Only 8% of Leaders are Good at Both Strategy and Execution
This situation replays itself severally in many organizations across the world. The organization spends a lot of time, money and effort conducting market research.
The research is excellent, and the data from the research is used to come up with a brilliant strategy that the entire board falls in love with.
The CEO signs off the strategy, which is then communicated to the rest of the organization. Everyone unanimously agrees that they all got it. It’s all systems go!
Once the strategy is launched, however, things start going awry. Nothing goes as expected, and most of the key performance indicators remain static, some even take a dip. A good example of this is Nokia. Starting from the late 90’s to the early 2000’s, Nokia was the leading mobile phone Brand.
Five years before the launch of the iPhone, Nokia was ready to launch its own touch operated, internet-connected device with a large display. They knew where the mobile phone market was headed and they had a strategy to dominate that market, yet they were unable to maintain their dominant market position.
When Apple released their first iPhone in 2007, they toppled Nokia from the dominant position and started a decline that ended with Nokia being sold to Microsoft in 2013. Why does this happen?
The problem here is something known as a strategy-execution gap, a big black hole that yawns menacingly between strategy and execution. Far too many visions get swallowed by this unforgiving black hole. One survey found out that executives claim that 40% of their strategy’s potential value gets lost due to poor execution.
For organizations to remain successful, its leaders need to excel at both strategy and execution. They need to not only know how to give a grand promise to their customers and investors, but how to deliver on this promise as well. A brilliant strategy is good for nothing if the execution is poor.
Unfortunately, most organizations continue to treat strategy and execution as separate elements. Very often, you will find different areas of the company managing strategy and execution. The CEO, presidents and other senior management team are typically in charge of strategy, while the execution bit is left to the functional leaders and individual employees.
Separating the two activities creates a risk that the important activities and processes that drive the strategy might not get executed properly, which then undermines the importance of the risk.
What is worrying is that a 2013 survey by Strategy& found that only 16% of executives excel at either strategy or execution. Even more saddening is that only half of these (8%) are good at both strategy and execution.
Great business leaders realize the importance of strategy and execution and treat them as two complimentary elements that must work together in order to achieve success.
Take the case of Steve Jobs, who was recalled to Apple in 1997 in an attempt to turn around the fortunes of the rapidly declining tech giant.
Jobs came with a strategy on how to return the company to profitability, but he didn’t just share a strategy and leave it at that. He was deeply involved in the execution of the strategy, cutting down on multiple products that were in development and even convincing Microsoft to invest $150 million in Apple, despite the two companies being rivals.
The good news is that, while only few executives are exceptionally good at both strategy and execution, this is a skill that can be learnt and improved.
If you want to improve your company’s performance and gain an edge over your competitors, here are some few tips on how to excel at both strategy and execution.
COMMIT TO AN IDENTITY
As a leader, you first need to figure out what your organization’s identity is, what the organization stands for.
Once you define this identity, commit to it and ensure everything within the organization, including your strategy, is aligned to this identity.
Understand your organization’s distinctive capabilities and its unique value proposition, then ensure that your strategy is in line with these key differentiators.
Avoid the temptation to chase multiple areas and markets where you have no chance of winning. A good example of a company that does this well is IKEA.
IKEA grew from a single store in a Swedish forest to become the world’s largest furniture retailer with a net worth of $58.7 billion by remaining committed to its identity of “creating a better everyday life for many people.” Every undertaking by the company, from its frugal business model to its thorough research into how people actually live at home, is meant to help the company deliver on this promise.
Another great example of a company that is well committed to its identity is Apple. Apple knows that they can’t do everything and do it well. Because of this, they say no to a number of great ideas and focus instead on opportunities that are in line with their identity.
They understand that any project they undertake either contributes to the successful execution of their strategy or takes away vital resources, therefore they opt to focus only on projects that contribute to the successful execution of their strategy.
Once you define your identity and come up with a strategy that it aligned with this identity, you need to spend time translating this strategy into clear actionable goals that can be tracked and measured. According to the survey by Strategy&, high performing business leaders spend 20% more time translating their strategy into actionable goals compared to low performing business leaders.
You also need to ensure that the people who are in charge of delivering the strategy are clear on the company’s identity, the strategy and the specific actions they need to take in order for successful execution of the strategy.
You should communicate frequently and make sure that a consistent message is delivered downward throughout the organization and that everyone knows the deliverables that are required in order for the strategy to be achieved.
High performing business leaders spend 12% more time ensuring that the strategy and deliverables are clear to everyone within the entire organization compared to low performing leaders.
TRANSLATE THE STRATEGY INTO SHORT TERM ACTIONS AND PROCESSES
A strategy is a grand, long term plan. Without turning the strategy into everyday actions and processes, it is more likely that your grand dreams will evaporate into thin air.
You need to ensure that there is a clear link between day to day (short term) activities and the overall strategy.
For instance, if your strategy is to capture a new market, some of the actions that you might need to accomplish in order to successfully achieve this strategy might include increasing your marketing activities in that market segment, setting up an office in the location for geographically targeted markets, buying out a competitor or merging with them, and so on.
Asking yourself the below questions can make it easier for you to translate your strategy into everyday actions and processes.
- Who will be involved? What team will handle which work? Who will be the team leaders?
- Are there any visible programs, such as training programs, new processes or new technologies that need to be built in order for the vision to be achieved?
- What impact will the strategy have on other areas of the organization? How can we enhance this (for positive impacts) or mitigate against it (for negative impacts)?
- What are the personal goals for each manager or employee?
- What resources will be required in order to execute the strategy? Do we need more time, more financial resources, more equipment or more people?
- How will we track and ensure that everyone is diligently following through with what has been decided?
As a leader, you need to be deeply involved in this process. You need to provide any coaching and support that your team might need in order to achieve the desired results. Follow up regularly to ensure that everyone meets their targets and deadlines. If you notice that some things are not working or going according to plan, be ready to step in and readjust the rudder.
You should also be ready to give immediate corrective feedback on your team’s performance.
The survey by Strategy& found that high performing business leaders spend 25% more time establishing the short term activities and processes required for successful execution of the strategy and 14% more time checking their progress and readjusting their course compared to low performing business leaders.
LEVERAGE YOUR ORGANIZATIONAL CULTURE
Company culture is an often under-appreciated and under-utilized element within organizations.
When coming up with a strategy, many organizations see company culture as an impediment rather than an asset. Smart leaders, however, know that they can leverage their organizational culture to help in the implementation of strategy.
They ensure that the strategy is aligned with the core values that define organizational culture and that they take talent management seriously.
They know that strategies cannot be successfully implemented if they do not align with the company culture. This is well encapsulated in the words of Peter Drucker, who famously that ‘organizational culture eats strategy for breakfast’.
Take a look at your company’s culture. What are your company’s core values? Do your employees feel a sense of community and camaraderie between each other? Is there a flow of efficient communication within the organization?
Are your employees committed to learning? What behaviors and practices do you associate with your company? Does your strategy align with your company’s core values? How can you take advantage of the behaviors and practices associated with your organization to drive the strategy?
Do you have forums for employees to candidly share their feedback on what works and what does not? Answering these crucial questions will help you to leverage your organizational culture to drive execution.
In leveraging your organizational culture, you also need to think about your role as a CEO. Many CEOs often forget that company culture starts with them. Your staff sees how you incorporate your personal values in your daily activities and emulate it. Therefore, if you want to promote an organizational culture that encourages strategy execution, don’t forget that it starts with you.
FOCUS ON STRATEGIC PRIORITIES AND CUT COSTS TO GROW STRONGER
Leaders who excel at strategy and execution have a laser focus. They know that the main purpose of a strategy is not to create goals, but to help them make choices. As a leader, you should use your strategy as a guide that helps you to identify the few key processes that have the biggest impact on the success of your organization.
Once you identify these key processes, you can then focus all your attention on them and forget everything else. For instance, I have noticed that when organizations want to improve revenue, many leaders decide to simply cut costs across the board.
Smart leaders, on the other hand, totally cut back the costs on process and projects that do not matter and double down on projects that hold the highest potential.
A good example of a company that did this is Lego. In 2004, Lego was losing a million dollars a day. A decade later, in 2015, it had claimed its position as the world’s largest target company. How did it do this?
Lego was able to turn its fortunes by marshalling its resources strategically and cutting costs to grow. In 2004, Lego had investments in multiple industries, including areas like theme parks and clothing, yet it had no chance at dominating in these industries.
Instead of sticking to the fallacy of sunk cost, Lego decided to do away with these businesses and focus on its core business, which is making and selling toys. By doing so, Lego was able to get back to profitability.
Another good example of a company that did this was Apple in 1997. When Steve Jobs came back to Apple in 1997, the company had over 18 different products, yet its sales were dismal.
Realizing that the company was expending a lot of time and resources on products that were not even profitable, Steve Jobs decided to kill over 70% of the company’s products, including the Newton, the Pippin, The Twentieth Anniversary Mac, The Cube and several Mac Clones.
Entire departments were dissolved, and the remaining resources were deployed to the four most important products. Within a year, a company that was almost going bankrupt posted $309 million in profits.
As a leader, you should use your strategy to allocate resources strategically. Deploy significant amounts of resources (people, time and finances) to the most important projects and processes and forget about everything else. Spending your resources on too many priorities is like trying to juggle too many balls at once.
Sooner or later, all of them will end up on the ground. This view is supported by Strategic&’s survey, which found that high performing leaders spend 54% more time defining strategic projects and allocating resources accordingly. They are also 36% more effective at prioritizing these important projects.
SHAPE THE FUTURE
In today’s world where change, innovation, technological change, and disruption happens faster than you can predict, business agility has become all the rage.
Business pride themselves on being able to quickly respond to changes within the market. Smart leaders, however, know that simply being agile and responding to external changes as quickly as possible is not enough.
That puts them in a reactive mode. Instead of constantly reacting to external changes, smart leaders shape the future by determining the change they want to see and then moving forward to create it.
Starbucks is a great of a company that shaped its future. Starbuck’s customers thought they just wanted a place to have a cup of coffee.
Starbuck’s CEO, Howard Schultz, however, knew they wanted more than coffee. He knew they wanted a place of conviviality beyond the home and the workplace, a place they could gather and connect with each other in a friendly, lively and enjoyable atmosphere.
Instead of waiting for customer attitudes to change from looking for just coffee to ‘coffee and community’, Schultz went ahead and created this new concept and then dominated the new industry.
Once again, Steve Jobs provides another good example on how to shape the future instead of reacting to external changes. He is quoted to have said that people don’t know what they want until you show it to them.
He opined that it is the job of companies to figure out what customers want long before the customers do and then create products that they never knew they wanted but can’t live without after using them.
By introducing the iPod, the iPhone and the iPad, Apple shaped not only its future, but that of the world.
Before launching these products, the masses had never even imagined about such products, yet today, people can’t live without them.
To be an effective leader who helps shape the future, you need to become proactive. You also need to come up with proactive strategies that give your organization the freedom to chart its own path instead of constantly responding to situations that may well be out of control.
You should learn how to anticipate any challenges and obstacles that might hinder the implementation of your strategy and how to anticipate customer needs and meet them even before they are expressed. Similarly, you should learn how to anticipate changes and trends within the market and capitalize on them before they become ubiquitous.
According to the survey by Strategic&, high performing leaders that successfully shape the future instead of constantly reacting to external changes spend 25% more time engaging with crucial stakeholders, identifying their needs and coming up with ways to meet them.
They also spend 13% more time thinking proactively and planning about the future and refining their strategy. They spend more time anticipating bottlenecks and challenges and positioning their organizations for future success.
One of the major reasons why strategic plans fail is rigidity on the part of business leaders.
Many leaders often confuse successful strategy execution with following the plan. Unfortunately, like the popular military saying goes, no battle plan survives contact with the enemy.
It does not matter how well planned your strategy is, once you start implementing it, it is inevitable that you will face some obstacles and challenges along the way. The most successful leaders are those who know the importance of flexibility.
Instead of following rigid plans that have been rendered obsolete by the obstacles, they reach quickly and readjust their plans to maneuver around the obstacles, while at the same time ensuring they don’t lose sight of the long term goal.
Leaders who excel at both strategy and execution are great at contingency planning.
They identify all the assumptions that their strategy is based on and come up with specific action plans to help them adjust their course in case any of these assumptions changes. Caterpillar provides a good example of business leaders that value flexibility.
In 2005, way before the global financial crisis of 2007-2008, Caterpillar’s then CEO Jim Owens asked all the division heads to come up with contingency plans in case of a market crash. By then, business was booming for Caterpillar and its competitors. Demand was at an all-time high. No one was contemplating an economic downturn.
While the move was not a popular one, the division heads nevertheless came up with contingency plans for a downturn. When the recession actually hit, the contingency plans were put into effect.
While its competitors suffered huge drops in revenue, Caterpillars profits were not majorly affected. By the time the economy was rising out of the Great Recession in 2010, Caterpillar stocks were the best performing in the Dow Jones industrial average.
If you want to set your organization apart from the thousands, perhaps millions of businesses whose grand visions get swallowed up when it comes to execution, you need to stop treating strategy and execution as separate activities and start thinking of them as crucial activities that should go hand in hand.
Remember, the key to nailing both strategy and execution is committing to an identity, translating your strategy into short term activities and processes, leveraging your organizational culture, focusing on strategic priorities, shaping the future and adopting flexibility.
If you follow these six tips, you will be on your way to joining the elite 8% of business leaders who are good at both strategy and execution.