Category Archives: Strategy

Successful Strategy Development and Execution: Getting it Right the First Time

As per last week’s series on “What is Strategy? And How is It Obtained?” (parts I, II, III, and IV) and the last two posts on The Secrets to Successful Strategy Execution and Successful Strategy Execution is More Than Lean or Six Sigma, successful strategy development and execution is within the reach of every organization, and there are a number of toolsets that can be brought to bear to streamline development and execution once the basics are understood. However, the real key to avoiding false starts and getting it right the first time is to bring in an external sensei (which, literally translated, means “one who has gone before”) to guide the organization through the process.

Let’s face it, while it is easy in theory to come up with a vision, conduct a gap analysis, create an execution plan, streamline the plan with best practices, acquire the necessary tools and resources, and define the decision rights, information flows, and organization chart that will pull it all together, it can be very challenging in practice — especially if the organization has never done this before. Without a guide, the organization might not even be able to define an appropriate vision. Let’s face it “we will be the most progressive company in our vertical, by providing high quality, customized services to our customers, achieving a measurable difference of success for our suppliers, rewarding the excellence of our employees, and ensuring the long term prosperity of our shareholders“* is not a vision. It is a meaningless collection of buzzwords that’s on par with the drivel created by the Auto Joe-ks Mission Statement Generator that will only result in employees having a good joke at management’s expense as they say “Yeah, right! Who do the nincompoops think they are trying to fool? This is as likely as a monkey flying out of my butt!” After all, it doesn’t pass any of the sniff tests (outlined in part IV). It doesn’t specify what the organization is going to do, where it is going to do it, or why this will help the organization succeed.

Furthermore, it will be hard to conduct a gap analysis if the organization does not know how to define a successful representation of an organizational structure that is aligned to the strategy. Without an expert who knows what an appropriate structure looks like, and how to define the gaps between the current structure and the desired structure, the effort could grind to a halt. Then there is the issue of streamlining the structure, process, and execution plan. This will require someone who understands the core tenets of Lean, Six Sigma, or the foundational Toyota Production System, as well as Business Process Modelling. And the organization will be challenged to select the right tools and resources if the organization doesn’t fundamentally understand what the tools and resources have to do in order to enable the new organizational structure that is required. Plus, the entire effort can break down entirely when it comes to deciding decision rights when mangers mired in traditional mindsets will fight for rights they should never have had and should never, ever, want! And, assuming the organization is able to appropriately divide the decision rights, it might still be stumped on how to define, and enable, the information flows.

That’s why the ultimate key to getting it right the first time is to bring in an experienced guide to lead, moderate, and run the process. An experienced, analytical, and impartial guide will help the organization:

  • focus on constructing a buzzword-free vision that defines the what, where, and why in a manner the employees can truly and whole-heartedly get behind;
  • define a high-level end-state that specifies the who, what, and when;
  • conduct a meaningful gap analysis;
  • develop a process-oriented action plan that will get the organization from its current state to its desired state;
  • select the appropriate methodologies to streamline the processes;
  • identify the right tools and resources to meet the streamlined process needs;
  • categorize the relevant strategic and tactical decisions that will need to be made and assign them to the appropriate personnel (who are affected the most by them and who can generate the most effects from them);
  • streamline the required information flows;
  • create the appropriate organizational chart; and
  • identify the incentives that will have the most impact.

Furthermore, considering that, relatively speaking, consultants are cheap, there’s no reason for an organization not to hire a guide. It just make sense. Why stumble up the mountain when a guide can lead an organizational climber safely to the top?

*So, needless to say, the “leading” Canadian Broadcasting company that decided that it’s vision was to be the most progressive broadcasting company in Canada, by providing high quality, local service to our listeners, achieving a measurable difference for our advertisers, rewarding the excellence of our employees and ensuring long term prosperity of our shareholders wasn’t on the right track … or anywhere close to it!

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Successful Strategy Execution is More Than Lean or Six Sigma

As per Sourcing Innovation‘s last strategy execution post, which outlined the secrets to successful strategy execution, successful strategy execution requires clear-cut decision rights and information flows, as per Neilson et al., and good business process mapping. Lean is not enough. Six Sigma is not enough. TPS / Operational Excellence is not enough.

While these are very useful methodologies — as they can be used to streamline processes and operations once the organization has mapped out its current processes, identified the gaps, and developed revised processes that it believes will get it to where it needs to be; they are not vehicles for strategy execution in themselves. The very definition of lean is to eliminate waste from a process. That means an existing process is required as a starting point — lean can’t be used to develop a process from scratch. Six Sigma is a management strategy designed to improve the quality of process outputs by identifying and removing the causes of defects and minimizing variability. That means that, by definition, it also requires an existing (or proposed) process as a starting point. The Toyota Production System, the precursor to lean — which a few companies have rebranded “Operational Excellence” in light of the recent Toyota scandal, was a system developed to design out overburden (muri) and inconsistency (mura) and eliminate waste (muda). Again, the assumption is that there is a starting process.

Business Process Mapping is very straight forward, and there are a lot of free resources to be found if one searches for “business process mapping” or “business process modelling“. In addition there are a number of tools — such as flow charts, flow block diagrams, control flow diagrams, Gantt Charts, PERT diagrams; modelling techniques — such as functional modelling, data modelling and information modelling, and simulation modelling; and platforms — including workflow and BPM that can be used to assist the team. And it doesn’t matter which one the team selects — as long as everyone on the team understands it. The whole point of the exercise is to develop a representation of what the business is, and where the organization wants to go, that can be easily understood by everyone on the team and form the foundation of an action plan to get there. If the organization consists of mostly mathematical geeks, it can use directed acyclic tesseracts. It really doesn’t matter.

Strategy execution comes down to four essential elements:

  1. Have a clearly defined strategy. If it isn’t immediately obvious to an average high school student, it’s not clear enough
  2. Have an action plan to get from the current state to the desired state. Goals are not enough.
  3. Have the tools and resources in place to implement the plan. Make sure there is a process (such as lean, six sigma), process support (in the form of new systems and tools), and people ready to go (who must be given access to the support resources they need and trained in advance).
  4. Have the decision rights, information flows, and organizational chart clearly defined.Everyone must know what decisions are theirs, who they get data from and who they provide information to, and who they go to for guidance if a request requires a decision they do not own.

That’s it in a nutshell. It is within the grasp of every organization.

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Giving Your Supply Management a Competitive Edge

A recent article on “five strategies to give your business a competitive edge this year” in industry week for product development efforts is appropriate for supply management as well. Written by Renee Martin, co-author of The Risk Takers, it highlights how entrepreneurial strategies can help your supply chain to succeed.

What are the five strategies put forth, and what do they mean for your supply management practice?

  • Go on a Treasure Hunt and Find an Underserved NicheThis is easy if you have a real Spend Analysis solution that will let you slice and dice a data set of up to 50 Million transactions any way you want on your laptop in real time.
  • Spot a New Trend and PounceOnce a new technology or solution has proven itself as significant generator of ROI, adopt it. For example, this means that it’s past time that you adopted strategic sourcing decision optimization and global trade solutions.
  • Buck the Conventional WisdomJust because your current practice is considered a “best practice”, this doesn’t mean that it’s the absolute best practice for you. Maybe a revolutionary lean factory redesign could produce your product much more efficiently, maybe a distribution network redesign could greatly improve service levels without increasing costs, and maybe the best way to get the best price is to forget negotiation and work with your incumbent supplier to find a more cost-efficient product design.
  • Exploit Your Competitor’s Weaknesses and Make It Your StrengthAre they slow to market? Find a faster means of delivery. Are their products more customized? Find a new manufacturing shop that can do smaller lots and quick line changes.
  • Trust Your GutIf you think a certain supply strategy is too risky, it probably is.

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The Secrets to Successful Strategy Execution

As per this recent article on putting strategy into practice in Strategy+Business, which followed their article on the seven chapters of strategic wisdom (which inspired Sourcing Innovation’s recent series on What is Strategy? And How Is It Obtained? [parts I, II, III, and IV]), intent and execution must go hand in hand where strategy is concerned. So what are the foundations of a successful execution?

According to the article, the foundations are the four “building blocks” defined by Neilson, Martin, and Powers in their recent paper on “the secrets to successful strategy execution”. Specifically, decision rights, information flow (including metrics), motivators, and the organizational chart. The first two in particular are critical, as decision rights and information flows were found to have twice as much impact on strategy success as motivators and structure. So what does the organization have to do?

According to Neilson, Martin, and Powers the organization must start with decision rights — and specify who “owns” each decision and who must provide input, and information flows — and promote managers laterally so they build networks needed for cross-unit collaboration … and only then alter organizational structures and realign incentives to support the initial moves. For example, the organization might start by delegating accountability for profits unambiguously to the divisions (to prevent wasted man years on strategy development only to have a solid business case dismissed by a hand wave of an uninformed corporate VP after a five minute review) or delegate run-of-the-mill operational decisions (to prevent decision paralysis). Then it might institute regular business meetings where the C-suite and division / unit leaders meet to discuss a particular issue or action (to prevent information flows from being “censored”) or establish standardized back-office processes and analytical tools for deal customization (to prevent sales people from crafting customized one-off deals that cost the company more than it will make in revenue). These two actions will make sure everyone knows what decisions they are responsible for, when they’re supposed to provide input, how much leeway they have in interpretation and execution, and where they go for more information. Only then would organizational structures (to remove unnecessary layers or improve cross-organizational collaboration) and incentives (to drive greater performance and profitability) be altered, because, until the organization has its people working together and properly aligned to the strategy, it won’t know what the right structure and incentives are.

The reality is that, as Neilson, Martin, and Powers stated in their ground-breaking paper, while a brilliant strategy, blockbuster product, or breakthrough technology can put the organization on the competitive map, only solid execution can keep it there. Solid execution requires clear decision rights and unimpeded information flow because unclear decision rights not only paralyze decision making but also impede information flow which, in turn, results in poor decisions, limited career development, and a reinforcement of structural silos.

So how does the organization accomplish this? While Neilson et. al don’t address the how, it’s pretty obvious where the organization needs to start — Business Process Mapping. Once the organization has mapped out everything it does, it can identify what decisions need to be made and what information is required. Then, it simply assigns responsibility for decisions and institutes mechanisms for information flow. After these responsibilities are assigned and the information mechanisms are put in place, the organization can align organizational structure to mirror the decision rights and necessary information flows and adopt incentives to support the changes. While the devil will be in the details, the process itself, like the process for developing a strategy, isn’t magic. It is within the grasp of every organization.

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What is Strategy? And How Is It Obtained? (Part IV)

Part I reviewed the definitions of strategy offered by Alfred D. Chandler Jr., Kenneth R. Andrews, Michael E. Porter, Thomas J. Peters and Robert H. Waterman Jr., Richard N. Foster, Andrew S. Grove, and Henry Mintzberg, who are generally thought to be (among) the preeminent strategists of the last 50 years. It then indicated why each, on its own, was not sufficient. Part II looked at the definitions provided by Richard Whittington, Gordon Walker, and Robert Wittman and Matthias P. Reuter and derived not only some generic approaches to strategy, but many of the essential elements that a strategy needs to have — which allowed for the derivation of a working definition of business strategy. This was a good start, but it didn’t yield much insight as to how an organization goes about getting it. Thus, Part III discussed a few of the “strategy guides” and “strategy frameworks” that were out there and concluded that most were either specialist frameworks that could only be applied in certain circumstances (like the Blue Ocean Strategy Framework, the McKinsey 7-S Strategy Framework, and Value Stream Mapping) or simply lists of critical issues and requirements that must be addressed in the formulation of the strategy.

This post — which attempts to circumvent the needless complexity surrounding strategy formulation frameworks when the basics are pretty straight forward — is going to present a simple, generic, framework for strategy formulation that anyone can use to get started. Like the working definition of strategy, it might not be perfect, but as with the working definition of strategy, there is not a better one that’s as generically useful and as easy to understand. Basically, “strategy” is not some pie-in-the-sky PowerPoint production that can only be produced by a 50K+ a day consulting firm. It’s something that anyone with a decent mind for business and a decent understanding of their operations and market can do. And it doesn’t have to be fantastic either … good strategies can get consistently good results, which brings stability — which is probably the most important thing in turbulent markets. (Everyone in an organization has a lifetime to get rich. Forgetting that is what gets businesses into trouble.)

So what does the framework look like? Simple. It looks like this:

It starts with a Vision that is created by the organizational leaders based upon a solid understanding of their business, their market, and potential opportunities.

Once the (initial) Vision is decided upon, a Gap Analysis is conducted to determine the gap between where the organization is and needs to be. This Gap Analysis is based upon an understanding of where the organization currently is and what is needed to execute the vision.

Once the Gap Analysis is completed, an Execution Plan is derived by the stakeholders that will take the organization from where it is to where it needs to be. The execution plan outlines the current organizational capabilities that will be applied, new capabilities that will need to be added, and outside capabilities that will be utilized. When (a draft) of the plan is completed, it is analyzed against the Gap Analysis to see if it will close the gap within a target time frame with a reasonable probability. If the Gap Analysis is adequately addressed, the vision and execution plan become the organizational strategy. If the Gap Analysis is not adequately addressed, the remaining gap is computed and the plan is re-worked, or, if it is decided that the gap probably can’t be closed, the revised Gap Analysis is sent to the C-suite who can adjust the Vision accordingly.

The only other component is Research — of which the organization has to do lots. The organization needs to know where it is now, what capabilities it has, what resources it has to work with, what it’s doing, what it could be doing, what additional capabilities or resources it will need to do something else, etc. Note that this is where the other, more specialized, frameworks become useful. Where is the organization now? (MACS (Market-Activated Corporate Strategy Framework) Where is the market likely going? (Scenario Planning) Can the market be redefined? (Blue Ocean Strategy Framework) How will the market reactions change to a change in strategy? (Porter’s Five Force Analysis) How will IT help with execution? (McKinsey 7-S Strategy Framework) Can the execution plan be leaned? (Value Stream Mapping)

The effort is done when the strategy addresses the working definition and answers the six questions everyone was taught to ask in elementary school — the who, what, when, where, why, and how. In other words, when:

  • the VISION specifies what the organization is going to do (be the high-value provider), where the organization is going to do it (in North America, Europe, and Australasia), and implicitly answers the why (because buyers do not have a high value choice) and
  • the EXECUTION PLAN specifies who (engineering, marketing, sales) will be doing what (designing a new product, launching the campaign, visiting key retailers), when (this quarter, next quarter, next year), and how they will be doing it (utilizing an expert design firm’s services, capitalizing on new media, holding in-person displays).

That’s it. While it might require a lot of work (and a whole lot of research), new methodologies to enable and inspire collaboration (such as the QuEST framework specified in Nilofer’s The New How), and quite a bit of patience (as a fair amount of iteration will be required until the organization gets the process down and understands what sort of research it will need to conduct in advance of each step), there’s no magic involved. Strategy is within everyone’s grasp.

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