Successful Strategy Execution

Andrew MacLennan: It is really about translating major business objectives into concrete activities that will deliver the performance required. So I would say there are sort of three major things that organisations have got to do. Ideally, they have got to break down strategies which are inevitably conceptual into more concrete activities, if you like, taking a top down approach, but also recognising that not all activities emerge from top down strategies. Organisations have got to make sure they align any activities that arise with strategic objectives to make sure that they are actually still pushing the organisation in the right direction. And finally, organisations have got to align all their designs and systems to make sure that the right activities can actually be delivered. So there are lots of things that derail strategy in terms of the way organisations are set up, the way they are structured, the way their performance is measured, the way that risk is managed and so on.

So these are the three big challenges.

As for who is involved in it, I mean clearly it does vary a lot from one organisation to another, but I think it is probably fair to say in all circumstances strategy execution has to be driven by the most senior people in the organisation but it must involve the vast majority of people who will be involved in actually delivering the strategy. There is really good evidence that if you don’t involve those who are going to be executing the strategy in its creation and its shaping and the process of breaking it down, then you tend to see high levels of failure. There are two reasons for that; one is that organisations that fail to involve people in strategy creation tend to develop an unimplementable strategy if you like, and also of course you don’t get the buy in from those who you need to be committed to making it work.

Female interviewer: So strategy execution is obviously part of a wider strategy development process and that involves other activities like analysing risk, generating strategic options. How important is strategy execution in relation to all those other elements of the process?

Andrew MacLennan: They are definitely all important but, I mean, to give you a sense of it, around half of strategies fail catastrophically research would suggest, upwards of 70%, some would say as many as 90%, fail to some extent, so they don’t achieve all the objectives that are set out within a strategy. So clearly there is a huge problem in the strategy execution area for organisations of all sorts and all sizes around the world.

More constructively, it is clearly therefore an enormous potential source of competitor advantage. If organisations can get that right, they are going to be better than other organisations in their world.

Female interviewer: We have talked already about strategy execution failing sometimes or often, we have touched on this already, but what do you think the main reasons for this are? Why does it tend to fail?

Andrew MacLennan: There are definitely lots of reasons. Research has come up with many and a few of the big ones would be that there is no strategy execution framework, so there is not really a sort of guiding structure to actually make sure the strategy gets executed as intended. Structures can often be the problems, organisational structures. Communication is a huge barrier. Communication in all directions, from senior management towards more junior employees and back up the way, but also of course horizontally between people in the organisations who do need to communicate effectively to work well together. The involvement of staff and the ongoing involvement of more senior managers in the execution of strategy are both problem areas. Clarity of accountability for delivering activities is a big problem and certainly the whole area of performance measures and targets and reward systems which are clearly related, is a massive area where strategy can fall down. Really good strategies can be derailed by serious problems there.

But I would make the point that it is useful to have that, sort of, checklist in mind, but actually the key for any one organisation is to examine the barriers in the specific situation that they find themselves and in particular think about how those barriers inter- relate. An awful lot of them are inter-related, so identifying the underlying causes of problems is really important otherwise we are dealing with relatively superficial symptoms and problems and we are likely to see them reappear in the future even if we do manage them in the short-term.

Female interviewer: So what key things need to happen before a strategy can actually be executed?

Andrew MacLennan: I think a lot of things before we can get to sort of actually creating a good strategy and so on. I think there are some fundamental building blocks that organisations can put in place and my research suggests that having a strategy execution framework is really important and an awful lot of organisations don’t have that.

They don’t pay the same attention to developing that that they might, for example, when they are thinking about strategic planning or project management. Skill development in the area is really important as well. How do organisations develop the skills to execute strategy? I think that it is essential to examine that.

Control systems matter as well. The question here is how does your organisation know if it is failing to execute its strategy? How does your organisation know if its strategy execution capability is insufficient? So control systems are important then. And also I think, you know, a softer issue, I think the motivation both to develop good strategy and be interested in thinking strategically but also the motivation to execute strategy is really important as well. So these four building blocks I think are critical.

Female interviewer: What would you say are the characteristics of a really good strategy implementation plan?

Andrew MacLennan: Well, firstly, I think that a good strategy execution plan has to be based on good strategy. We clearly need a clear logical strategy that is going to work as a starting point. Secondly, I think it needs to be broken down into concrete critical activities. My test here is always, you know, if competent individuals and teams can get on with delivering activity without lots more intervention and systems and decision-making from those senior to them, then that’s probably concrete enough. If you haven’t reached that point within a strategy execution plan, then there is more work to be done.

I think trade offs are very important as well. In other words, organisations have to decide what they are going to focus on doing really well, which customers they are going to serve, which products they are going to offer, which channels they are going to use, which resources they are going to focus upon utilising and implicitly, the things that they are not going to do. And that gets played out very explicitly in strategy execution when we look at how the activities that we are deciding to undertake are plausibly going to cause the outcomes that we intend to achieve, that becomes very clear then and I think some of the earlier strategic decisions get tested by that breakdown process. So a good plan should enable that.

Finally, I think that it is essential to see how the activities that need to be undertaken are being baked into the organisation in terms of its organisational designs and systems, things like structure, things like processes, things like project management, things like performance measures. If we look at all of those things and we say, are these critical activities that we need to deliver actually going to happen given this structure that we wrap around them, and the answer is yes, then we can be a bit more relaxed. But often small tweaks are required.

Female interviewer: And once the strategy implementation plan has been designed, it has been put into action, what are the best ways of monitoring the progress of the strategy?

Andrew MacLennan: I think there are probably two ways to think about that. The first is being concerned about actual delivery and having a good framework for that. And I think project management for one off changes and process management for ongoing activities are ideal for tracking outputs, in other words, you know, making sure that having planned something we actually do create the physical changes that are required as a result. But that is only half the battle. The other aspect of course is thinking about performance measurement at a more strategic level and that is where we are really concerned about tracking outcomes. So we may have undertaken activities, we may have created physical change, but have the more conceptual goals that these things were intended to help achieve, have they actually been achieved or are we on the way to achieving them? So that is really important as well, thinking about measures relating to inevitably more conceptual strategic goals.

Female interviewer: The five Cs of strategy execution form the core principles of your book. Can you explain what they are and why they are so important?

Andrew MacLennan: Yes, absolutely. The five Cs really represent a short, quick way of articulating the most important things to get right for an organisation in terms of managing its strategy execution. And they are causality, criticality, compatibility, continuity and clarity. Let me take them one by one though.

Causality is really about making sure that the activities that we undertake will plausibly cause our strategic objectives to be achieved. Organisations have got to bridge the gap between the conceptual notions around strategy and the concrete world of delivery and activity, make sure that those two things are connected up.

However, criticality is also important because if we were to figure out all of the different activities that we should potentially undertake in order to achieve our objectives, there will be an awful lot of them, so it is essential to focus our attention and organisational resources around the things that really matter the most.

Having said that, if we were simply to do that exercise and figure out, if you like, the most important activities that will all help to achieve our objectives, they might all look perfect in isolation but when we start to look at how they relate and whether or not they can, if you like, live side by side, we will start to spot problems. So we have got to make sure that the individual critical activities that the organisation has focused upon are consistent and are pulling the organisation in the same direction and we have got to iron out any incompatibilities.

Continuity is really around making sure that the activities you decided we have got to undertake are actually meshed into the organisation’s way of operating, so making sure that the different individuals and teams in the organisation’s hierarchy, if you like, have clear accountability for making sure that those activities happen and that the outcomes from them are actually realised. And that is also important over time. So, for example, changes in staff members or structural changes in the organisation don’t disrupt the delivery of that strategy.

And finally, of course there is clarity. And clarity is really about making sure that individual employees and teams in organisations can see how what they do at an everyday level contributes towards the high level objectives of the organisation being achieved and the two reasons for that is that it is motivating for them and also because it helps them to make everyday trade off decisions, if you like, in their work because they can see what the outcomes from their efforts are likely to be.

Female interviewer: You spoke there about criticality, the importance of isolating and concentrating on activities that are critical to delivering the strategy. What are the best ways for organisations to actually identify which activities are critical and which ones aren’t?

Andrew MacLennan: Yes, that’s a really good question and I think the answer depends on the context.

If you have got a situation where there are high levels of uncertainty so maybe, you know, launching a completely new product or perhaps entering a completely new market, then I think we have to resort to some extent to explicit logic, you know, a rather purist approach to it, where we just think very, very clearly about it, ideally with lots of help from stakeholders who can provide a sort of multi-dimensional view of the hypotheses that we develop around, you know, what activities will cause our outcomes to be achieved. But also, under those circumstances, testing using pilots and so on I think is really important and conducting, if you like, original research can be really wise as well to reduce some of that uncertainty.

In situations, though, where there is much less uncertainty, where we have done things before and we are more refining our business model, if you like, that’s where I think you have to look to data and a good analysis of the data.

Female interviewer: The fifth C as you mentioned is clarity. What practical things can leaders do to communicate a clear message to their employees in terms of what the strategy means to them and what role they have to play in its successful execution?

Andrew MacLennan: I would in some ways say, you know, communication is vital and I think it is also often poorly managed and not done nearly enough and not done consistently enough through probably enough different mechanisms. But I would say that consultation is better than communication and I would say that involvement is better than both of them. So for senior leaders, I think how can they involve those who will be executing strategy in its creation and its breaking down, if you like, to activities?

Female interviewer: And finally, what are the three most important things that organisations can do to translate strategy into action successfully?

Andrew MacLennan: I think at a practical level that entirely depends upon the organisation and the context. So what is the nature of the environment, both externally and internally, and how does that affect the relationship between the activities we undertake and the outcomes we want to see from them? At a more fundamental level, if you give me an extra couple, I would call it the five Cs.

By way of concluding, I would say that strategy execution is definitely difficult but it is an absolutely essential challenge and I think if organisations approach it systematically with a medium to long-term plan to increase their capability in that area, I think that they see enormous benefits from it in terms of their competitive position. So although it is difficult and I may well have made it sound difficult, I think fairly it is a challenge entirely worth tackling and I obviously wish your listeners all the best in doing so.