engagement induced through the wider environment of executive leadership example, the consequences of policies, processes and structure, corporate identity and reputation etc.
What is often overlooked, is that the way the mechanism for creating clarity is used —the ‘social process’ or leadership behaviour with which the ‘conceptual process’ to create clarity is applied— can be the primary mechanism for securing ‘emotional engagement’.
The ‘system’ that you design should routinely share meaningful information to set context, exploit feedback, initiative, and expertise, and enable timely better-quality decisions by those best placed to make them. It should be scalable and facilitate work both within departments and across boundaries; and it should end reliance on ‘force of personality’ and on individual personalities. Such a system can build systemic ‘mutual trust and confidence’.
An effective approach to strategy execution in organizations, will therefore enable all leaders at all levels and across the matrix, to create clarity and simultaneously engender emotional engagement, on a systemic and dynamic basis —dynamic because strategy needs to be continuously reviewed in the light of actual progress and changing circumstances, and to ensure that what is strategically desirable remains tactically possible: and to do all this in such a way that autonomy, mastery and meaning are provided.
The organizational agility and adaptability resulting from such an approach enables both strategic innovation (step-change, disruption) and tactical innovation (incremental, continuous improvement) to proceed without the ‘internal friction’ that all too often is encountered. Experience shows that ‘system design’ which meets these requirements this can double productivity and revenue, and reduce budgeted investment by up to 60% — yes, case studies do exist.