Quality, innovation, profitability, and growth all depend on having strategy and execution fit together seamlessly.
Did You Know?
In a recent Strategy& global survey, 700 business executives were asked to rate their company’s top leaders in terms of their skill at strategy creation and at execution. Only 8 percent were credited as being very effective at both.
Strategy&, the strategy consulting business of PwC, has been studying the relationship between strategy and execution for years. The authors Ivan de Souza, Richard Kauffeld, and David van Oss have found that companies such as Apple, Amazon, Danaher, IKEA, Starbucks, and the Chinese appliance manufacturer Haier, all of which compete successfully time after time, put forth a clear winning value proposition, backed up by distinctive capabilities, and apply this mix of strategy and execution to everything they do.
Any company can follow the same path as these successful firms, and an increasing number of companies are doing just that, by developing capabilities that combine all the elements of execution — technology, human skills, processes, and organizational structures — to deliver a value proposition.
These 10 principles, derived from our experience at Strategy&, can help you avoid common pitfalls and accelerate your progress.
1. Aim High
Set a lofty ambition for your strategy: not just financial success but sustained value creation, making a better world through your products, services, and presence.
Apple’s early goal of making “a computer for the rest of us,” which effectively shaped the personal computer industry, is a classic example.
Next, aim just as high on the execution side, with a dedication to excellence that seems almost obsessive to outsiders.
Apple, for instance, has long been known for its intensive interest in every aspect of product design and marketing, iterating endlessly until its notoriously demanding leaders are satisfied. The company’s leaders do not consider execution beneath them; it is part of what makes Apple special.
With high aspirations (for example, IKEA’s goal of “creating a better everyday life for the many people” or Amazon’s self-proclaimed role as the “everything store”), you recruit talented people who are deeply committed to being there.
That’s one way you’ll know that you’re aiming high enough: The whole organization will start to feel like a better place to work.
2. Build on Your Strengths
Your company has capabilities that set it apart, things you do better than anyone else. You can use them as a starting point to create greater success.
Take an inventory of your most distinctive capabilities. Look for examples where you have excelled as a company, achieving greatly desired outcomes without heroic efforts. Articulate all the different things that had to happen to make these capabilities work, and figure out what it will take to build on your strengths, so that you can succeed the same way more consistently in the future.
The more knowledge you have about your own capabilities, the more opportunities you’ll have to build on your strengths. So you should always be analyzing what you do best, gathering data about your practices, and conducting postmortems.
In every case, there is something to learn — about your operations, and also about the choices you make and the value you’re able to deliver.
3. Be Ambidextrous
In the physical world, ambidexterity is the ability to use both hands with equal skill and versatility. In business, it’s the ability to manage strategy and execution with equal competence.
Ambidextrous managers can think about the technical and operational details of a project in depth and then, without missing a beat, can consider its broader ramifications for the industry.
If strategy through execution is to become a reality, people across the enterprise need to master ambidexterity.
Find them, recognize and reward them, and give them opportunities to influence others.
4. Clarify Everyone’s Strategic Role
The people in your day-to-day operations — wherever they are, and on whatever level — are continually called upon to make decisions on behalf of the enterprise. If they are not motivated to deliver the strategy, the strategy won’t reach the customers.
It is well established that financial rewards and other tangible incentives will go only so far in motivating people.
Workers cannot make a greater personal commitment unless they understand why their jobs make a difference, and why the company’s advancement will help their own advancement.
Successful leaders spend a great deal of time and attention on the connection between strategy and personal commitment.
5. Align Structures to Strategy
Set up all your organizational structures, including your hierarchical design, decision rights, incentives, and metrics, so they reinforce your company’s identity: your value proposition and critical capabilities.
If the structures of your company don’t support your strategy, consider removing them or changing them wholesale.
Otherwise, they will just get in your way.
Consider, for example, the metrics used to track the results delivered by call center employees. In many companies, these individuals must follow a script and check off that they’ve said everything on the list — even at the risk of irritating potential customers. Better instead to get employees to fully internalize the company’s strategy and grade them on their prowess at solving customer problems.
Overall, every structure in your organization should make your capabilities stronger, and focus them on delivering your strategic goals.
6. Transcend Functional Barriers
Great capabilities always transcend functional barriers.
Consider Starbucks’ understanding of how to create the right ambience, Haier’s ability to rapidly manufacture home appliances to order, and Amazon’s aptitude for launching products and services enabled by new technologies.
These companies all bring people from different functions to work together informally and creatively.
The stronger the cross-functional interplay and the more it is supported by the company’s culture, the more effective the promotion.
Appoint a single executive for each capability team, accountable for fully developing the capability. Ensure this person has credibility at all levels of the organization. Tap high-quality people from each function for this team, and give the leader the authority to set incentives for performance.
7. Become a Fully Digital Enterprise
Embrace digital technology’s potential to transform your company: to create fundamentally new experiences and interactions for your customers, your employees, and every other constituent.
For example, Under Armour began as a technologically enabled sports apparel company, specializing in microfiber-based synthetic fabrics that felt comfortable under all conditions. To keep its value proposition as an innovator, it aggressively expanded into fitness trackers and the development of smart apparel. The company is now developing clothing that will provide data that can both help athletes raise their game and point the way to design improvements.
Adopting digital technology may mean abandoning expensive legacy IT systems, perhaps more rapidly than you had planned. Fortunately, cloud-based technologies provide many more options than were available before.
8. Keep It Simple, Sometimes
Many company leaders wish for more simplicity: just a few products, a clear and simple value chain, and not too many projects on the schedule. Unfortunately, it rarely works out that way.
Capabilities are multifaceted. Different customers want different things. Internal groups design new products or processes without consulting one another. Mergers and acquisitions add entirely new ways of doing things.
The answer is to constantly seek simplicity, but in a selective way.
One advantage of aligning your strategy with your capabilities is that it helps you see your operations more clearly.
You can distinguish the complexity that truly adds value (for example, a supply chain tailored to your most important customers) from the complexity that gets in your way (for example, a plethora of suppliers when only one or two are needed).
As Vinay Couto, Deniz Caglar, and John Plansky explain in Fit for Growth: A Guide to Strategic Cost Cutting, Restructuring, and Renewal (Wiley, 2017), effective cost management depends on the ability to cut the investments that don’t drive value. Customer-facing activities can be among the worst offenders. Some customers need more tailored offerings or elaborate processes, but many do not.
For example, Lenovo, a leading computer hardware company with twin headquarters in China and the U.S., has a strategy based on cross-pollination of innovation between two entirely different markets. The first is “relationship” customers (large enterprises, government agencies, and educational institutions), which purchase in large volume, need customized software, and are often legacy IBM customers. The second is “transactional” customers (individuals and smaller companies), typically buying one or two computers at a time, all seeking more or less the same few models; these customers, however, are sensitive to cost and good user experience.
Lenovo has a single well-developed hardware and software innovation capability aimed at meeting the needs of both types of customers.
The principle “keep it simple, sometimes” is itself more complex than it appears at first glance.
It combines three concepts in one:
- First, be as simple as possible.
- Second, let your company’s strategy be your guide in adding the right amount of complexity.
- Third, build the capabilities needed to effectively manage the complexity inherent in serving your markets and customers.
9. Shape Your Value Chain
As you raise your game, you will raise the game of other operations you work with, including suppliers, distributors, retailers, brokers, and even regulators.
Since these partners are working with you on execution, they should also be actively involved in your strategy.
That means selling your strategy to them, getting them excited about taking the partnership to a whole new level, and backing up your strategic commitment with financing and analytics, to align analytics and processes across your value chain.
10. Cultivate Collective Mastery
The more bound your company is by internal rules and procedures for making and approving decisions, the slower it becomes.
The alternative is what we call collective mastery.
This is a cultural attribute, often found in companies where strategy through execution is prevalent. It is the state you reach when communication is fluid, open, and constant.
Your strategists understand what will work or not work because they talk easily with functional specialists. Your functional specialists know not only what they’re supposed to do, but why it matters. Everyone moves quickly and decisively, because they have the ingrained judgment to know who to consult, and when. People trust one another to make decisions on behalf of the whole.
Many of the attributes of Silicon Valley companies owe a great deal to the high level of collective mastery in the area.
Collective mastery builds over time when people have the support and encouragement they need to work easily and readily across organizational boundaries, with a high level of trust and frequent informal contact.
To operate this way, you have to be flexible, knowing what you do best allows you to be closer to the customers who matter, and to give more autonomy to employees.
In the end, the 10 principles of strategy through execution will do more than help you achieve your business goals.
They will also help build a new kind of culture, one in which people are aware of where you’re going and how you’re going to get there.
The capabilities you build, and the value you provide, are larger than any individual can make them.
Download Report: 10 Principles of Strategy through Execution
See also Building Trust while Cutting Costs
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