Strategy realization is a hot topic because many companies are not confident about their ability to realize their strategic intentions. Recent research shows that many companies realize their strategies too little too late. Our extensive research and consulting work that forms the basis for our book confirm this conclusion. The major reason for this lies in the one-sided view on strategy that executive managers have. This classical view on strategy revolves around the development of a well thought-out strategic plan that is implemented rigorously. The origins of this view can be found in the Command & Control management style that is well versed in many boardrooms: managers who believe in the lure of the success of rigorous planning and the subsequent delegation of the accountability for the implementation of the strategic plan.
A different way of looking is to view strategy realization as a process of discovery. In this perspective, the people in the organization must learn to put the strategy into practice. Managers and professionals like account managers, engineers and researchers develop new approaches to realize the strategic objectives. The strategy they try to realize is based on management assumptions. Managers will form assumptions on how the strategy will be received by clients and on the capability of their organization to deliver this strategy. As assumptions go, these can be right or wrong. The more intense the strategic renewal, the more managers will have to rely on their assumptions and the higher the probability that these assumptions will be proven wrong. When an assumption is proven wrong, managers are faced with a strategic dilemma: must the strategy be changed or should the organization change its approach to realize it. Both changes are hard to make as every organization has its favorite approach to doing business, often based on hard-won survival lessons.
In our view, strategy realization concerns the management of two different processes:
- Strategy feedback process, to focus management attention on and discipline management effort to execute the strategy, by translating the strategy into objectives, targets, plans and performance indicators;
- Strategy feed forward process, aimed at facilitating organizational learning and enabling (executive) management interventions to change the behaviors and adjust the strategic direction.
In our book we outline these two key processes to manage strategy realization. The strategy feedback process is about using planning and control instruments in an effective manner in order to get focus and discipline. We found that there is room for improvement in this area for many companies. The strategy feed forward process is about influencing and changing behavior in order to solve strategic dilemmas. We observe that managers often do not benefit from the informal early warning signals that are abound in their organization. We conclude that these two management processes put quite different demands to leaders. The strategy feedback process is about providing direction and getting results, the strategy feed forward process is about facilitating dialogue and making people change.
From our research comes forth that in order to manage strategy realization effectively, executives have to take into account the following elements: (see figure)
- Strategy – defined as the mixture of strategic leitmotivs, the strategic ambitions and the portfolio of strategic initiatives;
- Control – defined as the coordinating principles underlying the management instruments, the organization structure and the governance model;
- Behavior – defined as the action patterns that are employed by the organization;
- Legacy – defined as the dominant logic of the firm that has emerged over time. The dominant logic refers to the management views, beliefs, values and norms on how to conduct and govern the business activities.
Together, these four elements constitute the strategy realization model. To manage strategy realization effectively, we argue that executive management has to ensure alignment between the elements of the strategy realization model, by addressing the following questions.
1 Fit questions
- Are your business planning cycle and performance management systems aligned to your strategic ambitions?
- To what extent do control systems support the intended behaviors?
- To what extent do key people display the behavior that warrants strategic success?
2 Gap questions
- To what extent do your strategic ambitions differ from ‘business as usual’?
- Will current performance measurement measure strategic success?
- Will the embedded action patterns enhance the required behavior?
With our book ‘Strategy realization, the next level’ we intend to provide answers to these questions. This book is meant to provide you with food for thought.
We have benefitted from the learning lessons of executive teams in numerous companies like ABN AMRO, Achmea, KPN, Nuon, Shell, TNT, Unilever and two Dutch government projects: High Speed Train (‘HSL-Zuid’) and Road Pricing (‘Anders Betalen voor Mobiliteit’). Next to that, we have conducted interviews with some 50 CEOs and CFOs to validate our findings and conclusions.
We do not believe that these cases result in ideal solutions that are universally applicable. By combining some of our insights with your own experience, we believe however that you can significantly improve the strategy realization process in your organization.