All organizations have a strategy they want like to execute on but – for some reason – are unable to do so. This means they can’t live up to their potential and deliver their promises to their stakeholders. They wonder, “where did things go wrong?”
For any strategy to be executed, there’s a series of things that need to happen.
Strategy definition process
The process to define the strategy must take into account the organization’s current reality – its strengths and weaknesses, the prevalent culture, internal power structures, and external power structures (e.g., direct/indirect competition, customers, partners, etc.). All of these must be accounted for when the strategy is being defined or tweaked.
Suppose the organization has a history of not being able to come up with breakthrough innovations or can’t suddenly develop them. Therefore, any strategy that requires the organization to come up with breakthrough innovations most likely will not work.
If the organization has a history of acquiring companies and selling them off at a loss, it can’t expect that the next acquisition will be different unless there is a fundamental change in how it approaches the way it integrates acquired companies or products.
These are nothing but wishes and will lead to the same kinds of results achieved in the past. The people who will define the strategy should first look at their historical skills gaps, culture gaps, and execution gaps to see if anything has changed (or is expected to) due to specific decisions made by executives.
The result of the strategy process must be identifying a keystone behavior or metric that everyone in the organization can measure and act upon. Like Southwest Airlines’ obsession on being the lowest-cost airline or Alcoa’s commitment to having zero incidents in their factories or Amazon’s focus on giving the customer what they want (even if they don’t yet know what they want) or Apple’s concentration on design.
Most organizations get this step wrong. They spend a lot of time outlining the strategy in such detail that they need at least a 10-page slide deck to explain all of it.
When this happens, most of the employees can no longer remember the organization’s strategy and how they can bring it to life. Each will make decisions based on what they think the strategy is. This is where misalignment starts and, when everyone in the organization does this, the result is a list of limiting tactics and it’s no longer a strategy.
What is worse is when you ask employees about their company’s stated strategy and they rattle out the goals (e.g., become a $20 billion company with $10 billion in profits within 10 years). We need to understand that goals are not the strategy.
The strategy is the how part. How will the company go about achieving its goals?
Converting strategy to behavior
If the strategy development process results in a 10-slide explanation of the strategy, we can be sure that the execution of that strategy will be challenging. A good strategy can be explained in three to four short sentences. Great examples are the ones I have mentioned above: Alcoa, Southwest Airlines, Apple, and Amazon.
Will it be building new products, addressing new markets, acquiring new companies, expanding into new territories, being obsessive about customers’ success, or a combination of these?
The strategy needs to be clear enough for every employee to be able to use it in their regular decision-making process: Will this decision align with the company’s strategy or not? Even if it takes the company closer to its goal, if it doesn’t align with the stated strategy, the action can’t be justified.
Organizations that can execute on their strategies are usually those that leave choosing and defining tactics to operations people, the ones who make the day-to-day decisions that run the organization. Businesses need to hire good people, ensure they know the organization’s strategy, and trust them to pick the right tactic or decision to bring the strategy to life.
If the strategy definition process is done well, the strategy is clearly and succinctly defined, and all employees know the strategy, then line managers must be able to provide constant, consistent feedback to employees on whether the tactic they used to bring the strategy alive worked or not.
There will be times when frontline employees will make a mistake on the tactic they use in a situation. It is the manager’s responsibility to sit down with them and explain why the tactic didn’t work, discuss other tactics they could have used, and ensure they understand how to choose the right tactic.
Employees learn from this experience so they get better choosing and using tactics. This is how line managers can help to bring the strategy alive. Not by enforcing tactics but by allowing tactics to emerge based on a need in a given situation. This is also how an organization can ensure it is agile and can respond to the market in real-time.
In the past, when market conditions remained stable for long stretches of time, it was okay for headquarters to define not only the strategy but also dictate the execution.
Given the volatility of the markets and geopolitics, the interconnected world economy, swift changes in technology, global availability of capital, and extremely fast-growing startups, it is critical for large organizations to enable frontline managers to define the tactics of engagement.
It is also important for frontline managers to consistently provide feedback to the strategy development team on the effectiveness of the strategy and any changes on the ground. This back-and-forth between the teams that execute the strategy and the teams that define the strategy is critical for the strategy to be effective, even when it’s executed correctly.
This ability of the frontline managers to respond to changes in market dynamics independently and in alignment with the organization’s stated strategy makes an organization an intelligent enterprise.
Is your organization on the way to becoming an intelligent enterprise?