Part 1: External as well as Internal Perspectives – The New Strategy Execution Agenda
Early in 2016, Leadership Forum asked more than 200 mid-level managers and their direct reports in a global B2B company a simple question...
“What are the three factors that most inhibit the execution of strategy in your business unit or more focused segment of the business?”
What was startling about the replies was not what was said but what wasn’t.
Although many words were applied to the internal barriers to strategy execution (inconsistent leadership, poor communication, lack of clarity, etc.), very little was said about the external barriers. Seemingly little thought was given on a day-to-day basis to how marketplace change, especially how the actions of rivals, customers and other actors, could overwhelm their plans. This finding confirmed our hypothesis, based on our observations of many other organizations across various sectors, that managers involved in execution see it simply as the implementation of a set of plans and that this is exclusively an internal matter.
In the so-named digital age, we speak, and write, endlessly on the dangers of disruptive technologies, of living in a world characterized by constant change and uncertainty, of small start-ups suddenly and rapaciously eating market share. Yet, for all the words our actions demonstrate that we still cling, with almost religious fervor, to the tried, tested (and typically failed) approaches to strategy execution. That, once we’ve analyzed, and captured in plans, the external world through SWOTs, PESTELs, Five-Forces etc., the focus is then solely on getting the inside of the organization aligned to the plan. The external world will stand still under the next scheduled planning cycle and resulting strategy refresh.
And we wonder why more that 70% of strategies fail, according to repeated research.
As we collated the responses from these B2B managers they fell neatly into three categories that together capture the primary causes of strategy execution failure – Focus Factors, Capability Factors and Coherence Factors – but all were viewed narrowly through an internal lens. By addressing the internal as well as integrating the external, these stubborn causes of failure can be transformed into critical success factors for success. We need to grind a new set of strategy execution lenses, if you will.
By focus, we mean getting full agreement on how to translate a given strategy into an executable road map. And then, once this agreement has been reached, give appropriate attention at different levels of the organization to ensuring a successful execution.
Our research showed us that this requires attention be paid to rectifying typical drivers of internal focus failure, such as leaders not having a shared understanding as to what is important and why, too many strategic initiatives and a lack of monitoring of progress based on measurable milestones. However, Focus failure is also the result of not taking an external perspective, resulting in lack of attention to the external markets – in particular the impact on customers and the reactions of competitors to deny the strategic advantage being pursued with the strategy.
By capability we mean having the right capabilities in place in order for execution to succeed. In addition to internal reasons for internal Capability Focus failure, such as lack of leadership strength, Inability to absorb the change involved and lack of of cultural fit to the new direction, capability failure also includes not taking an external perspective, such as Inability to read what is happening in the marketplace in response to the strategic changes being introduced. We call these marketplace-oriented capabilities.
Execution must enhance critical internal capabilities to better capture the external context such as capturing customer and competitor data, translating such data into winning customer value propositions, developing marketing strategies, and adapting plans based on marketplace learning, etc. Capabilities in using and translating into action advanced data analytics will be increasingly important.
By coherence we do not mean simply a coherent action plan. Coherence resides in the relationships and linkages among all the relevant stakeholders involved in executing the plan. Coherence consists of dynamically coordinating and adjusting these relationships and linkages in line with learning about change both in the marketplace and within the organization. Learning about both is not an option; it is a prerequisite for successful strategy execution.
Internal coherence-related causes of execution failures that were repeatedly pointed to in our research responses included overlaps, turf tugs and a lack of coordination, communication and collaboration among those responsible for implementation. However, not taking into account external factors leads to external incoherence in terms of understanding the marketplace. This inevitably leads to breakdowns in unity of purpose and in transitions from one phase of execution to another. For example, when coherence is not achieved around critical marketplace assumptions, interpretations of execution results quickly clash and suggestions to modify market initiatives generate intense conflict.
The Price of External Failure
The almost complete absence of concern with external factors unearthed by our research meant that:
1. Focus was almost exclusively internally oriented. In the absence of an embedded external Focus, the ongoing competitive dynamics will no doubt alter the underlying marketplace opportunity—for better or for worse—and do so before it is anticipated or detected.
2. Capability centered almost entirely on internal capacities. In the absence of attention to marketplace-oriented capability enhancement, internal capabilities may be augmented but there is no guarantee they will contribute to a winning marketplace strategy.
3. Coherence seemed to obsess on the internal relationships and linkages. Coherence that is obsessed on an integrated plan misses the necessary balance between the internal and the external; it can quickly degenerate into ordering the deck chairs on the titanic.
Strategy execution without a built-in external perspective will lead to our missing an expanding or emerging opportunity or, perhaps worse, encourage us to go harder after a declining opportunity. An incomplete picture of the factors affecting execution cannot but give us poor results.
In part two of this work, we will outline a set of Principles for Strategy Execution, based on the three areas of focus.