Business Strategy: Execution is the Key
A must read article for a marketing strategist
Business Strategy: Execution Is the Key
Date: Jan 21, 2005 By Lawrence Hrebiniak
Many managers are comfortable planning, but lag when it comes to actually putting the plan into action. This chapter explains why execution is even more important than planning, and how you can put your plan into motion more quickly and efficiently.
Introduction
Two decades ago, I was working with the Organizational Effectiveness Group in AT&T's new Consumer Products division, a business created after the court-mandated breakup and reorganization of the company in 1984. I remember one particular day that made an impression on me that would last for years.
I was talking to Randy Tobias, the head of the division. I had met Randy while doing some work for Illinois Bell, and here we were talking about his division's strategic issues and challenges. Randy later moved into the chairman's office at AT&T and then became a successful CEO of Eli Lilly, but his comments that day years ago were the ones that affected me most.
Here was a new business thrust headlong into the competitive arena. Competition was new to AT&T at the time. Competitive strategy for the business was nonexistent, and Tobias was laboring to create that elusive original plan. He focused on products, competitors, industry forces, and how to position the new division in the marketplace. He handled expectations and demands from corporate as he forged a plan for the business and helped position it in the AT&T portfolio. He created a strategic plan where previously there had been none, a Herculean task and one well done at the time.
On that day, I recall asking Randy what was the biggest strategic challenge confronting the business. I expected that his answer would deal with the problem of strategy formulation or some competitive threat facing the division. His answer surprised me.
He said that strategy formulation, while extremely challenging and difficult, was not what concerned him the most. It was not the planning that worried him. It was something even bigger and more problematic.
It was the execution of strategy that concerned him above all else. Making the plan work would be an even bigger challenge than creating the plan. Execution was the key to competitive success, but it would take some doing.
I, of course, sought further clarification and elaboration. I can't remember all of his points in response to my many questions, but here are some of the execution challenges he raised that day, referring to his own organization. He mentioned the following:
· The culture of the organization and how it was not appropriate for the challenges ahead
· Incentives and how people have been rewarded for seniority or "getting older," not for performance or competitive achievement
· The need to overcome problems with traditional functional "silos" in the organization's structure
· The challenges inherent in managing change as the division adapted to new competitive conditions
This was the first elaboration of execution-related problems I had ever heard, and the message has stayed with me over the years. It became clear to me that day that:
Execution is a key to success
It also struck me in those early days with AT&T that, although execution is a key to success, it is no easy task. Here was a company with an ingrained culture and structure, a set way of doing things. For the company to adapt to its new competitive environment, major changes would be necessary, and those changes would be no simple cakewalk. Obviously, developing a competitive strategy wouldn't be easy, but the massive challenges confronting the company made it clear to me early on that:
Making strategy work is more difficult than the task of strategy making
Execution is critical to success. Execution represents a disciplined process or a logical set of connected activities that enables an organization to take a strategy and make it work. Without a careful, planned approach to execution, strategic goals cannot be attained. Developing such a logical approach, however, represents a formidable challenge to management.
Even with careful development of an execution plan at the business level, execution success is not guaranteed. Tobias's strategic and execution plans for the Consumer Products division were well thought out. Yet troubles plagued the division's progress. Why? The problem was with the entire AT&T corporation. The company was about to go through a huge metamorphosis that it simply was not equipped to deal with and make work. Execution plans at the business level founder or fail if they don't receive corporate support. AT&T was, at the time, a slow-moving behemoth in which change was vehemently resisted. Well-prepared and logical plans at the Consumer Products business level were hampered by a poor corporate culture. Tobias' insights and potentially effective execution actions were blunted by corporate inertia and incompetence.
Although execution is critical to strategic success, making strategy work presents a formidable challenge. A host of factors, including politics, inertia, and resistance to change, routinely can get in the way of execution success.
Fast forwarding to the present, I just finished a few weeks working with managers from Deutsche Post, Aventis Pharmaceutical, and Microsoft, talking to them about execution problems. I also just participated in a Wharton executive program on strategic management and was debriefing with a few of the participants.
The major point cutting through all the conversations is the importance and difficulty of executing strategy. Two decades after my conversation with Randy Tobias, managers are still emphasizing that execution is a key to success. They are arguing that making strategy work is important and is more difficult than strategy making. Plans still fail or wither on the vine because of poor execution.
The striking aspect of all this is that managers apparently still don't know a great deal about the execution of strategy. It is still seen as a major problem and challenge.
Management literature has focused over the years primarily on parading new ideas on planning and strategy formulation in front of eager readers, but it has sorely neglected execution. Granted, planning is important. Granted, people are waking up to the challenge and are beginning to take execution seriously.
Still, it is obvious that the execution of strategy is not nearly as clear and understood as the formulation of strategy. Much more is known about planning than doing, about strategy making than making strategy work.
Is execution really worth the effort? Is execution or implementation truly a key to strategic success?
Consider one relatively recent comprehensive study of what contributes to company success. In this study of 160 companies over a five-year period, success was strongly correlated, among other things, with an ability to execute flawlessly. Factors such as culture, organizational structure, and aspects of operational execution were vital to company success, with success measured by total return to shareholders. Other recent works have added their support to this study's finding that execution is important for strategic success, even if their approach and analysis are less rigorous and complete.iii These works then, in total, support the view I've held for years:
Sound execution is critical—A focus on making strategy work pays major dividends
Despite its importance, execution is often handled poorly by many organizations. There still are countless cases of good plans going awry because of substandard execution efforts. This raises some important questions.
If execution is central to success, why don't more organizations develop a disciplined approach to it? Why don't companies spend time developing and perfecting processes that help them achieve important strategic outcomes? Why can't more companies execute or implement strategies well and reap the benefits of those efforts?
The simple answer, again, is that execution is extremely difficult. There are formidable roadblocks or hurdles that get in the way of the execution process and seriously injure the implementation of strategy. The road to successful execution is full of potholes that must be negotiated for execution success. This was the message two decades ago, and it still is true today.
Let's identify some of the problems or hurdles affecting implementation. Let's then focus on confronting the obstacles and solving the problems in subsequent chapters of this book.
Managers Are Trained to Plan, Not Execute
One basic problem is that managers know more about strategy formulation than implementation. They are trained to plan, not execute plans.
In most MBA programs I've looked at, students learn a great deal about strategy formulation and functional planning. Core courses typically hone in on competitive strategy, marketing strategy, financial strategy, and so on. The number of courses in most core programs that deal exclusively with execution or implementation? Usually none. Execution is most certainly touched on in a couple of the courses, but not in a dedicated, elaborate, purposeful way. Emphasis clearly is on conceptual work, primarily planning, and not on doing. At Wharton, there is at least an elective on strategy implementation, but this is not typical of many other MBA programs. Even if things are beginning to change, the emphasis still is squarely on planning, not execution.
Added to the lack of training in execution is the fact that strategy and planning in most business schools are taught in "silos," by departments or disciplines, and execution suffers further. The view that marketing strategy, financial strategy, HR strategy, and so on is the only "right" approach is deleterious to the integrative view demanded by execution.
It appears, then, that most MBA programs (undergrad, too, for that matter) are marked by an emphasis on developing strategies, not executing them. Bright graduates are well versed in strategy and planning, with only a passing exposure to execution. Extrapolating this into the real world suggests that there are many managers who have rich conceptual backgrounds and training in planning but not in "doing." The lack of formal attention to strategy execution in the classroom obviously must carry over to a lack of attention and consequent underachievement in the area of execution in the real world.
If this is true—if managers are trained to plan, not to execute—then the successful execution of strategy becomes less likely and more problematic. Execution is learned in the "school of hard knocks," and the pathways to successful results are likely fraught with mistakes and frustrations.
It also follows logically that managers who know something about strategy execution very likely have the advantage over their counterparts who don't.
If managers in one company are better versed in the ways of execution than managers in a competitor organization, isn't it logical to assume, all other things being equal, that the former company may enjoy a competitive advantage over the latter, given the differences in knowledge or capabilities? The benefits of effective execution include competitive advantage and higher returns to shareholders, so having knowledge in this area would clearly seem to be worthwhile and beneficial to the organization.
Let the "Grunts" Handle Execution
Another problem is that some C-level and other top-level managers actually believe that strategy execution or implementation is "below them," something best left to lower-level employees. Indeed, the heading of this section comes from an actual quote from a high-level manager.
I was working on implementation programs at GM, under the auspices of Corporate Strategic Planning. In the course of my work, I encountered many competent and dedicated managers. However, I also ran across a few who had a jaundiced view of execution. As one of these managers explained:
"Top management rightfully worries about planning and strategy formulation. Great care must be taken to develop sound plans. If planning is done well, management then can turn the plans over to the grunts whose job it is to make sure things get done and the work of the planners doesn't go to waste."
What a picture of the planning and execution process! The planners (the "smart" people) develop plans that the "grunts" (not quite as smart) simply have to follow through on and make work. "Doing" obviously involves less ability and intelligence than "planning," a perception of managerial work that clearly demeans the execution process.
The prevailing view here is that one group of managers does innovative, challenging work (planning) and then "hands off the ball" to lower levels for execution. If things go awry and strategic plans are not successful (which often is the case), the problem is placed squarely at the feet of the "doers," who somehow screwed up and couldn't implement a perfectly sound and viable plan. The doers fumbled the ball despite the planners' well-designed plays.
Every organization, of course, has some separation of planning and doing, of formulation and execution. However, when such a separation becomes dysfunctional—when planners see themselves as the smart people and treat the doers as "grunts"—there clearly will be execution problems. When the "elite" plan and see execution as something below them, detracting from their dignity as top managers, the successful implementation of strategy obviously is in jeopardy.
The truth is that all managers are "grunts" when it comes to strategy execution. From the CEO on down, sound execution demands that managers roll up their sleeves and pitch in to make a difference. The content and focus of what they do may vary between top and middle management. Nonetheless, execution demands commitment to and a passion for results, regardless of management level.
Another way of saying this is that execution demands ownership at all levels of management. From C-level managers on down, people must commit to and own the processes and actions central to effective execution. Ownership of execution and the change processes vital to execution are necessary for success. Change is impossible without commitment to the decisions and actions that define strategy execution.
The execution of strategy is not a trivial part of managerial work; it defines the essence of that work. Execution is a key responsibility of all managers, not something that "others" do or worry about.
Planning and Execution Are Interdependent
Even though, in reality, there may be a separation of planning and execution tasks, the two are highly interdependent. Planning affects execution. The execution of strategy, in turn, affects changes to strategy and planning over time. This relationship between planning and doing suggests two critical points to keep in mind.
Successful strategic outcomes are best achieved when those responsible for execution are also part of the planning or formulation process. The greater the interaction between "doers" and "planners" or the greater the overlap of the two processes or tasks, the higher the probability of execution success.
A related point is that strategic success demands a "simultaneous" view of planning and doing. Managers must be thinking about execution even as they are formulating plans. Execution is not something to "worry about later." All execution decisions and actions, of course, cannot be taken at once. Execution issues or problem areas must be anticipated, however, as part of a "big picture" dealing with planning and doing. Formulating and executing are parts of an integrated, strategic management approach. This dual or simultaneous view is important but difficult to achieve, and it presents a challenge to effective execution.
Randy Tobias had this simultaneous view of planning and doing. Even as he was formulating a new competitive strategy for his AT&T division, he was anticipating execution challenges. Competitive strategy formulation wasn't seen as occurring in a planning vacuum, isolated from execution issues. Central to the success of strategy was his early identification and appreciation of execution-related factors whose impact on strategic success was judged to be formidable. Execution worries couldn't be put off; they were part and parcel of the planning function.
In contrast, top management at a stumbling Lucent Technologies never had this simultaneous view of planning and execution.
When it was spun off from AT&T, the communications, software, and data networking giant looked like a sure bet to succeed. It had the fabled Bell Labs in its fold. It was ready to hit the ground running and formulate winning competitive strategies. Even as the soaring technology market of the late 1990s helped Lucent and other companies, however, it couldn't entirely mask or eliminate Lucent's problems.
One of the biggest problems was that management didn't anticipate critical execution obstacles as they were formulating strategy. Its parent, Ma Bell, had become bureaucratic and slow moving, and Lucent took this culture with it when it was spun off. The culture didn't serve the company well in a highly competitive, rapidly changing telecom environment, a problem that was not foreseen. An unwieldy organizational structure, too, was ignored during Lucent's early attempts at strategy development, and it soon became a liability when it came to such matters as product development and time to market. More agile competitors such as Nortel beat Lucent to market, signaling problems with Lucent's ability to pull off its newly developed strategies.
One thing that was lacking at Lucent was top management's having a simultaneous view of planning and doing. The planning phase ignored critical execution issues related to culture, structure, and people. The results of this neglect were extremely negative, only magnified by the market downturns in 2000 and thereafter.
Execution Takes Longer than Formulation
The execution of strategy usually takes longer than the formulation of strategy. Whereas planning may take weeks or months, the implementation of strategy is usually played out over a much longer period of time. The longer time frame can make it harder for managers to focus on and control the execution process, as many things, some unforeseen, can materialize and challenge managers' attention.
Steps taken to execute a strategy take place over time, and many factors, including some unanticipated, come into play. Interest rates may change; competitors don't behave the way they're supposed to (competitors can be notoriously "unfair" at times, not playing by our "rules"!), customers' needs change, and key personnel leave the company. The outcomes of changes in strategy and execution methods cannot always be easily determined because of "noise" or uncontrolled events. This obviously increases the difficulty of execution efforts.
The longer time frame puts pressure on managers dealing with execution. Long-term needs must be translated into short-term objectives. Controls must be set up to provide feedback and keep management abreast of external "shocks" and changes. The process of execution must be dynamic and adaptive, responding to and compensating for unanticipated events. This presents a real challenge to managers and increases the difficulty of strategy execution.
When the DaimlerChrysler merger was consummated in 1998, many believed that the landmark deal would create the world's preeminent carmaker. Execution since has been extremely difficult, however, and the six years after the merger have seen many new problems unfold. The company has faced one crisis after another, including two bouts of heavy losses in the Chrysler division, a series of losses in commercial vehicles, and huge problems with failed investments in an attempted turnaround at debt- burdened Mitsubishi Motors.iv Serious culture clashes also materialized between the top-down, formal German culture vs. the more informal and decentralized U.S. company. Angry shareholders at the 2004 meeting created and mirrored internal dissent and issued an ultimatum to Jurgen Schrempp to turn things around fast.
The six years after the merger presented problems unforeseen at the time of the merger. Execution always takes time and places pressure on management for results. But the longer time needed for execution also increases the likelihood of additional unforeseen problems or challenges cropping up, which further increases the pressure on managers responsible for execution results. The process of execution is always difficult and sometimes quarrelsome, with problems only exacerbated by the longer time frame usually associated with execution.
Execution Is a Process, Not an Action or Step
A point just made is critical and should be repeated: Execution is a process. It is not the result of a single decision or action. It is the result of a series of integrated decisions or actions over time.
This helps explain why sound execution confers competitive advantage. Firms will try to benchmark a successful execution of strategy. However, if execution involves a series of internally consistent, integrated activities, activity systems, or processes, imitation will be extremely difficult, if not impossible.
Southwest Airlines, for example, does many things differently than most large airlines. It has no baggage transfer, serves no meals, issues no boarding passes, uses one type of airplane (reducing training and maintenance costs), and incents fast turnaround at the gate. It has developed capabilities and created a host of activities to support its low-cost strategy. Other airlines are hard pressed to copy it, as they're already doing everything Southwest isn't. They're committed to different routines and methods. Copying Southwest's execution activities, in total, would involve difficult trade-offs, markedly different tasks, and major changes, which complicates the problem of developing and integrating new execution processes or activities. This is not to say that competitors absolutely cannot copy Southwest; indeed, other low-cost upstarts and traditional airlines are putting increasing competitive pressure on Southwest. This is simply arguing that such imitation is extremely hard to do.
Execution is a process that demands a great deal of attention to make it work. Execution is not a single decision or action. Managers who seek a quick solution to execution problems will surely fail in attempts at making strategy work. Faster is not always better!
Execution Involves More People than Strategy Formulation DOES
In addition to being played out over longer periods of time, strategy implementation always involves more people than strategy formulation. This presents additional problems. Communication down the organization or across different functions becomes a challenge. Making sure that incentives throughout the organization support strategy execution efforts becomes a necessity and, potentially, a problem. Linking strategic objectives with the day-to-day objectives and concerns of personnel at different organizational levels and locations becomes a legitimate but challenging task. The larger the number of people involved, the greater the challenge of effective strategy execution.
I once was involved in a strategic planning project with a well-known bank. Another project I wasn't directly involved in had previously recommended a new program to increase the number of retail customers who used certain profitable products and services. A strategy was articulated and a plan of execution developed to educate key personnel and to set goals consistent with the new thrust. Branch managers and others dealing with customers were brought in to corporate for training and to create widespread enthusiasm for the program.
After a few months, the data revealed that not much had changed. It clearly was business as usual, with no change in the outcomes that were being targeted by the new program. The bank decided to do a brief survey to canvas customers and branch personnel in contact with customers to determine reactions to the program and see where modifications could be made.
The results were shocking, as you've probably guessed. Few people knew about the program. Some tellers and branch personnel did mention that they had heard about "something new," but nothing different was introduced to their daily routines. A few said that the new program was probably just a rumor, as nothing substantial had ever been implemented. Others suggested that rumors were always circulating, and they never knew what was real or bogus.
Communication and follow-through for the new program were obviously inadequate, but the bank admittedly faced a daunting task. It was a big bank. It had many employees at the branch level. Educating them and changing their behaviors was made extremely difficult by the bank's size. Decentralized branch operations ensured that problems were always "popping up" in the field, challenging employees' attention and making it difficult to introduce new ideas from corporate to a large group of employees.
In this example, the number of people who needed to be involved in the implementation of a new program presented a major challenge to the bank management. One can easily imagine the communications problems in even larger, geographically dispersed companies such as GM, IBM, Deutsche Post, GE, Exxon, Nestlé, Citicorp, and ABB. The number of people involved, added to the longer time frames generally associated with strategy execution, clearly creates problems when trying to make strategy work.
Additional Challenges and Obstacles to Successful Execution
The issues previously noted are serious, potentially impeding execution. Yet there are still other challenges and obstacles to the successful implementation of strategy. These need to be identified and confronted if execution is to succeed.
To find out what problems managers routinely encounter in the execution of strategy, I developed two research projects to provide some answers. My goal was to learn about execution from those most qualified to give me the scoop—managers actually dealing with strategy execution. I could have relied solely on my own consulting experiences. I felt, however, that a more widespread approach—surveys directed toward many practicing managers—would yield additional positive results and useful insights into execution issues.
Wharton-Gartner Survey
This was a joint project involving the Gartner Group, Inc., a well-known research organization, and me, a Wharton professor. This is a relatively recent project, with data collection and analysis in 2003.
The purpose of the research, from the Gartner introduction, was as follows:
"To gain a clear understanding of challenges faced by managers as they make decisions and take actions to execute their company's strategy to gain competitive advantage."
The research instrument was a short online survey sent to 1,000 individuals on the Gartner E-Panel database. The targeted sample comprised managers who reported that they were involved in strategy formulation and execution. Complete usable responses were received from a sample of 243 individuals, a return rate that is more than sufficient for this type of research. In addition, the survey collected responses to open-ended questions to provide additional data, including explanations of items covered in the survey instrument.
There were 12 items on the survey dealing with obstacles to the strategy-execution process. They focused on conditions that affect execution and were originally developed in conjunction with a Wharton Executive Development Program on strategy implementation. Let's briefly consider this program and the survey it generated, and then we'll look at the items involved.
Wharton Executive Education Survey
I have been running an executive program on strategy implementation at Wharton a number of times a year for about 20 years. I have met hundreds of managers with responsibility for strategy execution, many of whom confronted major hurdles in their attempts to execute strategy successfully. As part of the formal program, managers brought their real-world problems with them. Time was allocated to air out the problems and focus on their solution in the course of the program.
Based on these presentations and my discussions with managers, I developed a list of execution hurdles or challenges to the execution process. I discussed this list with managers, asking them to rank the problems or obstacles in order of importance. Over time, items were modified, added to, or deleted from the list until I settled on 12 items that made sense and had "face" validity. These items, managers felt, clearly had a relationship to strategy execution.
Using the 12 items to gather opinions over a large number of executive education programs provided me with responses from a sample of 200 managers. They provided a ranking of the items' impact on strategy execution. Open-ended responses to questions about execution issues, problems, and opportunities were also collected over time, providing additional valuable data. Coupled with the data collected in the Wharton-Gartner Survey using the same 12 items, I had complete responses from more than 400 managers involved in strategy execution who told me about their execution problems and their solutions to them.
Panel Discussions
In subsequent Wharton executive programs after the data collection, I held informal panel discussions to collect additional insights into what the data were actually saying. I asked managers why, in their opinion, people responded the way they did. "What are the surveys telling us about execution problems or issues?" was the predominant question.
These discussions forced managers to read between the lines and interpret the formal data. They also enabled me to probe into what could be done to overcome the obstacles and achieve successful execution outcomes. Insights were collected, then, not only on the sources of execution problems but their solutions as well.
The surveys and follow-up discussions provided data right from "the horse's mouth." These were not idiosyncratic data, the opinions or observations of a few managers or CEOs who, against all odds, "did it their way." The number of managers providing answers, coupled with an emphasis on real problems and solutions, added a strong sense of relevance to the opinions gathered about strategy execution.
The Results: Opinions About Successful Strategy Execution
Table 1.1 shows the results of the surveys. The 12 items are shown, with the respective rank orderings for the Wharton-Gartner Survey and the Wharton Executive Education Survey. (The actual questionnaire, for those interested, appears in the appendix to this book.)
Table 1.1 Obstacles to Strategy Execution
Obstacles
Wharton-Gartner Survey (n = 243)
Rankings Wharton-Executive Education Survey (n = 200)
Either Survey Top 5 Rankings
1. Inability to manage change effectively or to overcome internal resistance to change
1
1
3
2. Trying to execute a strategy that conflicts with the existing power structure
2
5
3
3. Poor or inadequate information sharing between individuals or business units responsible for strategy execution
2
4
3
4. Unclear communication of responsibility and/or accountability for execution decisions or actions
4
5
3
5. Poor or vague strategy
5
2
3
6. Lack of feelings of "ownership" of a strategy or execution plans among key employees
5
8
3
7. Not having guidelines or a model to guide strategy- execution efforts
7
2
3
8. Lack of understanding of the role of organizational structure and design in the execution process
9
5
3
9. Inability to generate "buy-in" or agreement on critical execution steps or actions
7
10
10. Lack of incentives or inappropriate incentives to support execution objectives
9
8
11. Insufficient financial resources to execute the strategy
11
12
12. Lack of upper-management support of strategy execution
12
11
It is obvious that there is strong agreement on some of the items. The importance of managing change well, including cultural change, is first on both surveys. Inability to manage change effectively clearly is seen as injurious to strategy-execution efforts. Although culture was not mentioned explicitly in the item, the open-ended responses and panel discussions placed culture at the core of many change-related problems. To many of the respondents, "change" and" "culture change" were synonymous.
Trying to execute a strategy that conflicts with the prevailing power structure clearly is doomed to failure, according to the managers surveyed. Confronting those with influence at different organizational levels who disagree with an execution plan surely will have unhappy results in most cases.
Poor sharing of information or poor knowledge transfer and unclear responsibility and accountability also can doom strategy-execution attempts. These two items suggest that attempts at coordination or integration across organizational units can suffer if unclear responsibilities and poor sharing of vital information needed for execution is the rule. Again, this makes sense because complex strategies often demand cooperation and effective coordination and information sharing. Not achieving the requisite knowledge transfer and integration certainly cannot help the execution of these strategies.
There is also agreement on the unimportance of some of the items. Both survey groups clearly agreed that a lack of upper-management support and insufficient financial resources were not major problems for strategy execution in their organizations. These results were extremely surprising, so I pursued them further.
Presenting these results to managers in the panel discussions helped clarify the findings. Basically, the story is that top-management support and adequate financial resources are absolutely critical, but that support is primarily manifested during a planning stage, when deciding on execution plans and methods. Commitment to plans of actions and commitment of resources occur as part of planning, so they are "givens," predetermined inputs to the execution process. Execution plans and activities already have the blessing and approval of top management, and commitment of the requisite resources has already been made. Occasionally, top management may renege on its support during execution, but managers said that this was the exception, not the rule.
This explains, then, why the items dealing with financial support and top management buy-in were rated as only minor execution problems, not serious obstacles. The issues related to support and commitment had already been confronted and resolved, according to the managers interviewed. They definitely are saying, however, that had the blessing of top management not been attained, execution success would be far less probable, if not impossible, to achieve. Given that buy-in and financial support were a reality and in place, the focus could turn to other execution tasks and activities.
It is important to note, too, that top management and financial support are seen by managers as different issues than the power issue previously reported as significant for execution. Power has a broader and more pervasive influence than financial allocations, although there clearly is some relationship. Even after the approval of an execution project and the attendant budget allocations, power and social influence come into play and can affect execution. Managers were adamant in their opinion that, while power certainly includes elements of hierarchy and budgeting, power differences are deeper, more complex, and permeate the entire organization, regardless of hierarchical level.
There are some differences between managers in the two surveys on a few of the items. Having a "poor or vague strategy," for example, was ranked as the second biggest execution obstacle by the Wharton Executive Education group, but it was ranked fifth by the Wharton-Gartner managers. "Not having a model or guidelines to guide strategy execution efforts" was ranked as the second biggest obstacle by the Executive Education group but was seventh in the Wharton-Gartner Survey. There were also small perceived differences on the importance of organizational structure or design in the execution process.
Why the differences? It may be due in part to the makeup of the samples in the two surveys. The Wharton-Gartner Survey tapped the opinions of managers, some of whom, we can infer, were successful in execution and some of whom weren't. Surely, some of the individuals sampled were successful in their implementation efforts, meaning they weren't having problems.
In contrast, many of the managers in the Executive Education Survey attended the Wharton program because they were having actual execution problems. They came to the program to help solve them and to overcome real implementation obstacles. Their focus was clearly on righting or avoiding execution mistakes. They could see problems, say, with organizational structure or not having a model to guide execution efforts, whereas managers in the Wharton-Gartner Survey may have already overcome those problems and, hence, ranked them lower in importance. Whatever the reason, there were some differences between the two groups.
Poor Execution Outcomes
There was strong agreement between the research groups on the impact of the execution problems on performance results. In addition to "not achieving desired execution outcomes or objectives," managers in the surveys ranked a few additional results of poor execution methods as being highly problematical. These include the following:
· Employees don't understand how their jobs contribute to important execution outcomes.
· Time and money are wasted because of inefficiency or bureaucracy in the execution process.
· Execution decisions take too long to make.
· The company reacts slowly or inappropriately to competitive pressures.
These are not trivial issues. Execution problems can cost the organization dearly. Time and money are wasted, and a company can face serious competitive setbacks because of an inability to respond to market or customer demands. Execution problems must be addressed, but which ones and in what order?
Making Sense of the Data and Going Forward
Given the responses from managers just noted, what does all this mean? What really affects execution? What should we focus on in subsequent chapters of this book?
The first thing I did to answer these questions was to include all items that were ranked fifth or higher in either or both samples of managers. If either or both groups felt that strongly about an execution obstacle, I felt that the item deserved consideration. The far right-hand column in Table 1.1 shows checkmarks by these items.
Second, I looked to the open-ended responses, panel discussions, and my own notes taken during the Wharton programs and panel discussions to flesh out the items in Table 1.1. This proved to be enlightening. I determined easily that "managing change" included managing cultural change to many of the respondents, a point emphasized earlier. The impact of culture itself on execution and company performance was often emphasized, even though culture was not one of the 12 survey items. Managers basically said that culture was an underlying explanatory element in responses dealing with incentives, power, and change, items that were included in the survey. Some argued strongly for the importance of culture as a separate factor affecting execution success.
From these discussions and open-ended responses, I learned why there were many strong comments for certain items, such as the need for an execution model or plan. If a plan existed to guide execution efforts in their company, managers did not rank it as a significant problem. If such a plan didn't exist, it was considered to be a major shortcoming that gave rise to yet additional problems in the execution process.
I read and heard the lamentations of many about execution problems that arise from poor strategy or inadequate planning. Vague strategies cannot easily be translated into the measurable objectives or metrics so vital to execution. Unclear corporate and business plans inhibit integration of objectives, activities, and strategies between corporate and business levels. Poor strategies result in poor execution plans. Points such as these derived from the panel discussions and open-ended responses provided helpful insights into the meaning of the survey items and the factors affecting execution.
Finally, managers told me about the importance of controls or feedback in the execution process. What they were emphasizing is the importance of strategy reviews that provide feedback about performance and allow for changes in execution methods. These points are consistent with the importance of managing change and organizational adaptation, issues already discussed, but the managers' additional emphasis on the importance of controls, feedback, and change were duly noted.
After carefully examining all the data, I then tried to "cluster" the items logically to see which obstacles to successful execution seemed to "stick together." Here is my take on what the data seem to be saying.
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:
1. Developing a model to guide execution decisions or actions
2. Understanding how the creation of strategy affects the execution of strategy
3. Managing change effectively, including culture change
4. Understanding power or influence and using it for execution success
5. Developing organizational structures that foster information sharing, coordination, and clear accountability
6. Developing effective controls and feedback mechanisms
7. Knowing how to create an execution-supportive culture
8. Exercising execution-biased leadership
Having a Model or Guidelines for Execution
Managers need a logical model to guide execution actions.
Without guidelines, execution becomes a helter-skelter affair. Without guidance, individuals do the things they think are important, often resulting in uncoordinated, divergent, even conflicting decisions and actions. Without the benefit of a logical approach, execution suffers or fails because managers don't know what steps to take and when to take them. Having a model or roadmap positively affects execution success.
Strategy is the Primary Driver
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.
Good people are important for execution. 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. Strategy is critical. It drives the development of capabilities and which people with what skills sit in what seats on the bus. If one substitutes "jet airplane" for "bus" above—given today's high-flying, competitive markets—the importance of strategy, direction, and the requisite critical skills and capabilities necessary for success are emphasized even more.
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. What aspects of strategy and planning impact execution outcomes the most is a critical question that needs answering. Another critical question deals with the relationship between corporate- and business-level strategies and how their interaction affects execution outcomes.
Managing Change
Execution or strategy implementation often involves change. Not handling change well will spell disaster for execution efforts.
Managing change means much more than keeping people happy and reducing resistance to new ideas and methods. It also means knowing the tactics or steps needed to manage the execution process over time. Do managers implement change sequentially, bit by bit, or do they do everything at once, biting the bullet and implementing change in one fell swoop? The wrong answer can seriously hamper or kill execution efforts. Knowing how to manage the execution process and related changes over time is important for execution success.
The Power Structure
Execution programs that contradict the power or influence structure of an organization are doomed to failure. But what affects power or influence? Power is more than individual personality or position. 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.
Coordination and Information Sharing
These are vital to effective execution. Knowing how to achieve coordination and information sharing in complex, geographically dispersed organizations is important to execution success. 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.
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.
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. Knowing what does affect cultural change is central to execution success.
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.
Leadership affects how organizations respond to all of the preceding execution challenges. It is always at least implied when discussing what actions or decisions are necessary to make strategy work. A complete analysis of execution steps and decisions usually defines what good leadership is and how it affects execution success, directly or indirectly.
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. There is an emergent aspect of strategy and execution, as organizations learn and adapt to environmental changes over time. Adaptation and change depend on effective execution methods.
As important as controls and feedback are, they often don't work. Control processes fail. They don't identify and confront the brutal facts underlying poor performance. Adaptation is haphazard or incomplete. Understanding how to manage feedback, strategy reviews, and change is vital to the success of strategy execution.
These are the issues that impact the success or failure of strategy-execution efforts. Coupled with the issues previously mentioned (longer time frames, involvement of many people, and so on), these are the areas that present formidable obstacles to successful execution if they are not handled properly. They also present opportunities for competitive advantage if they are understood and managed well.
The last words, "managed well," hold the key to success. Knowing the obstacles or potential opportunities is necessary but not sufficient. The real issue is how to deal with them to generate positive execution results. The major significant point or thrust of this chapter is that execution is not managed well in most organizations. The remainder of this book is dedicated to correcting this woeful situation.
The Next Step: Developing a Logical Approach to Execution Decisions and Actions
So where and how does one begin to confront the issues just noted? Which execution problems or opportunities should managers consider first? What decisions or actions come later? Why? Can an approach to strategy execution be developed to guide managers through the maze of obstacles and problematical issues just identified?
The next chapter begins to tackle these questions. It presents an overview, a conceptual framework to guide execution decisions and actions. Managers need such a model because they routinely face a bewildering set of decisions about a host of strategic and operating problems, including those dealing with execution. They need guidelines, a "roadmap" to steer them logically to execution success.
Priorities are also needed. 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.
Having a model, finally, also facilitates a "simultaneous" view of planning and doing. All execution actions cannot be taken at once; some must precede others logically. A good overview or model, however, provides a "big picture" that enables managers to see and anticipate execution problems. Execution is not something that others should worry about later. Planning requires anticipating early on what must be done to make strategy work.
Development of a logical overview is a step that has been ignored by practitioners, academics, and management consultants alike. Execution problems or issues typically have been handled separately or in an ad-hoc fashion, supported by a few anecdotes or case studies. This is not sufficient. Execution is too complex to be approached without guidelines or a roadmap.
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. They need guidelines, a way to see and approach execution and the logical order of the key variables involved. A roadmap is needed to guide them through the minefields of bad execution decisions and actions. Managers require a "big picture" as well as an understanding of the "nitty-gritty," the key elements that comprise the big picture.
The next chapter tackles the essential task of providing this overview by showing the order and logic of key execution decisions. It begins to confront the obstacles identified in this chapter as it lays out this sequence of decisions or actions. These decisions and actions simultaneously define the areas needing additional attention in later chapters of this book. Having a model of execution is vital to making strategy work, so let's take this important and necessary step.
Summary
· Execution is a key to strategic success. Most managers, however, know a lot more about strategy formulation than execution. They know much more about "planning" than "doing," which causes major problems with making strategy work.
· Strategy execution is difficult but worthy of management's attention across all levels of an organization. All managers bear responsibility for successful execution. It is not just a lower-level task.
· Part of the difficulty of execution is due to the obstacles or impediments to it. These include the longer time frames needed for execution; the need for involvement of many people in the execution process; poor or vague strategy; conflicts with the organizational power structure; poor or inadequate sharing of information; a lack of understanding of organizational structure, including information sharing and coordination methods; unclear responsibility and accountability in the execution process; and an inability to manage change, including cultural change.
· Knowing execution hazards (opportunities) is necessary but not sufficient. For successful execution to occur, managers need a model or a set of guidelines outlining the entire process and relationships among key decisions or actions. A "roadmap" is needed to help with the order of execution decisions as managers confront obstacles and take advantage of opportunities.
Business Strategy: Execution Is the Key
Date: Jan 21, 2005 By Lawrence Hrebiniak
Many managers are comfortable planning, but lag when it comes to actually putting the plan into action. This chapter explains why execution is even more important than planning, and how you can put your plan into motion more quickly and efficiently.
Introduction
Two decades ago, I was working with the Organizational Effectiveness Group in AT&T's new Consumer Products division, a business created after the court-mandated breakup and reorganization of the company in 1984. I remember one particular day that made an impression on me that would last for years.
I was talking to Randy Tobias, the head of the division. I had met Randy while doing some work for Illinois Bell, and here we were talking about his division's strategic issues and challenges. Randy later moved into the chairman's office at AT&T and then became a successful CEO of Eli Lilly, but his comments that day years ago were the ones that affected me most.
Here was a new business thrust headlong into the competitive arena. Competition was new to AT&T at the time. Competitive strategy for the business was nonexistent, and Tobias was laboring to create that elusive original plan. He focused on products, competitors, industry forces, and how to position the new division in the marketplace. He handled expectations and demands from corporate as he forged a plan for the business and helped position it in the AT&T portfolio. He created a strategic plan where previously there had been none, a Herculean task and one well done at the time.
On that day, I recall asking Randy what was the biggest strategic challenge confronting the business. I expected that his answer would deal with the problem of strategy formulation or some competitive threat facing the division. His answer surprised me.
He said that strategy formulation, while extremely challenging and difficult, was not what concerned him the most. It was not the planning that worried him. It was something even bigger and more problematic.
It was the execution of strategy that concerned him above all else. Making the plan work would be an even bigger challenge than creating the plan. Execution was the key to competitive success, but it would take some doing.
I, of course, sought further clarification and elaboration. I can't remember all of his points in response to my many questions, but here are some of the execution challenges he raised that day, referring to his own organization. He mentioned the following:
· The culture of the organization and how it was not appropriate for the challenges ahead
· Incentives and how people have been rewarded for seniority or "getting older," not for performance or competitive achievement
· The need to overcome problems with traditional functional "silos" in the organization's structure
· The challenges inherent in managing change as the division adapted to new competitive conditions
This was the first elaboration of execution-related problems I had ever heard, and the message has stayed with me over the years. It became clear to me that day that:
Execution is a key to success
It also struck me in those early days with AT&T that, although execution is a key to success, it is no easy task. Here was a company with an ingrained culture and structure, a set way of doing things. For the company to adapt to its new competitive environment, major changes would be necessary, and those changes would be no simple cakewalk. Obviously, developing a competitive strategy wouldn't be easy, but the massive challenges confronting the company made it clear to me early on that:
Making strategy work is more difficult than the task of strategy making
Execution is critical to success. Execution represents a disciplined process or a logical set of connected activities that enables an organization to take a strategy and make it work. Without a careful, planned approach to execution, strategic goals cannot be attained. Developing such a logical approach, however, represents a formidable challenge to management.
Even with careful development of an execution plan at the business level, execution success is not guaranteed. Tobias's strategic and execution plans for the Consumer Products division were well thought out. Yet troubles plagued the division's progress. Why? The problem was with the entire AT&T corporation. The company was about to go through a huge metamorphosis that it simply was not equipped to deal with and make work. Execution plans at the business level founder or fail if they don't receive corporate support. AT&T was, at the time, a slow-moving behemoth in which change was vehemently resisted. Well-prepared and logical plans at the Consumer Products business level were hampered by a poor corporate culture. Tobias' insights and potentially effective execution actions were blunted by corporate inertia and incompetence.
Although execution is critical to strategic success, making strategy work presents a formidable challenge. A host of factors, including politics, inertia, and resistance to change, routinely can get in the way of execution success.
Fast forwarding to the present, I just finished a few weeks working with managers from Deutsche Post, Aventis Pharmaceutical, and Microsoft, talking to them about execution problems. I also just participated in a Wharton executive program on strategic management and was debriefing with a few of the participants.
The major point cutting through all the conversations is the importance and difficulty of executing strategy. Two decades after my conversation with Randy Tobias, managers are still emphasizing that execution is a key to success. They are arguing that making strategy work is important and is more difficult than strategy making. Plans still fail or wither on the vine because of poor execution.
The striking aspect of all this is that managers apparently still don't know a great deal about the execution of strategy. It is still seen as a major problem and challenge.
Management literature has focused over the years primarily on parading new ideas on planning and strategy formulation in front of eager readers, but it has sorely neglected execution. Granted, planning is important. Granted, people are waking up to the challenge and are beginning to take execution seriously.
Still, it is obvious that the execution of strategy is not nearly as clear and understood as the formulation of strategy. Much more is known about planning than doing, about strategy making than making strategy work.
Is execution really worth the effort? Is execution or implementation truly a key to strategic success?
Consider one relatively recent comprehensive study of what contributes to company success. In this study of 160 companies over a five-year period, success was strongly correlated, among other things, with an ability to execute flawlessly. Factors such as culture, organizational structure, and aspects of operational execution were vital to company success, with success measured by total return to shareholders. Other recent works have added their support to this study's finding that execution is important for strategic success, even if their approach and analysis are less rigorous and complete.iii These works then, in total, support the view I've held for years:
Sound execution is critical—A focus on making strategy work pays major dividends
Despite its importance, execution is often handled poorly by many organizations. There still are countless cases of good plans going awry because of substandard execution efforts. This raises some important questions.
If execution is central to success, why don't more organizations develop a disciplined approach to it? Why don't companies spend time developing and perfecting processes that help them achieve important strategic outcomes? Why can't more companies execute or implement strategies well and reap the benefits of those efforts?
The simple answer, again, is that execution is extremely difficult. There are formidable roadblocks or hurdles that get in the way of the execution process and seriously injure the implementation of strategy. The road to successful execution is full of potholes that must be negotiated for execution success. This was the message two decades ago, and it still is true today.
Let's identify some of the problems or hurdles affecting implementation. Let's then focus on confronting the obstacles and solving the problems in subsequent chapters of this book.
Managers Are Trained to Plan, Not Execute
One basic problem is that managers know more about strategy formulation than implementation. They are trained to plan, not execute plans.
In most MBA programs I've looked at, students learn a great deal about strategy formulation and functional planning. Core courses typically hone in on competitive strategy, marketing strategy, financial strategy, and so on. The number of courses in most core programs that deal exclusively with execution or implementation? Usually none. Execution is most certainly touched on in a couple of the courses, but not in a dedicated, elaborate, purposeful way. Emphasis clearly is on conceptual work, primarily planning, and not on doing. At Wharton, there is at least an elective on strategy implementation, but this is not typical of many other MBA programs. Even if things are beginning to change, the emphasis still is squarely on planning, not execution.
Added to the lack of training in execution is the fact that strategy and planning in most business schools are taught in "silos," by departments or disciplines, and execution suffers further. The view that marketing strategy, financial strategy, HR strategy, and so on is the only "right" approach is deleterious to the integrative view demanded by execution.
It appears, then, that most MBA programs (undergrad, too, for that matter) are marked by an emphasis on developing strategies, not executing them. Bright graduates are well versed in strategy and planning, with only a passing exposure to execution. Extrapolating this into the real world suggests that there are many managers who have rich conceptual backgrounds and training in planning but not in "doing." The lack of formal attention to strategy execution in the classroom obviously must carry over to a lack of attention and consequent underachievement in the area of execution in the real world.
If this is true—if managers are trained to plan, not to execute—then the successful execution of strategy becomes less likely and more problematic. Execution is learned in the "school of hard knocks," and the pathways to successful results are likely fraught with mistakes and frustrations.
It also follows logically that managers who know something about strategy execution very likely have the advantage over their counterparts who don't.
If managers in one company are better versed in the ways of execution than managers in a competitor organization, isn't it logical to assume, all other things being equal, that the former company may enjoy a competitive advantage over the latter, given the differences in knowledge or capabilities? The benefits of effective execution include competitive advantage and higher returns to shareholders, so having knowledge in this area would clearly seem to be worthwhile and beneficial to the organization.
Let the "Grunts" Handle Execution
Another problem is that some C-level and other top-level managers actually believe that strategy execution or implementation is "below them," something best left to lower-level employees. Indeed, the heading of this section comes from an actual quote from a high-level manager.
I was working on implementation programs at GM, under the auspices of Corporate Strategic Planning. In the course of my work, I encountered many competent and dedicated managers. However, I also ran across a few who had a jaundiced view of execution. As one of these managers explained:
"Top management rightfully worries about planning and strategy formulation. Great care must be taken to develop sound plans. If planning is done well, management then can turn the plans over to the grunts whose job it is to make sure things get done and the work of the planners doesn't go to waste."
What a picture of the planning and execution process! The planners (the "smart" people) develop plans that the "grunts" (not quite as smart) simply have to follow through on and make work. "Doing" obviously involves less ability and intelligence than "planning," a perception of managerial work that clearly demeans the execution process.
The prevailing view here is that one group of managers does innovative, challenging work (planning) and then "hands off the ball" to lower levels for execution. If things go awry and strategic plans are not successful (which often is the case), the problem is placed squarely at the feet of the "doers," who somehow screwed up and couldn't implement a perfectly sound and viable plan. The doers fumbled the ball despite the planners' well-designed plays.
Every organization, of course, has some separation of planning and doing, of formulation and execution. However, when such a separation becomes dysfunctional—when planners see themselves as the smart people and treat the doers as "grunts"—there clearly will be execution problems. When the "elite" plan and see execution as something below them, detracting from their dignity as top managers, the successful implementation of strategy obviously is in jeopardy.
The truth is that all managers are "grunts" when it comes to strategy execution. From the CEO on down, sound execution demands that managers roll up their sleeves and pitch in to make a difference. The content and focus of what they do may vary between top and middle management. Nonetheless, execution demands commitment to and a passion for results, regardless of management level.
Another way of saying this is that execution demands ownership at all levels of management. From C-level managers on down, people must commit to and own the processes and actions central to effective execution. Ownership of execution and the change processes vital to execution are necessary for success. Change is impossible without commitment to the decisions and actions that define strategy execution.
The execution of strategy is not a trivial part of managerial work; it defines the essence of that work. Execution is a key responsibility of all managers, not something that "others" do or worry about.
Planning and Execution Are Interdependent
Even though, in reality, there may be a separation of planning and execution tasks, the two are highly interdependent. Planning affects execution. The execution of strategy, in turn, affects changes to strategy and planning over time. This relationship between planning and doing suggests two critical points to keep in mind.
Successful strategic outcomes are best achieved when those responsible for execution are also part of the planning or formulation process. The greater the interaction between "doers" and "planners" or the greater the overlap of the two processes or tasks, the higher the probability of execution success.
A related point is that strategic success demands a "simultaneous" view of planning and doing. Managers must be thinking about execution even as they are formulating plans. Execution is not something to "worry about later." All execution decisions and actions, of course, cannot be taken at once. Execution issues or problem areas must be anticipated, however, as part of a "big picture" dealing with planning and doing. Formulating and executing are parts of an integrated, strategic management approach. This dual or simultaneous view is important but difficult to achieve, and it presents a challenge to effective execution.
Randy Tobias had this simultaneous view of planning and doing. Even as he was formulating a new competitive strategy for his AT&T division, he was anticipating execution challenges. Competitive strategy formulation wasn't seen as occurring in a planning vacuum, isolated from execution issues. Central to the success of strategy was his early identification and appreciation of execution-related factors whose impact on strategic success was judged to be formidable. Execution worries couldn't be put off; they were part and parcel of the planning function.
In contrast, top management at a stumbling Lucent Technologies never had this simultaneous view of planning and execution.
When it was spun off from AT&T, the communications, software, and data networking giant looked like a sure bet to succeed. It had the fabled Bell Labs in its fold. It was ready to hit the ground running and formulate winning competitive strategies. Even as the soaring technology market of the late 1990s helped Lucent and other companies, however, it couldn't entirely mask or eliminate Lucent's problems.
One of the biggest problems was that management didn't anticipate critical execution obstacles as they were formulating strategy. Its parent, Ma Bell, had become bureaucratic and slow moving, and Lucent took this culture with it when it was spun off. The culture didn't serve the company well in a highly competitive, rapidly changing telecom environment, a problem that was not foreseen. An unwieldy organizational structure, too, was ignored during Lucent's early attempts at strategy development, and it soon became a liability when it came to such matters as product development and time to market. More agile competitors such as Nortel beat Lucent to market, signaling problems with Lucent's ability to pull off its newly developed strategies.
One thing that was lacking at Lucent was top management's having a simultaneous view of planning and doing. The planning phase ignored critical execution issues related to culture, structure, and people. The results of this neglect were extremely negative, only magnified by the market downturns in 2000 and thereafter.
Execution Takes Longer than Formulation
The execution of strategy usually takes longer than the formulation of strategy. Whereas planning may take weeks or months, the implementation of strategy is usually played out over a much longer period of time. The longer time frame can make it harder for managers to focus on and control the execution process, as many things, some unforeseen, can materialize and challenge managers' attention.
Steps taken to execute a strategy take place over time, and many factors, including some unanticipated, come into play. Interest rates may change; competitors don't behave the way they're supposed to (competitors can be notoriously "unfair" at times, not playing by our "rules"!), customers' needs change, and key personnel leave the company. The outcomes of changes in strategy and execution methods cannot always be easily determined because of "noise" or uncontrolled events. This obviously increases the difficulty of execution efforts.
The longer time frame puts pressure on managers dealing with execution. Long-term needs must be translated into short-term objectives. Controls must be set up to provide feedback and keep management abreast of external "shocks" and changes. The process of execution must be dynamic and adaptive, responding to and compensating for unanticipated events. This presents a real challenge to managers and increases the difficulty of strategy execution.
When the DaimlerChrysler merger was consummated in 1998, many believed that the landmark deal would create the world's preeminent carmaker. Execution since has been extremely difficult, however, and the six years after the merger have seen many new problems unfold. The company has faced one crisis after another, including two bouts of heavy losses in the Chrysler division, a series of losses in commercial vehicles, and huge problems with failed investments in an attempted turnaround at debt- burdened Mitsubishi Motors.iv Serious culture clashes also materialized between the top-down, formal German culture vs. the more informal and decentralized U.S. company. Angry shareholders at the 2004 meeting created and mirrored internal dissent and issued an ultimatum to Jurgen Schrempp to turn things around fast.
The six years after the merger presented problems unforeseen at the time of the merger. Execution always takes time and places pressure on management for results. But the longer time needed for execution also increases the likelihood of additional unforeseen problems or challenges cropping up, which further increases the pressure on managers responsible for execution results. The process of execution is always difficult and sometimes quarrelsome, with problems only exacerbated by the longer time frame usually associated with execution.
Execution Is a Process, Not an Action or Step
A point just made is critical and should be repeated: Execution is a process. It is not the result of a single decision or action. It is the result of a series of integrated decisions or actions over time.
This helps explain why sound execution confers competitive advantage. Firms will try to benchmark a successful execution of strategy. However, if execution involves a series of internally consistent, integrated activities, activity systems, or processes, imitation will be extremely difficult, if not impossible.
Southwest Airlines, for example, does many things differently than most large airlines. It has no baggage transfer, serves no meals, issues no boarding passes, uses one type of airplane (reducing training and maintenance costs), and incents fast turnaround at the gate. It has developed capabilities and created a host of activities to support its low-cost strategy. Other airlines are hard pressed to copy it, as they're already doing everything Southwest isn't. They're committed to different routines and methods. Copying Southwest's execution activities, in total, would involve difficult trade-offs, markedly different tasks, and major changes, which complicates the problem of developing and integrating new execution processes or activities. This is not to say that competitors absolutely cannot copy Southwest; indeed, other low-cost upstarts and traditional airlines are putting increasing competitive pressure on Southwest. This is simply arguing that such imitation is extremely hard to do.
Execution is a process that demands a great deal of attention to make it work. Execution is not a single decision or action. Managers who seek a quick solution to execution problems will surely fail in attempts at making strategy work. Faster is not always better!
Execution Involves More People than Strategy Formulation DOES
In addition to being played out over longer periods of time, strategy implementation always involves more people than strategy formulation. This presents additional problems. Communication down the organization or across different functions becomes a challenge. Making sure that incentives throughout the organization support strategy execution efforts becomes a necessity and, potentially, a problem. Linking strategic objectives with the day-to-day objectives and concerns of personnel at different organizational levels and locations becomes a legitimate but challenging task. The larger the number of people involved, the greater the challenge of effective strategy execution.
I once was involved in a strategic planning project with a well-known bank. Another project I wasn't directly involved in had previously recommended a new program to increase the number of retail customers who used certain profitable products and services. A strategy was articulated and a plan of execution developed to educate key personnel and to set goals consistent with the new thrust. Branch managers and others dealing with customers were brought in to corporate for training and to create widespread enthusiasm for the program.
After a few months, the data revealed that not much had changed. It clearly was business as usual, with no change in the outcomes that were being targeted by the new program. The bank decided to do a brief survey to canvas customers and branch personnel in contact with customers to determine reactions to the program and see where modifications could be made.
The results were shocking, as you've probably guessed. Few people knew about the program. Some tellers and branch personnel did mention that they had heard about "something new," but nothing different was introduced to their daily routines. A few said that the new program was probably just a rumor, as nothing substantial had ever been implemented. Others suggested that rumors were always circulating, and they never knew what was real or bogus.
Communication and follow-through for the new program were obviously inadequate, but the bank admittedly faced a daunting task. It was a big bank. It had many employees at the branch level. Educating them and changing their behaviors was made extremely difficult by the bank's size. Decentralized branch operations ensured that problems were always "popping up" in the field, challenging employees' attention and making it difficult to introduce new ideas from corporate to a large group of employees.
In this example, the number of people who needed to be involved in the implementation of a new program presented a major challenge to the bank management. One can easily imagine the communications problems in even larger, geographically dispersed companies such as GM, IBM, Deutsche Post, GE, Exxon, Nestlé, Citicorp, and ABB. The number of people involved, added to the longer time frames generally associated with strategy execution, clearly creates problems when trying to make strategy work.
Additional Challenges and Obstacles to Successful Execution
The issues previously noted are serious, potentially impeding execution. Yet there are still other challenges and obstacles to the successful implementation of strategy. These need to be identified and confronted if execution is to succeed.
To find out what problems managers routinely encounter in the execution of strategy, I developed two research projects to provide some answers. My goal was to learn about execution from those most qualified to give me the scoop—managers actually dealing with strategy execution. I could have relied solely on my own consulting experiences. I felt, however, that a more widespread approach—surveys directed toward many practicing managers—would yield additional positive results and useful insights into execution issues.
Wharton-Gartner Survey
This was a joint project involving the Gartner Group, Inc., a well-known research organization, and me, a Wharton professor. This is a relatively recent project, with data collection and analysis in 2003.
The purpose of the research, from the Gartner introduction, was as follows:
"To gain a clear understanding of challenges faced by managers as they make decisions and take actions to execute their company's strategy to gain competitive advantage."
The research instrument was a short online survey sent to 1,000 individuals on the Gartner E-Panel database. The targeted sample comprised managers who reported that they were involved in strategy formulation and execution. Complete usable responses were received from a sample of 243 individuals, a return rate that is more than sufficient for this type of research. In addition, the survey collected responses to open-ended questions to provide additional data, including explanations of items covered in the survey instrument.
There were 12 items on the survey dealing with obstacles to the strategy-execution process. They focused on conditions that affect execution and were originally developed in conjunction with a Wharton Executive Development Program on strategy implementation. Let's briefly consider this program and the survey it generated, and then we'll look at the items involved.
Wharton Executive Education Survey
I have been running an executive program on strategy implementation at Wharton a number of times a year for about 20 years. I have met hundreds of managers with responsibility for strategy execution, many of whom confronted major hurdles in their attempts to execute strategy successfully. As part of the formal program, managers brought their real-world problems with them. Time was allocated to air out the problems and focus on their solution in the course of the program.
Based on these presentations and my discussions with managers, I developed a list of execution hurdles or challenges to the execution process. I discussed this list with managers, asking them to rank the problems or obstacles in order of importance. Over time, items were modified, added to, or deleted from the list until I settled on 12 items that made sense and had "face" validity. These items, managers felt, clearly had a relationship to strategy execution.
Using the 12 items to gather opinions over a large number of executive education programs provided me with responses from a sample of 200 managers. They provided a ranking of the items' impact on strategy execution. Open-ended responses to questions about execution issues, problems, and opportunities were also collected over time, providing additional valuable data. Coupled with the data collected in the Wharton-Gartner Survey using the same 12 items, I had complete responses from more than 400 managers involved in strategy execution who told me about their execution problems and their solutions to them.
Panel Discussions
In subsequent Wharton executive programs after the data collection, I held informal panel discussions to collect additional insights into what the data were actually saying. I asked managers why, in their opinion, people responded the way they did. "What are the surveys telling us about execution problems or issues?" was the predominant question.
These discussions forced managers to read between the lines and interpret the formal data. They also enabled me to probe into what could be done to overcome the obstacles and achieve successful execution outcomes. Insights were collected, then, not only on the sources of execution problems but their solutions as well.
The surveys and follow-up discussions provided data right from "the horse's mouth." These were not idiosyncratic data, the opinions or observations of a few managers or CEOs who, against all odds, "did it their way." The number of managers providing answers, coupled with an emphasis on real problems and solutions, added a strong sense of relevance to the opinions gathered about strategy execution.
The Results: Opinions About Successful Strategy Execution
Table 1.1 shows the results of the surveys. The 12 items are shown, with the respective rank orderings for the Wharton-Gartner Survey and the Wharton Executive Education Survey. (The actual questionnaire, for those interested, appears in the appendix to this book.)
Table 1.1 Obstacles to Strategy Execution
Obstacles
Wharton-Gartner Survey (n = 243)
Rankings Wharton-Executive Education Survey (n = 200)
Either Survey Top 5 Rankings
1. Inability to manage change effectively or to overcome internal resistance to change
1
1
3
2. Trying to execute a strategy that conflicts with the existing power structure
2
5
3
3. Poor or inadequate information sharing between individuals or business units responsible for strategy execution
2
4
3
4. Unclear communication of responsibility and/or accountability for execution decisions or actions
4
5
3
5. Poor or vague strategy
5
2
3
6. Lack of feelings of "ownership" of a strategy or execution plans among key employees
5
8
3
7. Not having guidelines or a model to guide strategy- execution efforts
7
2
3
8. Lack of understanding of the role of organizational structure and design in the execution process
9
5
3
9. Inability to generate "buy-in" or agreement on critical execution steps or actions
7
10
10. Lack of incentives or inappropriate incentives to support execution objectives
9
8
11. Insufficient financial resources to execute the strategy
11
12
12. Lack of upper-management support of strategy execution
12
11
It is obvious that there is strong agreement on some of the items. The importance of managing change well, including cultural change, is first on both surveys. Inability to manage change effectively clearly is seen as injurious to strategy-execution efforts. Although culture was not mentioned explicitly in the item, the open-ended responses and panel discussions placed culture at the core of many change-related problems. To many of the respondents, "change" and" "culture change" were synonymous.
Trying to execute a strategy that conflicts with the prevailing power structure clearly is doomed to failure, according to the managers surveyed. Confronting those with influence at different organizational levels who disagree with an execution plan surely will have unhappy results in most cases.
Poor sharing of information or poor knowledge transfer and unclear responsibility and accountability also can doom strategy-execution attempts. These two items suggest that attempts at coordination or integration across organizational units can suffer if unclear responsibilities and poor sharing of vital information needed for execution is the rule. Again, this makes sense because complex strategies often demand cooperation and effective coordination and information sharing. Not achieving the requisite knowledge transfer and integration certainly cannot help the execution of these strategies.
There is also agreement on the unimportance of some of the items. Both survey groups clearly agreed that a lack of upper-management support and insufficient financial resources were not major problems for strategy execution in their organizations. These results were extremely surprising, so I pursued them further.
Presenting these results to managers in the panel discussions helped clarify the findings. Basically, the story is that top-management support and adequate financial resources are absolutely critical, but that support is primarily manifested during a planning stage, when deciding on execution plans and methods. Commitment to plans of actions and commitment of resources occur as part of planning, so they are "givens," predetermined inputs to the execution process. Execution plans and activities already have the blessing and approval of top management, and commitment of the requisite resources has already been made. Occasionally, top management may renege on its support during execution, but managers said that this was the exception, not the rule.
This explains, then, why the items dealing with financial support and top management buy-in were rated as only minor execution problems, not serious obstacles. The issues related to support and commitment had already been confronted and resolved, according to the managers interviewed. They definitely are saying, however, that had the blessing of top management not been attained, execution success would be far less probable, if not impossible, to achieve. Given that buy-in and financial support were a reality and in place, the focus could turn to other execution tasks and activities.
It is important to note, too, that top management and financial support are seen by managers as different issues than the power issue previously reported as significant for execution. Power has a broader and more pervasive influence than financial allocations, although there clearly is some relationship. Even after the approval of an execution project and the attendant budget allocations, power and social influence come into play and can affect execution. Managers were adamant in their opinion that, while power certainly includes elements of hierarchy and budgeting, power differences are deeper, more complex, and permeate the entire organization, regardless of hierarchical level.
There are some differences between managers in the two surveys on a few of the items. Having a "poor or vague strategy," for example, was ranked as the second biggest execution obstacle by the Wharton Executive Education group, but it was ranked fifth by the Wharton-Gartner managers. "Not having a model or guidelines to guide strategy execution efforts" was ranked as the second biggest obstacle by the Executive Education group but was seventh in the Wharton-Gartner Survey. There were also small perceived differences on the importance of organizational structure or design in the execution process.
Why the differences? It may be due in part to the makeup of the samples in the two surveys. The Wharton-Gartner Survey tapped the opinions of managers, some of whom, we can infer, were successful in execution and some of whom weren't. Surely, some of the individuals sampled were successful in their implementation efforts, meaning they weren't having problems.
In contrast, many of the managers in the Executive Education Survey attended the Wharton program because they were having actual execution problems. They came to the program to help solve them and to overcome real implementation obstacles. Their focus was clearly on righting or avoiding execution mistakes. They could see problems, say, with organizational structure or not having a model to guide execution efforts, whereas managers in the Wharton-Gartner Survey may have already overcome those problems and, hence, ranked them lower in importance. Whatever the reason, there were some differences between the two groups.
Poor Execution Outcomes
There was strong agreement between the research groups on the impact of the execution problems on performance results. In addition to "not achieving desired execution outcomes or objectives," managers in the surveys ranked a few additional results of poor execution methods as being highly problematical. These include the following:
· Employees don't understand how their jobs contribute to important execution outcomes.
· Time and money are wasted because of inefficiency or bureaucracy in the execution process.
· Execution decisions take too long to make.
· The company reacts slowly or inappropriately to competitive pressures.
These are not trivial issues. Execution problems can cost the organization dearly. Time and money are wasted, and a company can face serious competitive setbacks because of an inability to respond to market or customer demands. Execution problems must be addressed, but which ones and in what order?
Making Sense of the Data and Going Forward
Given the responses from managers just noted, what does all this mean? What really affects execution? What should we focus on in subsequent chapters of this book?
The first thing I did to answer these questions was to include all items that were ranked fifth or higher in either or both samples of managers. If either or both groups felt that strongly about an execution obstacle, I felt that the item deserved consideration. The far right-hand column in Table 1.1 shows checkmarks by these items.
Second, I looked to the open-ended responses, panel discussions, and my own notes taken during the Wharton programs and panel discussions to flesh out the items in Table 1.1. This proved to be enlightening. I determined easily that "managing change" included managing cultural change to many of the respondents, a point emphasized earlier. The impact of culture itself on execution and company performance was often emphasized, even though culture was not one of the 12 survey items. Managers basically said that culture was an underlying explanatory element in responses dealing with incentives, power, and change, items that were included in the survey. Some argued strongly for the importance of culture as a separate factor affecting execution success.
From these discussions and open-ended responses, I learned why there were many strong comments for certain items, such as the need for an execution model or plan. If a plan existed to guide execution efforts in their company, managers did not rank it as a significant problem. If such a plan didn't exist, it was considered to be a major shortcoming that gave rise to yet additional problems in the execution process.
I read and heard the lamentations of many about execution problems that arise from poor strategy or inadequate planning. Vague strategies cannot easily be translated into the measurable objectives or metrics so vital to execution. Unclear corporate and business plans inhibit integration of objectives, activities, and strategies between corporate and business levels. Poor strategies result in poor execution plans. Points such as these derived from the panel discussions and open-ended responses provided helpful insights into the meaning of the survey items and the factors affecting execution.
Finally, managers told me about the importance of controls or feedback in the execution process. What they were emphasizing is the importance of strategy reviews that provide feedback about performance and allow for changes in execution methods. These points are consistent with the importance of managing change and organizational adaptation, issues already discussed, but the managers' additional emphasis on the importance of controls, feedback, and change were duly noted.
After carefully examining all the data, I then tried to "cluster" the items logically to see which obstacles to successful execution seemed to "stick together." Here is my take on what the data seem to be saying.
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:
1. Developing a model to guide execution decisions or actions
2. Understanding how the creation of strategy affects the execution of strategy
3. Managing change effectively, including culture change
4. Understanding power or influence and using it for execution success
5. Developing organizational structures that foster information sharing, coordination, and clear accountability
6. Developing effective controls and feedback mechanisms
7. Knowing how to create an execution-supportive culture
8. Exercising execution-biased leadership
Having a Model or Guidelines for Execution
Managers need a logical model to guide execution actions.
Without guidelines, execution becomes a helter-skelter affair. Without guidance, individuals do the things they think are important, often resulting in uncoordinated, divergent, even conflicting decisions and actions. Without the benefit of a logical approach, execution suffers or fails because managers don't know what steps to take and when to take them. Having a model or roadmap positively affects execution success.
Strategy is the Primary Driver
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.
Good people are important for execution. 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. Strategy is critical. It drives the development of capabilities and which people with what skills sit in what seats on the bus. If one substitutes "jet airplane" for "bus" above—given today's high-flying, competitive markets—the importance of strategy, direction, and the requisite critical skills and capabilities necessary for success are emphasized even more.
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. What aspects of strategy and planning impact execution outcomes the most is a critical question that needs answering. Another critical question deals with the relationship between corporate- and business-level strategies and how their interaction affects execution outcomes.
Managing Change
Execution or strategy implementation often involves change. Not handling change well will spell disaster for execution efforts.
Managing change means much more than keeping people happy and reducing resistance to new ideas and methods. It also means knowing the tactics or steps needed to manage the execution process over time. Do managers implement change sequentially, bit by bit, or do they do everything at once, biting the bullet and implementing change in one fell swoop? The wrong answer can seriously hamper or kill execution efforts. Knowing how to manage the execution process and related changes over time is important for execution success.
The Power Structure
Execution programs that contradict the power or influence structure of an organization are doomed to failure. But what affects power or influence? Power is more than individual personality or position. 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.
Coordination and Information Sharing
These are vital to effective execution. Knowing how to achieve coordination and information sharing in complex, geographically dispersed organizations is important to execution success. 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.
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.
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. Knowing what does affect cultural change is central to execution success.
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.
Leadership affects how organizations respond to all of the preceding execution challenges. It is always at least implied when discussing what actions or decisions are necessary to make strategy work. A complete analysis of execution steps and decisions usually defines what good leadership is and how it affects execution success, directly or indirectly.
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. There is an emergent aspect of strategy and execution, as organizations learn and adapt to environmental changes over time. Adaptation and change depend on effective execution methods.
As important as controls and feedback are, they often don't work. Control processes fail. They don't identify and confront the brutal facts underlying poor performance. Adaptation is haphazard or incomplete. Understanding how to manage feedback, strategy reviews, and change is vital to the success of strategy execution.
These are the issues that impact the success or failure of strategy-execution efforts. Coupled with the issues previously mentioned (longer time frames, involvement of many people, and so on), these are the areas that present formidable obstacles to successful execution if they are not handled properly. They also present opportunities for competitive advantage if they are understood and managed well.
The last words, "managed well," hold the key to success. Knowing the obstacles or potential opportunities is necessary but not sufficient. The real issue is how to deal with them to generate positive execution results. The major significant point or thrust of this chapter is that execution is not managed well in most organizations. The remainder of this book is dedicated to correcting this woeful situation.
The Next Step: Developing a Logical Approach to Execution Decisions and Actions
So where and how does one begin to confront the issues just noted? Which execution problems or opportunities should managers consider first? What decisions or actions come later? Why? Can an approach to strategy execution be developed to guide managers through the maze of obstacles and problematical issues just identified?
The next chapter begins to tackle these questions. It presents an overview, a conceptual framework to guide execution decisions and actions. Managers need such a model because they routinely face a bewildering set of decisions about a host of strategic and operating problems, including those dealing with execution. They need guidelines, a "roadmap" to steer them logically to execution success.
Priorities are also needed. 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.
Having a model, finally, also facilitates a "simultaneous" view of planning and doing. All execution actions cannot be taken at once; some must precede others logically. A good overview or model, however, provides a "big picture" that enables managers to see and anticipate execution problems. Execution is not something that others should worry about later. Planning requires anticipating early on what must be done to make strategy work.
Development of a logical overview is a step that has been ignored by practitioners, academics, and management consultants alike. Execution problems or issues typically have been handled separately or in an ad-hoc fashion, supported by a few anecdotes or case studies. This is not sufficient. Execution is too complex to be approached without guidelines or a roadmap.
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. They need guidelines, a way to see and approach execution and the logical order of the key variables involved. A roadmap is needed to guide them through the minefields of bad execution decisions and actions. Managers require a "big picture" as well as an understanding of the "nitty-gritty," the key elements that comprise the big picture.
The next chapter tackles the essential task of providing this overview by showing the order and logic of key execution decisions. It begins to confront the obstacles identified in this chapter as it lays out this sequence of decisions or actions. These decisions and actions simultaneously define the areas needing additional attention in later chapters of this book. Having a model of execution is vital to making strategy work, so let's take this important and necessary step.
Summary
· Execution is a key to strategic success. Most managers, however, know a lot more about strategy formulation than execution. They know much more about "planning" than "doing," which causes major problems with making strategy work.
· Strategy execution is difficult but worthy of management's attention across all levels of an organization. All managers bear responsibility for successful execution. It is not just a lower-level task.
· Part of the difficulty of execution is due to the obstacles or impediments to it. These include the longer time frames needed for execution; the need for involvement of many people in the execution process; poor or vague strategy; conflicts with the organizational power structure; poor or inadequate sharing of information; a lack of understanding of organizational structure, including information sharing and coordination methods; unclear responsibility and accountability in the execution process; and an inability to manage change, including cultural change.
· Knowing execution hazards (opportunities) is necessary but not sufficient. For successful execution to occur, managers need a model or a set of guidelines outlining the entire process and relationships among key decisions or actions. A "roadmap" is needed to help with the order of execution decisions as managers confront obstacles and take advantage of opportunities.
posted by Vivek Hattangadi | 4:37 AM
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