Nearly half of all strategy initiatives fail to meet expectations.
When we discuss this harsh reality with CEB Strategy members, the majority (60%) point to poor execution as the reason for the failure, not the strategy itself.
Given how difficult it can be to encourage senior executive support for the right strategic initiatives in the first place, it makes it even more important that the implementation goes as smoothly as possible.
Two factors in today’s business environment may contribute to this worrisome gap between strategy and execution:
Increasing pressure to grow: With the economic climate improving, companies are expecting a near 40% increase in new growth initiatives across their portfolios.
Heavier workload: After the extreme staff cuts of the recession, many employees have had to pick up extra tasks, reducing their time for growth efforts.
A Firm Foundation – The Five Pillars
There are five pillars that will help corporate strategists bridge the strategy-to-execution gap and make the most of their firm’s next big bet.
Strategy formulation: Corporate history is littered with companies that hit severe growth stalls because they were following strategies based on flawed assumptions about customers, competitors, or internal capabilities. A lack of clarity about strategic assumptions can lead to unanticipated “surprises” during execution and reduce managers’ ability to monitor uncertainties and respond accordingly.
To get formulation right, strategists must be sure to clarify and test relevant assumptions when developing a strategic vision. This includes creating mechanisms to both identify and challenge assumptions from the executive team. Doing so will help avoid any surprises that can derail implementation.
Planning: Most large companies conduct strategic planning, spending millions of dollars and hundreds of employee hours each year. Despite these efforts, strategic goals are often unclear or misaligned, creating conflict and resourcing challenges that limit execution success.
The planning process should focus on vertical alignment between the corporate center and the business units (BUs), and horizontal alignment across BUs and functions. When crafting strategic plans, strategists should limit confusion about priorities by clarifying the objectives and roles for those in the business tasked with execution.
Performance management: Markets can shift between a firm’s strategic planning cycles, invalidating assumptions and the strategic plan. Without an effective system to monitor the performance of the strategy, organizations can get caught executing the wrong plan for months or even years before realizing the need for an adjustment.
Performance management systems enable timely course-correction through monitoring project and business performance. Hold partners accountable for key metrics goals and review dashboards regularly. Strategy teams can even schedule reviews of the strategic plan itself to determine whether underperformance was the result of a bad assessment of the market, the wrong strategy, or poor execution.
Communication: How organizations communicate and engage employees in new strategies is important for directing implementation. More than 65% of employees do not understand their role when new initiatives are launched. The lack of a cohesive communication strategy can reduce motivation and spark resistance to change, both of which can create inefficiencies and increase the cost of execution.
It’s important to engage key employees with targeted communications to win their support for the strategy. Use forums to generate a two-way dialogue or take a page from the company’s PR playbook to keep employees on board and engaged with achieving the company’s objectives.
Organizational capacity: While formulation, planning, performance metrics, and communication are all critical pillars for strategy execution, many organizations overemphasize the use of these tactics to encourage good implementation.
They fail to recognize the importance of unlocking capacity in the organization to allow for the actual implementation of new growth strategies, which requires helping manager make the right resource tradeoffs in terms of assets, time, people, etc.
Unlocking capacity is the final and most critical step in ensuring managers and the rest of the organization carry out the strategy, but close to 80% of strategists that we interviewed said they are ineffective at doing so.
In a recent discussion with heads of strategy, we examined the main barriers to unlocking capacity and what some strategists have done to overcome them. You can view key takeaways from that event here.