On failing large scale strategy execution
Picture the situation: Your organization has a brand new strategy. Everyone is eager to execute, people are energized... and five years later, you are not there. But why? This short note explores key themes experienced during thirty years in the field in Strategy and Digital.
Ultimately, a strategy is about where to go. Either as a direction, or as a position you want to hold, an ambition level, or how to create a fertile ground for seeking and testing directions in uncharted territories.
As a CXO, you want your forces to jointly work towards these directions. Let’s dig into what this really takes.
Definition of where to go
Let's say that a strategy statement is "We shall take advantage of digital technologies". While this during the 1990s were not an uncommon strategy statement, it was difficult to turn into execution. It was too ambiguous, and lead to much motion, but little progress. Investments were made, but with unfocused intent, uncertain benefits realization, and little effect.
Strategic ambiguity leads to much motion and little progress.
So what does it take to formulate a direction?
Instead, try a formulation like this:
Do D, for the purpose of P, resulting in R - with a focus on F, limited by L. The former strategy statement would then read:
"We shall try out cloud platforms, for the purpose of finding out what fits our organization, resulting in that we in one year can decide on which digital capabilities to build with a focus on cloud platforms of type IaaS, limited by a) cloud platforms that operate in our own geopolitical sphere; b) cloud platform providers that do not compete with our own lines of business"
While this is a more executable strategy, it is necessary, but not enough. That is because this now has to move into execution.
The one's what is the next's how
You are given the task to implement this strategy. You are proud, because owning a piece of the strategy, with the career possibilities this provides is by no means a small feat. You jump to execution, fire up some digital solutions that fit the strategy formulation, feel great and yet - something is missing. It is just not secure enough. It will not scale. It is going to be too expensive.
So what went wrong? It is because somewhere, the direction was not substantial enough. The original statement assumed digital security. It assumed scalability, and it assumed cost efficiency. But where should those assumption have been spelled out?
Sometimes, you will find them spelled out in overall strategy. However, a CXO rarely has time or broad enough insight into all the domains he or she must command, so in most cases, these statements are missing in the original strategy formulation. Therefore, you need to translate the one's what into your own how.
The tool you need to apply now is a secondary stage of strategic thinking. Are there other forces you must care about? Additional regulatory, compliance, financial, scalability requirements, that affect the strategic contextual framework for your organization? Once you have an idea about this, you can elaborate on the given strategy. In this case, the real limitation clause of the strategy includes c) the solution must be on the right risk level, and the result clause should include that the solution explored should scale to some objective, as well as a clause stating that the solution explored shall be cost efficient for some measurement type. Formulate the missing clauses, share them, and agree on them.
Now, does this work? I have applied this line of thinking in telco, finance, energy, transport and other industries. Is it a demanding exercise? Yes. Does it work in getting people aligned? Definitely. But is it enough to drive efficient execution? It is not. A key factor often hampering strategic direction execution is that of motivation systems.
Motivation systems can cause head winds
In our example, assume that this initiative requires inter-departmental alignment. But what if two departments have KPIs that conflict with this initiative? You will have a problem, because the organization is set up to execute in another direction than the strategy. For example, if present KPIs focus on business of today, while your initiative focus on business of tomorrow, how shall a line manager on whom you depend, a bit lower in the organization, act and prioritize? If career is of interest, he or she has problem breaking KPIs.
That is, to actually implement strategy, you must, as part of going from strategic direction to execution, look at the motivation system of an organization.
Motivation systems include structural KPIs, policies, and motivation systems.
So how do you translate this into practise? In my own experience, it is quite simple. You ask people what KPIs, policies or other motivations that hinder execution - and then you change these before you even try to execute further.
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Facing an organization that is structurally set up to go into two opposite directions at the same time is like sailing in head winds – it can be done, it is demanding and fun, but you do not go directly towards your objective.
Speed in execution requires a shared map
Lets assume, that you now have a shared direction, and a motivational system that helps. Again you are happy, but execution speed is repeatedly hampered. Unforeseen circumstances and limitations arise, and your initiative becomes questioned. You are questioned.
So what causes a larger organization to be slow? Why do you not get operational efficiency, despite having direction, resources and supporting motivation system? We need to look at the basics, that too often are less prioritized in a world that that teaches young persons to focus on the next fourteen seconds. We are going to the 14th century.
In the 14th century, getting a set of people navigate in the same direction was not helped by lightning speed communication. It was guided by maps. Maps were so valuable, that you could be ordered killed just by knowing that a map existed. But why were they valuable? It is because they shared traits with money:
But what are maps of today's organizations? At the end of the day, they are shared information, that are useful to many. But what type of information must be produced, maintained, controlled and shared, as this has a cost?
In principle, the answer is: As much as possible. In reality, there are a number of types to focus on:
Collectively the sum of these is often implicitly thought of as the operating model of an organization. Each of the information classes come with different challenges, models and solutions, but what can cause slowness in our example? Let’s explore.
If you follow this line of reasoning, you will find that lack of shared information, and the relationships between these are all causing slowness in strategy execution. Furthermore, you will find out while this information has a very high operational value, it is often not valued as financial asset, that appear on a balance sheet.
Henceforth, organizations that do produce and maintain their operational model information in a shared way can appear to have great financial performance - but do not have the health required for faced paced, operationally efficient change - if measured across the organizational ecosystem.
So, what to do about it? Let's look at larger best-in-class-organizations in this respect. How do they work? We are turning towards the military and some nation states. You did not see that coming, did you?
In the military, you talk about Command, Control, Communication and Information. There is a reason that one large military force in the world has a ratio of about 1:11 between fighters and those who enable fight. There is a reason for why the ability to share information to get a better picture of the situation, in many dimensions, is key. It is because
Without shared information, you are not poised for getting people to work in towards the same direction.
In nation states, there is a reason for why there are registries of properties, persons, roads and much more such as APIs. It is not because a single person needs it (I own my own property, and of course I know my local roads and neighbours), but because it lets multiple people to think and act across larger sets of information, in a joint direction.
In the business world, ownership of information is often more scattered, and to avoid having to solve these rather hard issues, we try to decentralize decision making and responsibilities. That has proven to be of great benefit in some industries, but, you also see examples of how this does not work well. Instead, the best examples of how to work come from those who understand their own needs: If you have long, safety critical value chains, the need for shared operational model information increases. If you can afford a technologically scattered situation and time to market is important, you put less focus on shared information. And, if your value proposition is about creating, or owning an eco-system, you put enormous efforts onto making all information about the operational model assets available to all those involved.
On your own strategic journey
On the Internet, you will find thousands of lists, such as this one, suggesting what to do or not to do. Accepting any of them without reflection is biting clickbait. Therefore, I ask you to not immediately bite. Instead, use some time to reflect. Do parts of this fit my own organization? What was not mentioned? Given that, if you wish to change – try out the goal formulation framework put forward in this post. It helps you delineate and pace your approach.
Disclaimer and sources
Disclaimer: This work is some personal summer time reflections. It is not based on a single organization, but work with senior managers in many organizations, in many lines of business, in many geographies. Henceforth, there is no link to a particular person, organization, strategic setting, but rather, an attempt to describe some commonalities in what makes strategy translate into meaningful action.
Secondly, this in no way an attempt to give a complete account of what it takes to succeed with strategy execution. There is a large amount of research out there, including culture, change management, general leadership principles, long term intent formulations and more.
Inspiration for this particular post include: Work by McKinsey on performance vs health. Work by the Fraunhofer Institute with respect to how to formulate a goal. A high number of internationally published academic research papers. Work by Software AG on non-financial asset information of an organization. And maybe most important: Lessons learned from discussions with great leaders and thinkers in Europe, Asia and the Americas from ABB, Bane NOR, Cognizant, Color Line, DiGi, Ericsson, Gartner, Hoegh LNG, the Lund Institute of Technology, Microsoft, Orkla, Telenor, SpareBank 1. You know who you are, and you all execute on strategy every day – thank you all for contributing to my summer reflections on strategy.
Thanks for this Lars, very insightful.