Think about it for a minute, and just let the question sink in.
Imagine you save your organization 1 Billion US Dollars. How would that make you feel? What would that do to your career? What would it do to your reputation?
I’m guessing we’d all agree it would be a good thing. I know it’d make me feel pretty good.
So, the next question is: how? How can you save your organization $1 Billion? Is it even possible?
The good news is that yes, it is possible. We just need to figure out where to start.
That’s right. According to our research, the cost to the top companies in the world for failing to implement strategic initiatives as planned is up to $1 Billion every year.
So, if you do everything you can do to ensure the strategy is actually implemented, you save your organization up to $1 Billion in losses. Easy, right?
Unfortunately, it apparently isn’t that easy.
In 6 out of the last 9 annual CEO Challenge Surveys conducted by The Conference Board, successful strategy execution has consistently been the #1 or #2 challenge identified by global Chief Executives. Since at least 1980, numerous studies have been performed to identify the ultimate impediments to successful strategy implementation, articles have appeared in mainstream business magazines from The McKinsey Report to Forbes and Harvard Business Review, and yet – as of 2014 – the question of how to successfully implement your strategy is still vexing executives and managers alike.
Why is strategy execution so hard?
Everybody loves to talk about strategy—well, creating strategies, anyway. Millions and millions of words have been written on the subject of strategic planning, strategic thinking and strategic management. Anyone in middle management and above has been involved in or at least has an understanding of the strategic planning process. Therefore, that side of strategy should be familiar to everyone. However, if you need a good refresher, check out Henry Mintzberg’s Strategy Safari in the Archistry Bookstore.
Unfortunately, there haven’t been nearly as many words written about strategy implementation as there has about strategic planning and thinking. Sure, there’s a lot of literature about process optimization, quality management and efficiently doing what we’re told to do.
That isn’t the point.
The point is that because there isn’t a good deal of discussion about what successful strategy implementation looks like – objectively and repeatably – we won’t really know if all that work on efficiency, quality and optimization is focused on activities and projects that matter in terms of achieving the strategic plan. We may be solving the wrong problem, or we may even be creating new ones. The ugly truth in many organizations is that we won’t even know until time to prepare quarterly results, or, worse yet, the annual report!
However, the real reason we’re all still chasing our tails on this one is that we, as executives and managers, don’t really see the whole picture of what’s involved to successfully execute business strategy. There are at least two dimensions to the problem:
- What kinds of things do we consistently get wrong?
- How can we see these execution issues in a way that leads to solving them from a consistent mindset?
Until we can reliably address both issues, we will continue to see strategy execution, operational excellence and strategy implementation issues topping CEO surveys for some time to come.
Let’s see if we can’t peel back the first layers of each dimension and prove our $1 Billion target is something worth fighting to achieve.
Many different collections of factors influencing strategy implementation failures have been compiled, and some additional references are provided at the end of this article. However, one of the more popular looks at this issue is Turning Great Strategy into Great Performance, a 2005 article from Harvard Business Review.
In this article, Mankins and Steele identify 11 key reasons organizations fail to successfully implement their strategy. These reasons are given below with their individual contribution to the 37% average performance loss between planned and actual results identified by the article.
- Inadequate or unavailable resources (7.5%)
- Poorly communicated strategy (5.2%)
- Actions required to execute not clearly defined (4.5%)
- Unclear accountabilities for execution (4.1%)
- Execution blocked by organizational silos and culture (3.7%)
- Inadequate performance monitoring (3.0%)
- Inadequate consequences or rewards for failure or success (3.0%)
- Poor senior leadership (2.6%)
- Uncommitted leadership (1.9%)
- Unapproved strategy (0.7%)
- Other obstacles, including inadequate skills and capabilities (0.7%)
Mankins and Steele called this performance loss between expected and actual performance the “Strategy Gap.”
A quick, first-pass analysis of these issues would indicate that the specific 10 items on the list fall into one of the following groups:
- Strategy Creation Problems (7.5%)
- Strategy Communication Problems (13.8%)
- Leadership Failures (14.2%)
Now that we have an initial sense of the nature of the problems contributing to our $1 Billon loss, it is pretty clear that almost any gain in these areas will translate directly into into bottom-line organizational performance. Our costs if we address 9 of the 11 initial items on the list aren’t going to significantly change.
We’re spending the same in terms of people, resources and facilities if we do the right things or the wrong ones. In fact, if we ensure we’re focused on doing the right things, we should not only reduce our costs, but we should also see a multiplier effect on our overall performance beyond the quantitative cost savings!
This is the ultimate win-win-win scenario: you win because you’re helping the organization, the organization wins because it ultimately makes more money, and the shareholders win through greater shareholder value.
You’ll be the hero for sure!
You just need to find a new way of thinking about the problem.
What’s the ultimate common factor in unlocking our $1B savings?
To find our new mindset for attacking each of these issues together, we first need to recognize we’re talking about changing the way the organization works. The three standard levers for organizational change are People, Process and Technology, but while the ultimate change we need to make to recover our $1 Billion will involve all three, we can find our unifying theory by focusing on just one: People.
Specifically, we need to recognize that the issues highlighted above all come from not just “people” but from the way people make decisions. Just trying to address “The People Problem” isn’t going to get us very far, and it’ll likely result in the opposite of what we’re trying to ultimately achieve as organization-wide “change programs” spring up everywhere to address all and sundry aspects of “The People Problem,” and all everyone in the organization really wants to do is just get back to work.
Decisions and how they are made – every day and by everyone in your organization – are at the root of the problem.
We need to understand what happens when we give people a task, and we need to understand exactly how they do their best to accomplish that task once left to their own devices.
We need to understand that decisions are made whenever the person makes them is faced with any uncertainty, be it uncertainty about what to do, uncertainty about what can happen or uncertainty about what’s important.
If we understand that the result of every decision made by everyone in the organization defines whether the organization succeeds or fails, then we have, at last, unlocked the root of the problem.
The ultimate problem is: if you and the people on whom you rely to execute don’t understand risk, you are putting your success – and that of your organization – in the hands of blind luck.
What’s the average cost of trusting blind luck when implementing your strategy?
About $1 Billion. Every year.
Are you willing to throw $1 Billion away, year after year, or are you ready to take charge of yourself and your organization to do something about it?
I thought so. Let’s get to work.
How do you save your organization $1 Billion and ensure your strategy is executed successfully?
The only way to reliably and consistently avoid falling into the Strategy Gap to the tune of $1 Billion annually is to understand that strategy implementation, business execution and operational excellence all come from consistently and reliably making the right decisions every day.
Successful business execution is successful risk management.
Specifically, it means successfully managing the operational risk inherent in your organization as people do their best to handle uncertainty – to manage risks – they face every day. It means communicating priorities effectively and clearly so the overall amount of uncertainty your organization faces on a day-to-day basis is reduced. It means establishing clear accountability and traceability from top-to-bottom as well as from bottom to top. It also means ensuring transparent and objective feedback and early warnings that give you the time to react when things don’t quite go as planned.
If you can do these things, you can save your organization up to $1 Billion. You can be the hero and ride off into the sunset happy and contented if you choose.
Is it possible? Yes.
Can you do it? Yes, you can.
Is it hard work? Yes, it is.
Do you know what to do? I hope so.
Do you know where to start? Maybe not.
Do you have someone who can help you every step of the way? Of course you do, but that’s the subject for another day.
How bad do you want it?
When you’re ready, give us a call or fill in the form below. In the meantime, feel free to keep reading, become a member of our community, sign up for our newsletter or do all of the above. We here, and we’re ready when you are.
If you’re interested in reviewing some of the academic literature on the recurring issues with strategy implementation and the scope of their impacts, the papers below are good places to start. If you have any comments or suggestions as to others, please feel free to suggest them in the forums or the comments below.
- Al-Ghamdi, S.M., Obstacles to Successful Implementation of Strategic Decisions: The Saudi Case. Department of Management & Marketing, College of Industrial Management, Dhahran, Kingdom of Saudi Arabia. 2005.
- Köseoglu, M.A., Barca, M., Karayormuk, K, A Study on the Causes of Strategies Failing to Success. Journal of Global Strategic Management. 2009.
- Li, Y., S. Guohui, M.J. Eppler. Making Strategy Work: A Literature Review on the Factors influencing Strategy Implementation. Institute for Corporate Communication Working Paper 2/2008.