Kendall Consulting Group - Strategy Implementation Innovation Article

Strategy Implementation

• The CEO of one Fortune 500 company discusses his strategies with the executive committee, then watches in frustration over the next year as not one of his major goals is achieved

• Faced with declining profits and tough economic times, the managers of one major company jointly brainstormed where they wanted the company to be in one, two and three years and how they might overcome their difficulties. As the months went by, few targets were achieved, and many key managers left the company

• A multi - billion dollar company has run for years with a general growth strategy. As the economy tightens and impacts the company, the executives refuse to narrow their focus. Ultimately, the company is impacted by the recession much more than competitors

• Consultants presented the results of an extensive strategic market study to the operating committee of a fourth company. Despite strong agreement with the crisp, clear recommendations and objectives for improving the company they were never implemented, and the expensive study was soon forgotten

Most managers in business can recount similar stories dealing with strategy formulation and implementation. Business magazines and newspapers present similar stories of companies that both excelled and failed at strategy formulation and implementation.

This article identifies those factors that allow some organizations to set and achieve their goals while others fail? We present some key success factors for companies in the strategy setting and implementation area. Our perspective on these factors comes from having worked in large organizations as the head of business strategy and business development as well as having collectively managed and worked on hundreds of consulting engagements that gave us a unique perspective on what businesses were doing. The concepts presented below are all too often violated with predictable results - failed implementation.

Success Factors in Strategy Setting

Remember Strategy Setting Is About Choice - Many managers believe that strategy setting is goal setting, often in the absence of factual data that the goals may even be attainable given the resources of the company. Strategy is about intention and direction, the selection of one alternative over another. Strategy is really about what you will do and won't do with the resources of the company.

One of the most successful service companies made and implemented some policies about which customers to pursue and serve. The new policy limited the attention some customer segments would receive. It was a tough call for the executives since some customers were long time friends of the company, but these customers were in the categories they decided not to serve in the future.

Make Strategy Setting A Team Activity - Often, CEO's will regard strategy setting as "their" domain but approach more tactical business decisions more collaboratively. However, collaboratively defined strategies are more likely to be achieved. than a CEO's individual goals that are announced to the company.

Each time we have seen a senior executive decree the strategy and goals of a company we have seen the company falter. Some measure of this is due to lack of buy - in but more often than not it is a lack of some factual information on the part of the senior manager making the decision in a vacuum. Not only does the strategy fail but often in such cases, key managers leave because their opinions were not sought or heard.

Often, other managers that stay adopt a passive - aggressive form of behavior. They resist or even resent the strategy, and little progress is made. Sadly, those executives who set strategies in such settings become frustrated and often strike out at the very individuals that could help them get the company back on track.

Some gurus and managers argue that in very rough times autocratic actions may be needed to save a company. Our experience, however, points to the power of teams to generate results. When individuals are made aware of the facts of the current situation, are included in defining actions, they commit themselves to the accomplishment of new strategies.

Analyze Your Strategies: Dreams Won't Happen; Real Objectives Will - Strategy setting is not about "pie in the sky" objective setting. Peter Drucker writes, "Strategy is about the futurity of current decisions." Strategy then is as much about analyzing where today's operating decisions will take you as it is about new directions. Should we organize our sales force by geography or by market segment? Should we invest in an internet- based market channel? Should we advertise or not? These are common strategic options.

Prior to the declaration of bankruptcy, K-Mart decided to forego much of its advertising expenditures and thus lost significant market share to competitors. The CEO admitted that they "hoped" things would go their way. Little analysis had been made of the impact such a decision would have on the overall business and competitive position of the company.

Good strategies are those that receive sufficient analyses to prove their worth in the face of potentially attractive alternatives. Many times a company does not want to dedicate already scarce resources to analyze the choices before them, often with disastrous consequences as was the case with K-Mart.

The nature and type of analyses will depend on the areas of strategy. We have seen companies devote significant and well spent resources to such analyses for such strategy components as product direction, market analysis, customer and supplier surveys, employee focus groups, and extensive business modeling and alternatives study.

Talk to Outsiders - Another way to avoid the hazards of vacuum decision making is to design your strategy setting process to include vibrant discussions with outsiders - advisors, suppliers, distributors and customers. Not including these players will result in your strategy setting become an insular internal process where only a few internal managers consult each other about the future directions the company might take.

Soon after new CEO Gerstner came to IBM an executive staff member was asked, "How did your company lose its edge?" His reply was that senior management had become mentally "constipated"; they had fed each other the same ideas for so long without doing a lot of reality checking that they had come to believe in their own myths. (At the time, IBM still thought the mainframe was to be its basis of growth in the future.)

Outsiders will usually tell you the way they really see you and what they really believe you can accomplish. One very successful CEO goes as far as inviting lost customers to an expense paid outing just to hear the often - sad "truth" about his company.

Get Alignment Amongst Implementers - More than lip service or "yes, boss"; you need real buy in. Real, active participation in the strategy setting process, where members voice their input and share openly about their reservations is the most vital ingredient to success here. Success in strategy implementation requires consistent decision making, and decision making which is consistent with strategy can only be attained when participants understand the strategy and support it.

Strategic alignment often must include more than an organization's managers and employees. Anyone who has a role in the execution of a strategy also needs to be aligned with it. In fact, these "outside" players are sometimes key to the success of the strategy, and their buy - in is often more difficult to obtain. We have seen major strategies sink because distributors were not joined to the new approaches the company was taking.

On the other hand, and on a more positive note, the automotive companies and some computer manufacturers now routinely meet with distributors to ensure they too buy - in to new distribution strategies and advertising campaigns.

Success Factors for Strategy Implementation

Build a Measurement System That Works - Managers who rely on traditional measures and reports within their companies are likely to find they have failed strategies. Why? Most of these systems or reports deal with information that is too old to accurately monitor strategy implementation. In fact, because existing measurement and reporting systems were designed for another purpose they may even mislead managers.

For instance, total sales of a new pharmaceutical - even years after launch- often depend on performance in the first 90 days on the market. Traditional order processing systems, often designed to measure the performance of long distribution chains, may be weeks behind in providing good information about orders and market performance. In this case, accurate short - term information is required to determine if a product launch is lagging behind expectations within the 90 - day window and if the marketing campaign should be augmented.

One way to ensure you are getting the right information is to create a separate set of indicators to tell you whether you would achieve those objectives. Several authors call this latter class of information "critical success factors" or a "balanced scorecard." They are bellwethers of performance, leading indicators or coincidence indicators of success or failure.

Regardless of what you are measuring, you may need to build new information collection mechanisms to get that data. These systems will be more forward looking or predictive than traditional information systems and thus more valuable in guiding strategy implementation. The information collected to help guide strategy implementation should be widely and openly shared within a business. In our view, company performance is eroded if such information is limited to a few people acting as gatekeepers to others who want or need such information.

Lastly, drawing from the lessons of all the work done in the area of TQM, if "it" isn't measurable then how do you know you are being successful? A strategy to penetrate a new market is only good if you can see the progress you are making in quantitative terms. And, since success is often the combined product of many people's efforts, it then follows that many people need to be privy to current measurement information. Without timely information course correction is impossible.

Align Reward Systems To Your Strategy - Old reward or incentive systems can work counter to a new strategy. In one client, we saw strategies to launch new products thwarted by an unchanged sales reward system that only encouraged the sale of established product lines. Such incentives may even extend into the distribution chain where rebates or other benefit programs favor old products or services. Organizations must carefully and continuously examine their motivation systems to see whether or not they are consistent with and encourage behavior in support of new strategy. If not, then these incentive programs must be changed.

When Coca - Cola wanted to increase the level of collaboration and communication amongst senior executives it changed its executive evaluation and reward systems to support the goal. This seemingly common sense step is often overlooked.

Lastly, implementers should be aware that many of the motivators involved are other than financial.

Tell the Truth About What Is Really Happening - We have often seen corporate "filtering systems" that take poor performance information and, with some creative "spin," make it sound like things are just fine. Rather than enabling decision - makers to take action, such prevarication inhibits response and leads to failed strategies Ð or worse. If things are not going well companies need to openly assess why and deal with it. The truth must be told - even in the face of investor dissatisfaction.

Peter Senge in his book The Fifth Discipline tells of his experience working with a major automaker. Analysis of why it took so long to bring a new model to market revealed a significant amount of "spin" in reporting. By focusing on truth telling as the key element of change, a new model was completed faster and at lower cost.

In company settings where we see the type of spin mentioned above, there is often a culture of finger pointing, blame assignment, and/or "kill the messenger." Organizations need to root out this dysfunctional behavior before they can move forward with their strategies.

Ensure Leadership - Not Dictatorship - Strong managers cannot make a strategy happen by force, by brow beating, or by slogans. As a colleague is fond of saying, "if you are about to ride a horse into hell, you had better hope the horse respects or even loves you. Spurs are useless against fire."

In today's world, leadership is a prerequisite to successful strategy implementation. By leadership we mean getting the managers and staff engaged in creating and implementing, having an active voice and providing active visible support to the new strategies.

The worse kind of failure is a failure of leadership. In organizations where we see passive senior managers, often isolated in their offices, we know we will be dealing with issues of failed strategies lower down in the organization.

A Final Thought

We want to end this essay with the story of one company that did do an outstanding job of strategy implementation. We highlight the factors above in this story.

In the opening dialogue that routinely took place at executive committee (EC) meetings, several managers argued that geographic expansion in Europe would better position the company and also improve earnings. Another choice raised by other managers was to expand the domestic branches of the company. Both ideas were circulated within the company and comments widely solicited. The EC continued discussions and also chartered the development of a detailed business plan.

To analyze this idea, the vice chairman of the company and several key staff members visited Europe and interviewed many potential customers to assess the market. The plan and market conditions looked favorable, but it was clear that great effort would be required to make the expansion a success.

The EC and Board approved the European expansion program, particularly after the vice - chairman Ð a native of the U.K. Ð agreed to personally lead and actively champion the effort. Several key staff members who were highly motivated and supportive of the strategy were chosen as the "pioneers" in the expansion. The prospect for promotion for each of the participants was quite clear if the effort succeeded, but it was a high - risk situation.

The selected staff moved to Europe and began to grow the new business there. New information systems were built to assess the growth and the potential growth for the business, and each employee was encouraged to feed both good and bad news into the information pool. Staff meetings of the growing business routinely talked about what was and was not working for them. A very open, supportive and entrepreneurial culture developed in Europe independent of the U.S. headquarters' culture.

The European business grew at triple digit growth rates for the first three years and was profitable far beyond expectations and plans from the first day. A year or so after launch, Europe "rescued" the U.S. during a dip in domestic earnings. The expansion strategy was such a success that the idea was cloned a few years later in several other foreign geographies with similar success. (As a side note, as expected several other competing firms expanded in the U.S. market, which proved over time to be saturated and a lower margin business. The company had made the right call in its initial strategic decision.)

This article has only highlighted only a few of the success factors in strategy creation and implementation. The situation in your company may require these or other critical success factors, and we would welcome the opportunity to discuss them with you.

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Innovations

Innovations is KCG's publication focused on organizational and technological change. Each issue of Innovations presents one or two case studies on a key topic as well as an approach or methodology relating to the situation. A recent issue is published here. Other articles can be found at our site by visiting the links at the bottom of the page.

.. collaboratively defined strategies are more likely to be achieved

"When you don't know where you're going, any road will take you there."

- Yogi Berra

Managers who rely on traditional measures and reports within their companies are likely to find they have failed strategies

... incentive systems can work counter to a new strategy

The worse kind of failure is a failure of leadership

Links to other articles at KCG's website

Innovations Articles

• Measures of Success for Internal Consulting Orgs (NEW!)
• Consultative Selling (New)
• Trends in Consulting
• Commentary on Trends in Consulting
• Marketing of Consulting Services
• Skills and Competencies of Successful Consultants
• Consulting Skills Development Experience
• Effective Uses of I.T. Staff as Internal Consultants
• Strategy Implementation
• Visit to an Operational Excellent Company
• Organizational Due Diligence (Mergers and Acquisitions)
• Principle Driven Operations
• Change Management
• Education's Role in Change Management
• Communications and Change Management
• Value Disciplines
• Role of IS Strategy in Making Market Leaders
• Strategic Planning and Change Mobilization
• Project Management
• Grow Your Own Consultants

Archive Articles (below)

• Designing Executive Information Systems
• Executive Information Systems: An Overview of Development
• Implications of Transition From an Industrial Era to One of Information
• Critical Success Factors Techniques can Apply to Team Management, Too
• Decision Scenarios Ensure Information System Meets Business Needs
• Critical Success Factors : Helping IS Managers Pinpoint Information Needs
• Combining Quality and Reengineering for Operational Superiority
• Steering IS Committees Straight
• Internal Consultants and a Consultative Approach
• EIS Plays Critical Role in Reengineering
• Rapid Software Selection

Kendall Consulting Group is an international general management consulting firm specializing in strategy execution, change management, and executive education. We invite you to contact us for how we might help you and your company grow and prosper.

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