Strategy swings - now the execution

Strategy has traditionally been a popular topic in board rooms and a fertile source of research, education and opinion. Strategy Execution has less shine and is a topic that managers and researchers seem to struggle with more. As a Chartered Controller and Management Consultant, I am interested in the underlying reasons and contribute to improving the effectiveness of Strategy Execution at organisations. Together with IMPROVEN, I turn my experience and expertise into an approach. At this place, I share my insights and experiences on this in a series of articles, with a special focus in this first article on the balance between change and performance.

Strategy swings but execution sticks to good intentions

Since ancient times, strategy has been a weighty tool for soldiers and other commanders, and a rich source of inspiration for philosophers, researchers and publicists. It revolves around future-defining choices in the often tense dynamics between organisation and outside world. Strategy-making is a subject that swings: it excites our powers of imagination, analysis, inventiveness and persuasion, and the stakes are high for people and parties committed to company or organisation.

Implementation is less glorious. We often see that intended strategies fail to materialise and results even fall far short of promises made. This is then seized upon to replace the old strategy with a new one, after which the pattern repeats itself. A waste of all that precious time and energy that goes into strategy formation. There is a lot of scientific research that shows that Strategy Execution often remains stuck in good intentions. A few telling sources:

- "3 out of 5 companies rate their organisation as weak in StrategyExecution.1" (Harvard Business Review)
- "70% of chief strategists express little confidence in their ability to close the gap between strategy and execution." (Gartner)
- "90% of organisations fail to execute their strategic plans successfully." (Kaplan & Norton)

Performance is as strong as the weakest link

Organisational performance is ultimately the result of the interaction between environment, strategy and the design and functioning of organisation and operations, and thus as strong as the weakest link.

Figure 1 illustrates this:It could of course be down to the strategy itself, but we know from experience and research that setting up and controlling the execution phase is perhaps more challenging than defining a good strategy. Why keep investing in new strategies if the Strategy Execution is not up to scratch? The end result will never be better than what the weakest link allows. So investing in effective Strategy Execution could well be much more profitable than continuing to muddle through.

What's in a name

Strategy Execution ensures that the organisation is set up and starts functioning in line with the intended strategy, delivering on the stated ambitions and promises made. This is more about the inner world, structure, discipline and creativity to get things done in line with the strategy. Staying the course instead of setting it.

A wide-ranging field, it has been emerging since the last century under such familiar names as "Management Control", "Corporate Performance Management" and "Total Quality Management". In all cases, it is about getting a grip on the relationship between strategy and results, but most of them emphasise certain aspects such as financial results or quality levels or do not always make a clear distinction between the "change side" and the "management side" of business operations.

The more neutral term "Strategy Execution" covers exactly the ground, namely equipping and operating the organisation in line with the intended strategy and promised results. Without anticipating certain types of results (e.g. quality), without suggesting that it is only about "performance", but with explicit reference to Strategy and with room for "change" in addition to "performance".

Strategy Execution is a balance between change (CHANGE) and performance (RUN)

A strategy describes how the organisation is going to fulfil its ambitions and promises to stakeholders through performance-determining choices, such as the markets and target groups the organisation targets (and which it does not), the distinctive characteristics of the product and service offerings, and choices that determine the productivity of the production of these offerings and the supporting processes.

At the time the organisation sets its strategy, business processes and organisation are not yet set up and equipped for it. The organisation will first have to strengthen itself in certain areas to start functioning and performing at the level of the intended strategy. Which improvements are needed and by which approach they will be obtained is part of the strategy. Realising these improvements is called implementing the strategy. After that, the organisation can perform in line with the strategy.

The distinction between change and performance in day-to-day operations (CHANGE and RUN) is important because they are essentially different activities, each requiring its own approach and way of managing, both in the strategy stage and in the execution stage.

CHANGE activities focus on the realisation of critical success factors or conditions in order to follow the chosen course full force and deliver the corresponding performance. They provide solutions to complex issues and major challenges that the organisation faces when following the chosen course. These challenges are too big and too specific to be added on top of daily processes. They require a project-based approach with input from multiple professional disciplines, usually have a longer lead time and require more manpower, money and other resources than the small improvements tackled in the daily process. CHANGE activities implement the strategy and thus put the organisation on track.

RUN activities are aimed at ensuring that the organisation continuously functions and performs in line with strategy, through a control cycle. This delivers ongoing (smaller) improvements that drive the organisation towards maximum performance, in line with ambitions. The driving force behind this is working according to the principles of the control cycle (Plan-Do-Check-Act). These find their way to the shop floor through a combination of "hard" and "soft" measures. The "hard" ingredients are Planning (direction) and the design of Processes, organisational and consultation structure and data & information infrastructure. The "soft" ingredients consist of leadership and cultural characteristics to promote desired behaviour and discourage undesired behaviour.

Figure 2 summarises this as follows:

There is always room for improvement

After advising on strategy definition, valuation and business recovery for over 20 years, since 2019 I have been focusing mainly on improving the governability of organisations, which I have come to see as one of the key bottlenecks in improving organisational performance. Thus, in recent years I have helped several profit and non-profit clients to define their strategy, followed by initiatives to improve the governance of their change and run activities. From these experiences, I have developed my own vision on Strategy Execution, which I am now co-developing with colleagues at Improven for a wider circle of clients.

Jan Bosman and André van Hofwegen are my sparring partners here. Jan is Managing Partner of Improven and, besides being an entrepreneur-director, a recognised expert and author in the field of process management, chain steering, organisational design and control. In the past 25 years, he has advised and practically guided various (profit and non-profit) organisations in the implementation of a more process-oriented organisational control in which customer value chains are central.

André is director of the subject group Process Improvement and recognised expert and author in the field of process management, process optimisation and the agility of organisations (organisational fitness). In addition to his role as subject group leader within Improven, André advises large and small organisations on streamlining and controlling processes.

Together, we are involved in Improven. All of Improven's specialist fields in the field of information, processes, projects, finance, risk and IT ultimately come together in a good Strategy Execution. We combine our knowledge and experience into the integrated approach that drives organisations to structurally higher performance by improving cooperation, agility and learning ability. You can read more about this in the coming series of articles.

1 How to Move from Strategy to Execution by Tomas Chamorro-Premuzic and Darko Lovric, HBR Magazine, June 20, 2022