Ensuring Effective Strategy-Making, Implementation and execution
Strategic Management
Strategic Management is a managerial process consisting of a set of managerial tasks - managerial decisions and actions - in managing a strategy through its life cycle stages. Effective strategic management is a disciplined effort involving strategic decisions, judgment, and actions that shape the nature and direction of an organization's activities in the strategy-making, strategy-implementation and execution. and performance evaluation. To be effective, strategic management requires that management possess the capacity to plan, organize, direct, monitor and control strategic decision-making and actions in adding value for customers, owners, and employees and doing its best work while avoiding misfires.
Strategic Management is a managerial process consisting of a set of managerial tasks - managerial decisions and actions - in managing a strategy through its life cycle stages. Effective strategic management is a disciplined effort involving strategic decisions, judgment, and actions that shape the nature and direction of an organization's activities in the strategy-making, strategy-implementation and execution. and performance evaluation. To be effective, strategic management requires that management possess the capacity to plan, organize, direct, monitor and control strategic decision-making and actions in adding value for customers, owners, and employees and doing its best work while avoiding misfires.
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Strategy Formulation
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Implementation
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Execution
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Performance Evaluation
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Strategy Formulation
Strategy formulation is a stage in the strategic management process involved in strategy-making based on rational approaches and/or an emergent approaches. Management develops strategies to guide how the organization conducts its business and how it will achieve its target objectives. Strategies are developed to deal with those strategic issues identified during strategic planning and written into the strategic plan (which is your organization's "road map" to guide your excursion into the future). Successful strategy formulation produces a clear set of recommendations, with supporting justifications, that revise as necessary the mission, its supply of resources and objectives (in meeting the expectations of the stakeholders). Effective formulation, and implementation will link rhetoric (what people say), choices (what people decide and are willing to pay for), and actions (what people do) into a consistent pattern across level, function, and time.
What is Strategy?
Strategy in a business organization is about how the organization seeks to survive and prosper within its environment over the long-term. It consists of the moves made and approaches taken by management to produce successful performance of the organization. The definition of strategy in the management literature falls into one of four categories:
In reality, strategy evolves over time as our intentions accommodate reality. Decision makers or managers start with a given perspective, conclude that it calls for a certain position, and sets about achieving it by way of a carefully crafted plan. Over time things change; a pattern of decisions and actions marks movement from starting point to goal. This pattern of decisions and actions is called "realized" or "emergent" strategy. The actual strategy of an organization is the outcomes of the combination of executed parts of deliberate strategy and emergent strategy - "realized pattern " that was not expressly intended but emerged as a result of actions undertaken by the organization in response to environments factors.
Levels of Strategy
The term "strategy" is an overloaded in everyday conversations because most people including professional practitioners do not bother to explicitly establish their point of view into what is essentially a layered concept that exists at least three (3) levels such as general strategy, corporate strategy, and business and competitive strategy.
Strategy-Making Process
Strategy formulation is primarily an intellectual and creative act involving developing solutions to known strategic problems identified and defined through diagnosis of strategic issues and events. The process for formulating deliberate strategy follows a Rations/Prescriptive Approach (also termed deliberate, rational and intended), meaning the core areas are linked sequentially; this means you do analysis to develop strategy which is then implemented and executed. “Deliberate strategies provide the organization with a sense of purposeful direction. The process involves the following steps:
Establishing Direction and Purpose
Establishing a direction and purpose for the organization involves developing a strategic vision and business mission. Senior Management deciding what business the company will be in and forming a strategic vision of where the organization deeds to be headed - in effect, setting the organization with a sense of purpose, providing long-term direction, and establishing a clear mission to be achieved.
Management's vision of what the organization seeks to do and to become is commonly termed the organization's "mission." A mission statement establishes the organization's future course and outlines "who we are, what we do and where we are going". This sets out a particular business position. The organization's mission which sets out the reasons for the organization's existence and vision - the "ideal" state that the organization aims to achieve.
The mission defines the basic purpose of the organization as well as its scope of operations and guides the identification and formulation of key organization goals and major performance objectives the organization expects to achieve to be successful. Ensure there is consensus on why the organization exists, what goals or outcomes it seeks to achieve, what it stands for, and whom it serves. If it has specific mandates - things it must do, or not do based on its articles of incorporation or bylaws, or long-term contracts or grants - then these should be clearly defined. Identification and clarification of mandates when dealing with non-profit organizations.
The vision clarifies the long-term future direction of the company and its strategic intent. The vision might describe the organization broadly, in terms of its mix of programs, reputation or status inside and outside its primary target market/community, key accomplishments, and relationship with stakeholders. The vision statement is a description of the organization in the future in broad categories or specific characteristics. For a non-profit organization for example, would include broad categories in terms of its mix of programs, resources, status, relationships, institutional development, and governance; or specific characteristics in terms of target areas, target population, budget size, staff size and composition, etc.
Setting Strategic Objectives
The purpose of setting objectives is to convert managerial statements of business mission and company direction (strategic vision) into specific performance targets, something by which the organization's progress can be measured. Strategic objectives serve as yardsticks for tracking an organization's performance and progress. The objectives set must ideally embrace a time horizon that is both short-term and long-term. Short-term objectives spell out the immediate improvements and outcomes desired by management. There are two (2) types of performance yardsticks including:
These measures make it explicit that management not only must deliver good financial performance but also must deliver on strengthening the organization's long-term business and competitive positions.
Develop a series of goals or organization status statements which describe the organization's direction assuming it is successful in addressing its mission. Essentially, this entails transforming the vision into a series of key goals for the organization, preferably in the form of status statements describing the organization. Setting organizational goals can also help a company measure their organization's progress and determine the tasks that must be improved to meet those business goals. The challenge of trying to close the gap between actual and desired performance pushes the organization to more inventive, to exhibit some urgency in improving both financial performance and non-financial (strategic) performance.
Analysis of Internal/External Environments
Analysis is a key stage in the Strategy-making/formulation process; the information gained at this stage will shape the next stages in the process. In this stage, gather as much information and data as possible that is relevant to accomplishing your vision. The focus of the analysis should be on understanding the needs of the business as a sustainable entity, its strategic direction, and identifying initiatives that will help the organization grow.
Crafting Strategy
Strategy -making brings into play the critical managerial issue of how to achieve the targeted results in light of the organization's situation and prospects. Objectives are the "ends," and strategy is the "means" of achieving them. In effect, strategy is the pattern of actions managers employ to achieve strategic and financial performance targets.
Strategies are developed for each goal. Ideally, each strategy represents a single, distinct approach to achieving all or part of the goal. Like goals, strategies are directional. For example, a strategy for the "Raise Revenue" goal might be to "Increase Membership." While goals and strategies are directional, objectives are specific, measureable actions.
Strategy formulation is a stage in the strategic management process involved in strategy-making based on rational approaches and/or an emergent approaches. Management develops strategies to guide how the organization conducts its business and how it will achieve its target objectives. Strategies are developed to deal with those strategic issues identified during strategic planning and written into the strategic plan (which is your organization's "road map" to guide your excursion into the future). Successful strategy formulation produces a clear set of recommendations, with supporting justifications, that revise as necessary the mission, its supply of resources and objectives (in meeting the expectations of the stakeholders). Effective formulation, and implementation will link rhetoric (what people say), choices (what people decide and are willing to pay for), and actions (what people do) into a consistent pattern across level, function, and time.
What is Strategy?
Strategy in a business organization is about how the organization seeks to survive and prosper within its environment over the long-term. It consists of the moves made and approaches taken by management to produce successful performance of the organization. The definition of strategy in the management literature falls into one of four categories:
- A Plan - A plan is a consciously intended courses of action on "how" - a means of getting from here to there. This may be general or detailed, formal or in the mind. As a plan, strategy is conceived in advance, has a purpose and is thoughtful to some degree.
- A Perspective - A vision and direction, a view of what the company or organization is to become. Mintzburg points out that strategy as a perspective is the same as "Strategy As A Plan" but without the formal planning. In this view, many people in the organization have the same orientation or perspective when they make strategic decisions.
- A Pattern - A pattern of decisions over time that may be consistent or inconsistent but represents a strategy. A consistent pattern of decisions may be the result of an explicit and written strategy or it may be result from organizational culture, or it may result from the influence of one or more leaders. An inconsistent pattern of decisions also represents a sort of strategy - a non-strategy, perhaps, but a strategy that governs decisions. So, in a sense, every organization has a strategy; they all make strategic decisions or non-decisions that are also decisions.
- A Position - We may view a position taken by the organization that reflects decisions to offer particular products and services in particular markets as a strategy relative to the environment.
In reality, strategy evolves over time as our intentions accommodate reality. Decision makers or managers start with a given perspective, conclude that it calls for a certain position, and sets about achieving it by way of a carefully crafted plan. Over time things change; a pattern of decisions and actions marks movement from starting point to goal. This pattern of decisions and actions is called "realized" or "emergent" strategy. The actual strategy of an organization is the outcomes of the combination of executed parts of deliberate strategy and emergent strategy - "realized pattern " that was not expressly intended but emerged as a result of actions undertaken by the organization in response to environments factors.
Levels of Strategy
The term "strategy" is an overloaded in everyday conversations because most people including professional practitioners do not bother to explicitly establish their point of view into what is essentially a layered concept that exists at least three (3) levels such as general strategy, corporate strategy, and business and competitive strategy.
- General Strategy - General strategy refers to how a given objective will be achieved. Strategy in the general sense is concerned with the relationships between ends and means; that is, between the results we seek and the resources at our disposal. Strategy and tactics are both concerned with formulating and then carrying out courses of action intended to attain particular objectives. Strategy is concerned with deploying the resources at your disposal whereas tactics is concerned with employing them.
- Corporate Strategy - Corporate strategy defines the markets and the businesses in which a company will operate. Corporate strategy is typically decided in the context of defining the comp[any's mission and vision, that is, saying what the company does, why it exists, and what it is intended to become. Corporate level strategy is about positioning the organization in order to achieve intended business goals. The positioning may be for growth, stability, or exiting the business.
- Competitive/Business Strategy - Competitive strategy defines for a given business the basis on which it will compete. Competitive strategy hinges on a company's capabilities, strengths, and weaknesses in relation to market characteristics and the corresponding capabilities, strengths and weaknesses of its competitors.
- Function Strategy - Functional strategies are concerned with how the functional areas defined by the Operations Strategy design contribute to business strategy. Functional strategy define where the functions of a business make long-term plans which support the competitive strategy being pursued by the business strategy. Functional strategies specify outcomes to be achieved from the daily operations of specific departments or functions. A Functional Strategy, for any business, large or small, focuses (the achievement of a goal) on the skills and abilities of individual departments and their employees.
- Operations Strategy - Operations strategy binds the various operations decisions and actions in functional areas into a cohesive consistent response to competitive forces by linking firm/organization policies, programs, systems, and actions into a systematic response to the competitive/strategic priorities chosen and communicated by the corporate or business strategy. Operations strategy is the collective concrete actions chosen, mandated, or stimulated by corporate strategy. Operations strategy defines how an entire business will allocate its resources to support operations and its strategic goals. Operations strategies focus on maximizing the efficiency and effectiveness of production while minimizing operating costs.
Strategy-Making Process
Strategy formulation is primarily an intellectual and creative act involving developing solutions to known strategic problems identified and defined through diagnosis of strategic issues and events. The process for formulating deliberate strategy follows a Rations/Prescriptive Approach (also termed deliberate, rational and intended), meaning the core areas are linked sequentially; this means you do analysis to develop strategy which is then implemented and executed. “Deliberate strategies provide the organization with a sense of purposeful direction. The process involves the following steps:
Establishing Direction and Purpose
Establishing a direction and purpose for the organization involves developing a strategic vision and business mission. Senior Management deciding what business the company will be in and forming a strategic vision of where the organization deeds to be headed - in effect, setting the organization with a sense of purpose, providing long-term direction, and establishing a clear mission to be achieved.
Management's vision of what the organization seeks to do and to become is commonly termed the organization's "mission." A mission statement establishes the organization's future course and outlines "who we are, what we do and where we are going". This sets out a particular business position. The organization's mission which sets out the reasons for the organization's existence and vision - the "ideal" state that the organization aims to achieve.
The mission defines the basic purpose of the organization as well as its scope of operations and guides the identification and formulation of key organization goals and major performance objectives the organization expects to achieve to be successful. Ensure there is consensus on why the organization exists, what goals or outcomes it seeks to achieve, what it stands for, and whom it serves. If it has specific mandates - things it must do, or not do based on its articles of incorporation or bylaws, or long-term contracts or grants - then these should be clearly defined. Identification and clarification of mandates when dealing with non-profit organizations.
The vision clarifies the long-term future direction of the company and its strategic intent. The vision might describe the organization broadly, in terms of its mix of programs, reputation or status inside and outside its primary target market/community, key accomplishments, and relationship with stakeholders. The vision statement is a description of the organization in the future in broad categories or specific characteristics. For a non-profit organization for example, would include broad categories in terms of its mix of programs, resources, status, relationships, institutional development, and governance; or specific characteristics in terms of target areas, target population, budget size, staff size and composition, etc.
Setting Strategic Objectives
The purpose of setting objectives is to convert managerial statements of business mission and company direction (strategic vision) into specific performance targets, something by which the organization's progress can be measured. Strategic objectives serve as yardsticks for tracking an organization's performance and progress. The objectives set must ideally embrace a time horizon that is both short-term and long-term. Short-term objectives spell out the immediate improvements and outcomes desired by management. There are two (2) types of performance yardsticks including:
- Financial Objectives - These typically focus on such measures as earnings' growth, return on investment and cash flow.
- Non-Financial Strategic Objectives - These measures provide consistent direction in strengthening a company's overall business and competitive positions. They involve such measures as: growing faster than the industry's average, making gains in market share, etc.
These measures make it explicit that management not only must deliver good financial performance but also must deliver on strengthening the organization's long-term business and competitive positions.
Develop a series of goals or organization status statements which describe the organization's direction assuming it is successful in addressing its mission. Essentially, this entails transforming the vision into a series of key goals for the organization, preferably in the form of status statements describing the organization. Setting organizational goals can also help a company measure their organization's progress and determine the tasks that must be improved to meet those business goals. The challenge of trying to close the gap between actual and desired performance pushes the organization to more inventive, to exhibit some urgency in improving both financial performance and non-financial (strategic) performance.
Analysis of Internal/External Environments
Analysis is a key stage in the Strategy-making/formulation process; the information gained at this stage will shape the next stages in the process. In this stage, gather as much information and data as possible that is relevant to accomplishing your vision. The focus of the analysis should be on understanding the needs of the business as a sustainable entity, its strategic direction, and identifying initiatives that will help the organization grow.
- Organizational Scan - The vision, mission and values drive the ongoing analysis of the organization's internal environment to assess its strengths and weaknesses with respect to strategic intent and relevant issues. It involves analysis and evaluation of the general economic and industry environment in which the organization operates; this includes a review of the organization's competitive position. It is essential to conduct a qualitative and quantitative review of the organization's existing product line.Internal analysis provides strategic decision makers with an inventory of organizational skills, and resources as well as their performance levels. Many resources can be combined to give organizations competitive advantage. In particular the advantages due to intangible assets including people and service capability provide the most difficult to imitate or copy advantage.
- Environmental Scan - The vision, mission, and values drive the ongoing analysis of the organization's external environment to assess its opportunities and threats. Changes in the external environment can have direct impact on the way organizations are run and people are managed. Some of those changes represent opportunities, and some of them represent real threats to the organization.
- SWOT Analysis - This involves analyzing the organization's external/internal environments to identify any opportunities and/or threats; and strengths and weaknesses. It involves continuous monitoring of environments conditions for changes in environments' factors that may affect your organizations performance. The SWOT analysis helps executives summarize the major facts and forecasts derived from external and internal analyses.
- Gap Analysis - Strategy gap analysis looks at the company's strategy and is closely tied to bench marking (comparing yourself to competitors or best practices). For example, a company that wants to grow into becoming a larger company would first perform market gap analysis to find out what current competitors don't do, and markets they don't serve then they will perform strategic gap analysis that looks at their current skills they lack, if their current location is right what kind of advertising they need and what resources they would need to acquire. The Gap Analysis, as part of strategic planning, can look for issues and adjust the strategy to better fit the situation, or realign the company's processes to align with the strategy.
Crafting Strategy
Strategy -making brings into play the critical managerial issue of how to achieve the targeted results in light of the organization's situation and prospects. Objectives are the "ends," and strategy is the "means" of achieving them. In effect, strategy is the pattern of actions managers employ to achieve strategic and financial performance targets.
- Review SWOT Analysis - This involves reviewing the information gleaned from completing the analysis. Determine what resources the business currently has that can help reach the defined goals and objectives. Identify any areas of which the business must seek external resources.
- Strategic Issues Diagnosis and Identification - Strategic issues are fundamental policy questions affecting the organization's mandates, mission and values, product-mix/service-mix, clients, users or payers, cost, financing,management or organization design. Identify and resolve issues facing the organization and prioritize them relative to the relevance and importance to success. In this step the organization must establish target values for some of the organization's objectives.
- Define or review Values, Community vision, and Principles - Every organization has values, and these values should be coherent with the strategy. Values assessment involves looking into the personal values of the members of the organization, organization values, and the organization's operating philosophy. The Core Values are the essence of the organization's corporate culture and the expression of its "personality"; they are the strong enduring beliefs and principles that the company uses as a foundation for its decisions.
- Strategic Options Development- This involves analyzing strategic issues and crafting strategies to respond to identified problems in areas such as corporate strategy, business/competitive strategies, and possibly operations strategies. Corporate strategy is about domain selection; and includes decisions and choices about the following: (1) What should be the capabilities that distinguish the company? (2) What should be the company's comparative advantage in adding value to its individual businesses? (3) What businesses should the company be in?. These are the fundamental choices that a corporate strategy comprises and they frame and guide all the decisions that a company's corporate executives, functions, and staff make every day. Business/competitive strategy is comprised of answers to fundamental questions such as: (1) Who should be the customers that define our target market? (2) What should be the value proposition that differentiates our products and services with those customers? (3) What should be the capabilities that make our business better than any other in delivering that value proposition? These choices comprising the business strategy should drive the decisions of business units' management teams, functions, and staff that make every day decisions on pricing, R&D, where to manufacture, etc. Options development involves identification of practical and creative alternatives for resolving identified strategic issues. For each of the alternatives, enumerate the barriers to achieving the alternative. Prepare proposals for achieving the alternatives subject to the barriers.
- Choice of Strategy - Selection of strategic options based on evaluation criteria that look at factors such as described in the evaluation section below. Strategic choice refers to the decision-making process of selecting strategic option from a number of alternatives for implementation. Selecting a given approach from "approaches" (or means) among all options and choices that can be made at a given point in time; that "approach" becomes the "strategy" (strategic option). Every decision, every action taken from then on, will be based on (or aligned with) that "strategy". Strategic choice is a set of related options (typically combining options for products/markets and services, and resources) that form a potential strategy. The simplest form of choice is therefore between taking an option or not taking it - doing it or not doing it. Most choices have more shades of possibility than this. An option is a course of action that it appears possible to take. A strategic option is a set of of related options from a options network that address a strategic issue.
Strategies are developed for each goal. Ideally, each strategy represents a single, distinct approach to achieving all or part of the goal. Like goals, strategies are directional. For example, a strategy for the "Raise Revenue" goal might be to "Increase Membership." While goals and strategies are directional, objectives are specific, measureable actions.
Emergent Strategy Formulation Process
Emergent strategy is realized pattern that was not expressly intended or planned that emerged from execution. The emergent approach (also termed realized) states that the three (3) core areas are interrelated and the analysis is in advance of the other two. The different styles/approaches of strategy making complement each other. Emergent strategy is a set of actions, or behavior, consistent over time, “a realized pattern [that] was not expressly intended” in the original planning of strategy. Emergent strategies rely on the organization's ability to learn from actual experiences of all employees at all levels.
Emergent strategy is undertaken by an organization that analyzes its environment constantly and implements its strategy simultaneously (Lynch, 2000; 26). Emergent strategy formulation process is a learning process in which cycles of events are characterized as an ongoing process of experience, reflection, interpretation, and action (Kim, 1993; Kolb, 1976). The emergent approach to strategy formulation is characterized by trial, experimentation, and discussion, that is, by a series of experimental approaches rather than a final objective. An emergent strategy develops when an organization takes a series of actions that with time turn into a consistent pattern of behavior, regardless of specific intentions. Emergent strategy implies that an organization is learning what works in practice. Emergent strategy is bottoms up, akin to strategic learning through feedback mechanisms to properly respond to and adapt to changes in the business environment in order to be profitable. Emergent strategy is more of a cumulative effect from bottom-up - the ground engineers, sales people, and other executive staff. These are daily tactical operations decisions made by those who are not in the position or state of mind to conceptualize such strategies.
Evaluating Formulated Strategy
The evaluation is based on a set of selection criteria that ensures the chosen strategies will be effective. An effective strategy is defined in terms of the degree to which the strategy meets these criteria including:
The whole point about strategy is that the critical factors determining its quality are often not directly observable or simply measured; and by the time strategic opportunities/threats do directly affect operating results, it may well be too late for an effective response.
Emergent strategy is realized pattern that was not expressly intended or planned that emerged from execution. The emergent approach (also termed realized) states that the three (3) core areas are interrelated and the analysis is in advance of the other two. The different styles/approaches of strategy making complement each other. Emergent strategy is a set of actions, or behavior, consistent over time, “a realized pattern [that] was not expressly intended” in the original planning of strategy. Emergent strategies rely on the organization's ability to learn from actual experiences of all employees at all levels.
Emergent strategy is undertaken by an organization that analyzes its environment constantly and implements its strategy simultaneously (Lynch, 2000; 26). Emergent strategy formulation process is a learning process in which cycles of events are characterized as an ongoing process of experience, reflection, interpretation, and action (Kim, 1993; Kolb, 1976). The emergent approach to strategy formulation is characterized by trial, experimentation, and discussion, that is, by a series of experimental approaches rather than a final objective. An emergent strategy develops when an organization takes a series of actions that with time turn into a consistent pattern of behavior, regardless of specific intentions. Emergent strategy implies that an organization is learning what works in practice. Emergent strategy is bottoms up, akin to strategic learning through feedback mechanisms to properly respond to and adapt to changes in the business environment in order to be profitable. Emergent strategy is more of a cumulative effect from bottom-up - the ground engineers, sales people, and other executive staff. These are daily tactical operations decisions made by those who are not in the position or state of mind to conceptualize such strategies.
Evaluating Formulated Strategy
The evaluation is based on a set of selection criteria that ensures the chosen strategies will be effective. An effective strategy is defined in terms of the degree to which the strategy meets these criteria including:
- Consistency - The strategy must not represent mutually inconsistent goals and policies.
- Suitability (Appropriateness) - Is the strategy consistent with the organization's mission, values, and operating principles? Does it fit with the vision and mission?
- Consonance - The strategy must represent adaptive response to the external environment and to the critical changes occurring within it as defined by the SWOT Analysis information..
- Value - Will the strategy contribute to meeting agreed-upon goals?
- Advantage - The strategy must provide for the creation and/or maintenance of a competitive advantage in the selected areas of activity.
- Feasibility . Is the strategy practical, given personnel and financial resources and capacity? The strategy must neither overtax available resources not create unsolvable sub-problems.
- Acceptability - Does it fit with the values of the company and the employees? Is the strategy acceptable to the Board, key staff, and other stakeholders?
- Flexibility - Can it be adapted and changed as needed?
- Cost-Benefit - Is the strategy likely to lead to sufficient benefits to justify the costs in time and other resources?
- Timing - Can and should the organization implement this strategy at this time, given external factors and competing demands?
The whole point about strategy is that the critical factors determining its quality are often not directly observable or simply measured; and by the time strategic opportunities/threats do directly affect operating results, it may well be too late for an effective response.
Strategy Statement
Strategy is the scope and direction of the organization over the long term which achieves advantage for the organization through its configuration of resources, within a changing environment, to meet the needs of markets and to fulfill stakeholders' expectations" (Johnson & Scholes, 2002). A company's strategy is typically a combination of (1) planned - deliberate and purposeful actions and (2) emergent - as-needed reactions to unanticipated developments and fresh competitive pressures. The strategy statement describes what the organization's competitive game plan will be.
Strategies are the statements of how an organization is going to achieve its mission and realize its vision. A company's strategy concerns how to:
The how of strategy tend to be company-specific, customized to a company's own situation and performance objectives.
A strategy statement communicates the company's intended strategy to everyone within the organization. A well written strategy statement will help employees and the organization to understand their roles when executing the company's strategy. Mixing the deliberate and emergent strategies in some way helps the organization to control its course while encouraging the learning process. The statement consists of three (3) components objective, scope, and competitive advantage.
Defining the objective, scope and competitive advantage requires trade-offs which are fundamental to strategy. The strategy statement is a hypothesis of the means by which strategic goals i.e., sustainable growth, are achieved. Goals and objectives provide the milestones for measuring the success of the strategy in achieving the mission and vision. Goals are statements of what needs to be done to implement the strategy. Objectives are specific milestones for meeting a specified goal. A strategy has to be sound, implemented and executed to have value.
Fundamental Questions Driving Strategy-Making Decisions
Strategy in general is concerned with how particular objectives are achieved, with courses of action. Corporate strategy is concerned with choices and commitments regarding markets, businesses, products, services, and the very nature of the company itself. Competitive strategy is concerned with competitors and the basis for competition. Regardless of the definition of strategy, or the many factors affecting the choice of corporate or competitive strategy, there are some fundamental questions that need to be asked and answered. These include:
Related to Mission and Vision
Related to General Strategy
Related to Corporate Strategy
Related to Competitive Strategy
Answers to these questions provide fundamental choices and options that comprise a business strategy and drive marketing function level decisions and goals which in turn influences the other functional strategies - i.e., production, HR, R&D, finance, etc., as well as what decisions a business management team, functions, and staff make every day.
Strategy is the scope and direction of the organization over the long term which achieves advantage for the organization through its configuration of resources, within a changing environment, to meet the needs of markets and to fulfill stakeholders' expectations" (Johnson & Scholes, 2002). A company's strategy is typically a combination of (1) planned - deliberate and purposeful actions and (2) emergent - as-needed reactions to unanticipated developments and fresh competitive pressures. The strategy statement describes what the organization's competitive game plan will be.
Strategies are the statements of how an organization is going to achieve its mission and realize its vision. A company's strategy concerns how to:
- grow the business,
- satisfy customers,
- out-compete rivals,
- respond to changing market conditions,
- manage each functional piece of business,
- achieve financial and strategic objectives.
The how of strategy tend to be company-specific, customized to a company's own situation and performance objectives.
A strategy statement communicates the company's intended strategy to everyone within the organization. A well written strategy statement will help employees and the organization to understand their roles when executing the company's strategy. Mixing the deliberate and emergent strategies in some way helps the organization to control its course while encouraging the learning process. The statement consists of three (3) components objective, scope, and competitive advantage.
- Objective - The Objective defines the ends that the strategy is designed to achieve within a specific time frame. Objectives are the "ends," and strategy is the "means" of achieving them. The strategic objective is the single, specific objective that will drive your organization. This must not be confused with the company's vision, mission or values. The objective must be specific, measurable and time bound. It must be a single goal (i.e., growth or profitability), although subordinate goals may follow from the strategic objective.
- Scope - The Scope is the domain of the business - the part of the business landscape in which the company will operate. The company's scope revolves around three (3) dimensions - the target customers, location and products. The scope must emphasize where the business direction and focus will go.
- Competitive Advantage - The Competitive Advantage is the essence of your strategy. It determines what you will do differently or better than the competition to achieve your objective. This component describes your strategies on how and why you will succeed and what makes you different from your competitors.
Defining the objective, scope and competitive advantage requires trade-offs which are fundamental to strategy. The strategy statement is a hypothesis of the means by which strategic goals i.e., sustainable growth, are achieved. Goals and objectives provide the milestones for measuring the success of the strategy in achieving the mission and vision. Goals are statements of what needs to be done to implement the strategy. Objectives are specific milestones for meeting a specified goal. A strategy has to be sound, implemented and executed to have value.
Fundamental Questions Driving Strategy-Making Decisions
Strategy in general is concerned with how particular objectives are achieved, with courses of action. Corporate strategy is concerned with choices and commitments regarding markets, businesses, products, services, and the very nature of the company itself. Competitive strategy is concerned with competitors and the basis for competition. Regardless of the definition of strategy, or the many factors affecting the choice of corporate or competitive strategy, there are some fundamental questions that need to be asked and answered. These include:
Related to Mission and Vision
- Who are we?
- What do we do?
- Why are we here?
- What kind of company are we?
- What kind of company do we want to become?
- What kind of company must we become?
Related to General Strategy
- What is our objective? What are the ends we seek?
- What is our current strategy, implicit or explicit?
- What courses of action might lead to the ends we seek?
- What are the means at our disposal?
- How are our actions restrained and constrained by the means at our disposal?
- What risks are involved and which ones are serious enough that we should plan for them?
Related to Corporate Strategy
- What is the current strategy, implicit or explicit?
- What assumptions have to hold for the current strategy to be viable?
- What is happening in the larger, social, political, technical, and financial environments?
- What are our growth, size, and profitability goals?
- In which markets will we compete?
- In which businesses?
- In which geographic areas?
Related to Competitive Strategy
- What is the current strategy, implicit or explicit?
- What assumptions have to hold for the current strategy to be viable?
- What is happening in the industry, with our competitors, and in general?
- What are our growth, size, and profitability goals?
- What products and services will we offer?
- To what customers or users?
- How will the selling/buying decisions be made?
- How will we distribute our products and services?
- What technologies will we employ?
- What capabilities and capacities will we require?
- Which ones are core?
- What will we make, what will we buy, and what will we acquire through alliance?
- What are our options?
- On what basis will we compete?
Answers to these questions provide fundamental choices and options that comprise a business strategy and drive marketing function level decisions and goals which in turn influences the other functional strategies - i.e., production, HR, R&D, finance, etc., as well as what decisions a business management team, functions, and staff make every day.
Strategy Implementation
Strategy implementation is a stage in the strategic management process. It provides the connecting loop between strategy formulation and strategy execution and control. It is a continuous process of closing the gap between where the company is, and what the future vision indicates it wants it to be with respect to corporate strategy choices - capabilities, enterprise advantage, and business portfolio it wants; and business and competitive strategy choices - customers, value proposition and skills it has chosen to have. Technically, a strategy can never actually be fully implemented because every thing that was necessarily assumed when formulating the strategy - about customers, technology, regulation, labor market, competitors, and so on - is in a constant state of flux. There will always be a gap between where the company is, and what its strategies call for.
Strategy Implementation Process
Strategy implementation is key to any organization's survival; and requires the collaboration of everyone inside the organization, and on many occasions parties outside the organization. Strategy implementation is the responsibility of top, middle and lower/line managers focused turning strategic plans into reality in order to achieve strategic objectives by building capacity through projects and programs to strengthen the organization and close the strategic gap there by enabling the organization to better deliver value to customers and meeting stakeholders expectations. Strategy Implementation consists of all the decisions and action plans required to turn strategic choices into reality, and requires competencies such as leadership skills, precision planning, organizing of resources and activities, as well as motivation to ensure people's commitment to the new strategy. The activities may include:
Businesses may find that they have to perform further planning even during implementation.
The strategy implementation is the process to implement the strategies, policies, programs and action plans that allows a firm to utilize its resources to take advantage of opportunities in the competitive environment. The process is comprised of the following steps:
Step #1 - Evaluate and Communicate the Strategic Plan
Evaluate the strategic plan (strategic goals and objectives) and selected strategies with respect to the initiatives, budgets and performance objectives prior to distribution to areas of the organization responsible for implementation. The following are the sub-steps to be undertaken in this step.
Step #2 - Develop an Implementation Structure
Create a structure that will serve as a framework and guide the implementation and execution of strategies. The structure must be clearly defined with well established lines of authority and responsibility within the organization's "chain of command" structure. Each member of the organization must know who s/he is accountable to, and who s/he is responsible for. The development sub-steps include:
Step #3 - Develop an Implementation-Support Policies and programs
These are policies and procedures that would be employed in aid of strategy implementation. The policies help define the guidelines to how members of the organization should behave. This establishes the organizational culture - the overall atmosphere within the company, particularly with respect to its members.
Step #4 - Budgeting and Allocation of Resources
The focus of this step is to equip the managers, responsible for implementing strategy, with the tools and other capabilities to perform their tasks and functions. This step includes the following sub-steps:
Step #5 - Discharge of Functions and Activities
This step involves making the tactics operational and putting the strategies into action, aided by strategic leadership, utilization of participatory management and leadership styles. This involves actual performance of tasks and activities; as well as management providing leadership and controlling the performance of activities or tactics in various levels of the organization. Throughout this step, the organization should also ensure the following:
The results of accomplishments in this step #5 will be the input in the third stage of Strategic Management: "Strategy Evaluation"
Strategy implementation is a stage in the strategic management process. It provides the connecting loop between strategy formulation and strategy execution and control. It is a continuous process of closing the gap between where the company is, and what the future vision indicates it wants it to be with respect to corporate strategy choices - capabilities, enterprise advantage, and business portfolio it wants; and business and competitive strategy choices - customers, value proposition and skills it has chosen to have. Technically, a strategy can never actually be fully implemented because every thing that was necessarily assumed when formulating the strategy - about customers, technology, regulation, labor market, competitors, and so on - is in a constant state of flux. There will always be a gap between where the company is, and what its strategies call for.
Strategy Implementation Process
Strategy implementation is key to any organization's survival; and requires the collaboration of everyone inside the organization, and on many occasions parties outside the organization. Strategy implementation is the responsibility of top, middle and lower/line managers focused turning strategic plans into reality in order to achieve strategic objectives by building capacity through projects and programs to strengthen the organization and close the strategic gap there by enabling the organization to better deliver value to customers and meeting stakeholders expectations. Strategy Implementation consists of all the decisions and action plans required to turn strategic choices into reality, and requires competencies such as leadership skills, precision planning, organizing of resources and activities, as well as motivation to ensure people's commitment to the new strategy. The activities may include:
- Establishing Annual Objectives
- Formulation of Policies for execution of strategies
- Allocation of Resources
- Actual performance of tasks and activities
- Leading and controlling the performance of activities in various levels of the organization.
Businesses may find that they have to perform further planning even during implementation.
The strategy implementation is the process to implement the strategies, policies, programs and action plans that allows a firm to utilize its resources to take advantage of opportunities in the competitive environment. The process is comprised of the following steps:
Step #1 - Evaluate and Communicate the Strategic Plan
Evaluate the strategic plan (strategic goals and objectives) and selected strategies with respect to the initiatives, budgets and performance objectives prior to distribution to areas of the organization responsible for implementation. The following are the sub-steps to be undertaken in this step.
- Clarifying the organization's strategy - Usually, strategic choices selected for implementation are expressed as high-level statements that resonate with the board, and executive level management. Ensure the strategic choices are sound and described in statements that clearly communicates what top management wants and their expectation. The statements should be expressed in terms that middle-level and line management would understand; such as the products and services to offer and in which markets; what resources, capabilities, and competencies are needed to support these products and services; how to acquire or build these resources.
- Evaluate Strategic Plan and Choice - Evaluate the strategic plan (strategic choices) with respect to the initiatives, budgets and performance. This would include:
- Aligning the strategies with the initiatives - Check the strategies to ensure they are following the same path leading to the mission and strategic goals of the organization.
- Aligning budgets to the annual goals and objectives - This involves conducting financial assessments to identify budgetary issues that could impact the attainment of objectives, and ensure the budget provides sufficient support for it. In the event that there are budgetary constraints or limitations, they must first be addressed before launching fully into implementation mode.
Step #2 - Develop an Implementation Structure
Create a structure that will serve as a framework and guide the implementation and execution of strategies. The structure must be clearly defined with well established lines of authority and responsibility within the organization's "chain of command" structure. Each member of the organization must know who s/he is accountable to, and who s/he is responsible for. The development sub-steps include:
- Establish a linking or coordination mechanism between and among the various departments and their respective divisions and units. This is mainly for the purposes of facilitating the delegation of authority and responsibility.
- Formulate the work plans and procedures to be followed in the implementation of the tactics in the strategies.
- Determine the key managerial tasks and responsibilities to be performed and the qualifications required of the role who will perform them.
- Determine the key operational tasks and responsibilities to be performed, and the qualifications/role rtequired of the person who will perform them.
- Assign the tasks to the appropriate departments of the organization. Enacting the operations plan involves allocation of resources to carry out the actions in achieving the goals. The implementation of the Operational Plan requires management to regularly monitor achievement and exert control to reduce any variance from the plan
- Evaluate the current staffing structure, checking if you have enough manpower, and if they have the necessary skills and competencies to carry out the tasks. This may result in to some extent in reorganization or reshuffling of people. In some cases, this may also require additional training for current staff members, or even hiring new employees with the required skills and competencies. This sub-step provides the focus to address two questions about the people in the organization essential to effective strategy execution, such as: "Do you have enough people to implement the strategies?", and "Do you have the right people in the organization to implement the strategies?"
- Communicate the details to the members - Management should also define the lines of communication throughout the organization. Employees, even those on the lowest tier of the organizational hierarchy ("chain of command"), must be able to communicate with their supervisors and top management, and vice versa. Ensuring an open and clear communication network will facilitate the implementation process.
Step #3 - Develop an Implementation-Support Policies and programs
These are policies and procedures that would be employed in aid of strategy implementation. The policies help define the guidelines to how members of the organization should behave. This establishes the organizational culture - the overall atmosphere within the company, particularly with respect to its members.
- Establish Performance Tracking and Monitoring System - The tracking and monitoring system will provide the basis for evaluating the progress of the implementation of strategies, and monitoring the rate of accomplishments of results, or if they were accomplished at all. Define the indicators for measuring the performance of every employee, of every unit or section, of every division, and of every department. This may include establishing annual objectives that relate logically to the strategy's long-term objectives. This establishes the basis: for allocating resources; as a mechanism for evaluating managers; as the major instrument for monitoring progress towards achieving long-term objectives; and for establishing organizational priorities.
- Establish Performance Management (Reward and Recognition) System - Encourage employee involvement through a recognition and reward system that enables performance management. Ensure the reward structure has clear and direct links to the accomplishment of results which will be indicated in the performance tracking and monitoring system.
- Establish Information and Feedback System - Establish a system that will enable you to gather feedback and results data, that will be used for strategy evaluation later on.
- Communicate these policies and programs to the members of the organization.
Step #4 - Budgeting and Allocation of Resources
The focus of this step is to equip the managers, responsible for implementing strategy, with the tools and other capabilities to perform their tasks and functions. This step includes the following sub-steps:
- Allocate the Resources - Allocating resources to various departments depending on the results of financial assessments as to their budgetary requirements. Budgets are financial statements of the resources required to achieve a set of finite objectives or put into action a formulated strategy. Resource allocation as expressed in the budget needs to be carefully linked to strategy. BCG Product Portfolio Matrix is one of the tools that can be used to link resource allocation decisions to choice of strategy. Budgets can be classified into the following categories: Capital Budgets, Revenue Budgets, and Expenditure Budgets.
- Disburse Resources - Disburse the necessary resources to the departments, making sure everything is properly and accurately documented.
- Monitoring and Control - Maintain a system of checks and balances to monitor whether the departments are operating within their budgetary limits, or if they have gone above and beyond their allocations.
Step #5 - Discharge of Functions and Activities
This step involves making the tactics operational and putting the strategies into action, aided by strategic leadership, utilization of participatory management and leadership styles. This involves actual performance of tasks and activities; as well as management providing leadership and controlling the performance of activities or tactics in various levels of the organization. Throughout this step, the organization should also ensure the following:
- Continuous engagement of personnel training and reorientation.
- Enforcing the applicable control measures in the performance of the tasks.
- Evaluating performance at every level and identifying performance gaps, if any, to enable adjustment and corrective actions. It is possible that corrective actions may entail changes in policies, programs and structures established and set in earlier steps. Make these changes when necessary.
The results of accomplishments in this step #5 will be the input in the third stage of Strategic Management: "Strategy Evaluation"
Evaluating Implemented Strategy
Strategy evaluation ensures that all key supporting elements of the business systems including Measures and Rewards, Structures and Processes, Culture and People are aligned behind the chosen strategies and hinged on the mission, vision, values and critical success factors (CSF) of the organization. The evaluation and control process is concerned with defining, attaining, and presenting constructive information for reviewing alternatives to the analyzed action plan.
The evaluation method is comprised of the activities defined by the process steps below.
Evaluation Process Steps
The implementation evaluation method assists managers in deciding whether or not the chosen strategies are steering the organization in the right direction towards achieving the strategic objectives and mission, It provides an intuitive and model-driven approach to assess the execution feasibility of the chosen strategy implementation. The evaluation method allows an organization to take into consideration a lot of the points that can influence successful implementation before an ideal strategy can be implemented. It is important to note that for a given organization and business environment not all strategies are executable.
Strategy Implementation Challenges
Strategy Implementation is fraught with challenges as evidenced by the low percentage of strategies that are effectively implemented. Strategic gap analysis attempts to determine what a company should do differently to achieve a particular goal by looking at the time frame, management, budget and other factors to determine where shortcomings lies.
Factors Contributing to Effective Implementation
A number of drivers/factors that contribute to effective implementation have been identified in the literature (Floyd and Wooldridge 1992; Beer and Eisenstat 2000; Rapert, Velliquette, and Garretson 2002; Dobni 2003; Crittenden and Crittenden 2008), these include:
[TBD]
Typically, the implementation gap - the gap between the strategic plan and its implementation - is caused by missing integrative links such as:
There are three (3) dimensions of strategy, from a strategy formulation perspective, that can be recognized in every real life strategy problem situation, namely: strategy process, strategy content, and the strategy context. Strategy process refers to the manner in which strategies come about. Strategy content is the actual strategy i.e., the action to be performed, and is a product of the strategy process. Context is the environment within which strategy operates and develops. It is the set of circumstances in and under which both strategy process and strategy content are determined. (DeWit & Meyer, 2004).
Strategy evaluation ensures that all key supporting elements of the business systems including Measures and Rewards, Structures and Processes, Culture and People are aligned behind the chosen strategies and hinged on the mission, vision, values and critical success factors (CSF) of the organization. The evaluation and control process is concerned with defining, attaining, and presenting constructive information for reviewing alternatives to the analyzed action plan.
The evaluation method is comprised of the activities defined by the process steps below.
Evaluation Process Steps
- Define the strategy to evaluate - Managers need to specify the implemented strategy and the progress results that need to be evaluated. Such results have to be objectively measurable and consistent; and can be defined using goals modeling.
- Outline Predetermined Standards - Managers need to outline standards according to the chosen implemented strategy. These standards often consist of a tolerance of range which defines adequate variations.
- Obtain data to Map Out Onto Set Standards - Data to obtain consists of results from the actions taken on the chosen strategies.
- Measure Performance - Assess the performance of the mapped out data.
- Performance Match Standards -if the performance of the identified strategy achieves the standards within the tolerance range then the process stops here; otherwise, Take Corrective Action.
- Take Corrective Action - The performance measured does not achieve the standards; managers must take necessary actions to resolve and amend the implementation Process.
The implementation evaluation method assists managers in deciding whether or not the chosen strategies are steering the organization in the right direction towards achieving the strategic objectives and mission, It provides an intuitive and model-driven approach to assess the execution feasibility of the chosen strategy implementation. The evaluation method allows an organization to take into consideration a lot of the points that can influence successful implementation before an ideal strategy can be implemented. It is important to note that for a given organization and business environment not all strategies are executable.
Strategy Implementation Challenges
Strategy Implementation is fraught with challenges as evidenced by the low percentage of strategies that are effectively implemented. Strategic gap analysis attempts to determine what a company should do differently to achieve a particular goal by looking at the time frame, management, budget and other factors to determine where shortcomings lies.
Factors Contributing to Effective Implementation
A number of drivers/factors that contribute to effective implementation have been identified in the literature (Floyd and Wooldridge 1992; Beer and Eisenstat 2000; Rapert, Velliquette, and Garretson 2002; Dobni 2003; Crittenden and Crittenden 2008), these include:
- Clear strategies and strategic focus -
- Cross-functional integration
- Support from senior management
- Good Communications
- Strategic consensus among members
[TBD]
Typically, the implementation gap - the gap between the strategic plan and its implementation - is caused by missing integrative links such as:
- Focus on Strategic Implementation - Strategic change in organizations is largely delivered through multiple projects and programs. The absence of an implementation process that is focused on a portfolio of strategy-fulfilling projects can result in an implementation gap.
- Common Top-Down Understanding - The firm's vision and strategic plan are generally created by top executives of the organization. The plan's implementation is carried out by middle and line management, and professionals and lower level employees through changes in operations and delivery of projects. Disconnects in both directions (top-down and bottom-up views) are often found to exist in the organization.
- Organizational Focal Point - Lack of organizational focal point that is responsible for overseeing the implementation of all the strategic projects. A vertical implementation rather than a cross-organizational implementation, invariably occurs. Delegating responsibilities to the functional level VPs is a common problem.
- Alignment Across Functions - This missing link relates to not having a cross-functional group that is responsible for strategic level decisions during implementation. The key here is making priority, resource, and other trade-off decisions among all the critically important projects.
- Executive Transition Mitigation - Frequent turnover of executives at VP level or above often result in dramatic implementation slowdowns and organizational conflicts.
- Feedback Loop - A missing link is a set of performance metrics and control reports that enable feedback, organizational learning, and continuous improvement over time. Sustaining competitive advantage over time makes continuous improvement mandatory.
There are three (3) dimensions of strategy, from a strategy formulation perspective, that can be recognized in every real life strategy problem situation, namely: strategy process, strategy content, and the strategy context. Strategy process refers to the manner in which strategies come about. Strategy content is the actual strategy i.e., the action to be performed, and is a product of the strategy process. Context is the environment within which strategy operates and develops. It is the set of circumstances in and under which both strategy process and strategy content are determined. (DeWit & Meyer, 2004).
Strategy Execution
Strategy execution occurs in the context of strategy implementation; it entails the decisions and activities undertaken at all levels in the organization involving top management through middle management, and front-line managers and workers to turn implemented strategy into commercial/social success. Strategy execution is one of the three (3) co-incident determinants of the strategic management process including strategy formulation and strategy implementation. Successful execution is the best possible results a strategy and its implementation will allow; and results in the organization's actual or realized strategy.
Strategy Execution Process
The Strategy Execution process is a decision-making process, and involves complex mix of decisions and actions on managing people, strategy and operations. The process steps include:
Strategy execution as a step-by-step process provides both a high level direction as well as some detail necessary for to capture strategy execution success. The execution process takes much longer period of time compared to formulation, making it harder for managers to focus. It is imperative to have well designed controls to enable managers to manage the process
Strategy execution occurs in the context of strategy implementation; it entails the decisions and activities undertaken at all levels in the organization involving top management through middle management, and front-line managers and workers to turn implemented strategy into commercial/social success. Strategy execution is one of the three (3) co-incident determinants of the strategic management process including strategy formulation and strategy implementation. Successful execution is the best possible results a strategy and its implementation will allow; and results in the organization's actual or realized strategy.
Strategy Execution Process
The Strategy Execution process is a decision-making process, and involves complex mix of decisions and actions on managing people, strategy and operations. The process steps include:
- Visualizing the strategy - This helps users understand what the strategy is. One of the most pressing challenges in strategy management is understanding what the strategy is. An effective way to improve understanding is through visualization methods that illustrate the strategy in terms of its components and how they relate to each other. The goals network model of the strategy enables visualization and helps improve this understanding by illustrating both the important elements of the strategy and how each relates to one another and to end state.
- Measuring the strategy - Key elements of the visualized strategy are assigned easily understood performance measures (financial and strategic or health measures). The full complement of financial and strategic measures are organized into a performance dashboard, e.g., Balanced Scorecard, or some other framework, so the reader can determine that progress is being made towards the desired ends.
- Reporting Progress - Review the strategy regularly to determine if the strategy is producing results as opposed to controlling performance. As part of the regular reporting, leaders must make ongoing strategic decisions to keep the strategy current and on course.
- Monitoring Environment Factors - Management must remain vigilant, and assess the environment, and make decisions that correct and evolve the strategy as conditions change. It involves the decisions and activities the organization undertakes in order to turn the implemented strategy into commercial success. These decisions and activities encompass the thousands of decisions and actions taken every day by executive, middle and line managers, and employees acting according to information they may have, and their own self-interest as influenced by organizational culture, and constrained by organizational policies and procedures. The strategy execution decisions have to be timely. Timeliness refers to "when" in the evolution of changes in the organization the decisions are made, rather than how much time the decision maker has to make the decision.
- Identify Strategy Projects - Organizations may have scores, if not hundreds, of projects ongoing at any point; to get a firm grasp of the type and range of these projects the organization needs to organize all projects and udentify strateggy projects in particular to improve project-oriented strategy execution.
- Align Strategy Projects - Once projects are captured they must then be aligned to the strategies or goals for the organization. Assess all projects - either proposed or ongoing; only those projects that directly impact the strategy should be resources and continued.
- Managing Initiatives - The organization must develop a capability in project management in order to execute the strategy effectively. The full complement of projects in the organization should be coordinated and controlled by a project management office with the responsibility of also monitoring both progress and performance. Monitoring progress creates feedback about the performance of the strategy and its execution allowing organizations to make adjustments accordingly.
- Communicating Strategy - Leaders must communicate visualized strategy to the workforce that will help them understand not only what needs to be done, but why. It is difficult to execute a strategy when it is not well understood, or performance relative to it is not communicated.
- Aligning Individual Roles - Senior leaders must ensure that employees at all levels can articulate and evaluate their personal contribution towards achieving specific strategic goals.
- Rewarding Performance - After explaining the strategy and aligning the workforce to it, senior management institutes the incentives that drive behaviors consistent with the strategy.
Strategy execution as a step-by-step process provides both a high level direction as well as some detail necessary for to capture strategy execution success. The execution process takes much longer period of time compared to formulation, making it harder for managers to focus. It is imperative to have well designed controls to enable managers to manage the process
Strategy Execution System
Strategy execution system is comprised of the set of policies and subsystems that guide the decisions and inform management of activities the organization undertakes in order to turn the implemented strategy into commercial success. These decisions and activities encompass the thousands of decisions and actions taken every day by executive, middle and line managers, and employees acting according to information they may have, and their own self-interest as influenced by organizational culture, and constrained by organizational policies and procedures. These decisions and actions include decision areas such as:
Most organizations have management systems that support parts of a strategy management system, such as strategy planning, budgeting, HR planning, or performance reporting. These systems typically function as silos and lack the required overarching capability to integrate and align the vital strategic management and operations management processes needed successful strategy execution.
To enable effective interplay between strategic management and management of value creation and delivery processes strategy execution system provides an integrated model of strategy (strategy content) as a goals model with implementation and execution refinement and elaboration of the strategy-making goal model.
Execution demands ownership at all levels of management and workers at customer touch points. People must commit to and own the process and actions to control effective execution.
Strategy execution system is comprised of the set of policies and subsystems that guide the decisions and inform management of activities the organization undertakes in order to turn the implemented strategy into commercial success. These decisions and activities encompass the thousands of decisions and actions taken every day by executive, middle and line managers, and employees acting according to information they may have, and their own self-interest as influenced by organizational culture, and constrained by organizational policies and procedures. These decisions and actions include decision areas such as:
- Establishing Annual Objectives - These represent the basis for allocating resources; provide primary mechanism for evaluating managers; the major instruments for monitoring progress towards achieving long-term objectives; establishes organizational, divisional and departmental priorities.
- Setting goals
- Prioritization of goals and objectives
- developing plans for the business
- Continuous allocation of resources - to perform selected organization actions (i.e., projects such as marketing campaigns, product development, strategic initiatives to develop assets, or individual development capability). Resource allocation as expressed in the budget needs to be linked to strategy
- Establishing the right incentives
- Manage initiatives and projects - Prioritize initiatives and projects to drive resource allocation; monitor and evaluate performance.
- Monitoring progress
- Evaluating performance and Change
Most organizations have management systems that support parts of a strategy management system, such as strategy planning, budgeting, HR planning, or performance reporting. These systems typically function as silos and lack the required overarching capability to integrate and align the vital strategic management and operations management processes needed successful strategy execution.
To enable effective interplay between strategic management and management of value creation and delivery processes strategy execution system provides an integrated model of strategy (strategy content) as a goals model with implementation and execution refinement and elaboration of the strategy-making goal model.
Execution demands ownership at all levels of management and workers at customer touch points. People must commit to and own the process and actions to control effective execution.
Performance Evaluation and Control
Performance Evaluation entails the process of evaluating the performance of a strategy, reviewing new developments and initiating corrective action to make adjustments in long-term direction, objectives, strategy, or implementation in light of actual experience, changing conditions, new ideas, and new opportunities. Strategy evaluation involves the assessment of performance measures collected through monitoring of projects and programs to determine the effectiveness of a strategy in meeting strategic objectives.
Evaluation is about being open to continuing feedback and adjusting your program(s) accordingly. Strategic evaluation can help to assess whether the decisions match the intended strategy requirements. The three main types of evaluation methods are goal based, process based and outcomes based. Goal based evaluations measure if objectives have been achieved. Process based evaluations analyze strengths and weaknesses.
Strategic control involve actions that may include performance measurements, monitoring, consistent review of internal and external issues and factors, and making corrective actions when necessary.
Performance Measurement System
Any effective evaluation of the strategy begins with defining the parameters to be measured; these parameters should mirror the goals set in the direction setting stage of the strategic management function. To evaluate performance, firms' need to establish a set of "desired" outcomes as well as the metrics they will use to monitor how well their organizations delivered against those outcomes. Those outcomes may include: achieving certain levels of productivity, revenues, profits, market share, market penetration, customer satisfaction, etc.
Review Process
The review process relies on a system of measures such as provided by the Balanced Scorecard of metrics to guide review decisions. The review process may be formal periodic reviews or informal, however it is the style and openness of the review process that makes all the difference whether the organization will:
The review meeting can be a control tool as well as problem-solving session where the organization examines what it has learned since the last review, with data (the metrics), that serves as a basis for ongoing adjustments for even better performance. These adjustments are in the form of how resources should be allocated, and how people in the organization will use their time. Determine your progress by measuring the actual results versus the plan.
Monitoring
Monitoring internal and external factors to identify issues will also enable you to react to any substantial change in your business environment. Effective and ongoing monitoring provide organizations early signal that a strategy and/or plan (strategic, tactical/action, and operational) are failing. Monitoring of plans, activities, and results provide information for future action.
Monitoring Premises and Assumptions
These are planning premises and assumptions established early on in the strategic planning process and act as a basis for formulating strategies. The premise control app has been designed to check systematically and continuously whether or not the premises set during the planning and implementation processes are still valid. It involves the checking of environmental conditions. Premises are primarily concerned with two types of factors:
Monitoring Strategic Thrusts and Milestones
Monitoring strategic thrusts and milestones provide an additional source of feed forward information. Implementation control is designed to assess whether the overall strategy should be changed in light of unfolding events and results associated with incremental steps, and actions that implement the overall strategy.
Strategic Surveillance
Monitoring a broad range of events inside and outside the company that are likely to threaten the course of the firm’s strategy is necessary to safeguard the established strategy in a continuous way.
Management Corrective Actions
Managers can use the scorecard information to control organization performance in the following ways:
This involves assessing a firm's effectiveness which may happen at the end and beginning of the planning cycle since the information provided is the input needed for the next cycle.
Performance Evaluation entails the process of evaluating the performance of a strategy, reviewing new developments and initiating corrective action to make adjustments in long-term direction, objectives, strategy, or implementation in light of actual experience, changing conditions, new ideas, and new opportunities. Strategy evaluation involves the assessment of performance measures collected through monitoring of projects and programs to determine the effectiveness of a strategy in meeting strategic objectives.
Evaluation is about being open to continuing feedback and adjusting your program(s) accordingly. Strategic evaluation can help to assess whether the decisions match the intended strategy requirements. The three main types of evaluation methods are goal based, process based and outcomes based. Goal based evaluations measure if objectives have been achieved. Process based evaluations analyze strengths and weaknesses.
Strategic control involve actions that may include performance measurements, monitoring, consistent review of internal and external issues and factors, and making corrective actions when necessary.
Performance Measurement System
Any effective evaluation of the strategy begins with defining the parameters to be measured; these parameters should mirror the goals set in the direction setting stage of the strategic management function. To evaluate performance, firms' need to establish a set of "desired" outcomes as well as the metrics they will use to monitor how well their organizations delivered against those outcomes. Those outcomes may include: achieving certain levels of productivity, revenues, profits, market share, market penetration, customer satisfaction, etc.
Review Process
The review process relies on a system of measures such as provided by the Balanced Scorecard of metrics to guide review decisions. The review process may be formal periodic reviews or informal, however it is the style and openness of the review process that makes all the difference whether the organization will:
- quickly seek effective course adjustments
- seek excuses or praise with little real direction change
- ignore much of the scorecard (system of measures)
The review meeting can be a control tool as well as problem-solving session where the organization examines what it has learned since the last review, with data (the metrics), that serves as a basis for ongoing adjustments for even better performance. These adjustments are in the form of how resources should be allocated, and how people in the organization will use their time. Determine your progress by measuring the actual results versus the plan.
Monitoring
Monitoring internal and external factors to identify issues will also enable you to react to any substantial change in your business environment. Effective and ongoing monitoring provide organizations early signal that a strategy and/or plan (strategic, tactical/action, and operational) are failing. Monitoring of plans, activities, and results provide information for future action.
Monitoring Premises and Assumptions
These are planning premises and assumptions established early on in the strategic planning process and act as a basis for formulating strategies. The premise control app has been designed to check systematically and continuously whether or not the premises set during the planning and implementation processes are still valid. It involves the checking of environmental conditions. Premises are primarily concerned with two types of factors:
- Environmental factors from PESTEL Analysis for example, inflation, technology, interest rates, regulation, and demographic/social changes.
- Industry factors from Five Forces Analysis and Industry Analysis for example, competitors, suppliers, substitutes, and barriers to entry.
Monitoring Strategic Thrusts and Milestones
Monitoring strategic thrusts and milestones provide an additional source of feed forward information. Implementation control is designed to assess whether the overall strategy should be changed in light of unfolding events and results associated with incremental steps, and actions that implement the overall strategy.
- Monitoring Strategic Thrusts (new or key strategic programs) is useful in enacting implementation controls focused on (1) Early agreement in the planning process on which thrusts are critical in the success of the strategy or of that thrust; (2) Use stop/go assessments linked to a series of meaningful thresholds (time, costs, research and development, success, etc.) associated with particular thrusts.
- Milestone Reviews - Milestones are significant points in the development of a program, such as points where large commitments of resources must be made.
Strategic Surveillance
Monitoring a broad range of events inside and outside the company that are likely to threaten the course of the firm’s strategy is necessary to safeguard the established strategy in a continuous way.
Management Corrective Actions
Managers can use the scorecard information to control organization performance in the following ways:
- Investigating on a regular basis what has been achieved, and what has not.
- Implementing corrective action where tasks are not achieved, or achieved on time.
- Checking that resources will be available when needed.
- Supervising, supporting and motivating the people of the organization to ensure tasks are undertaken.
- Adjusting the operational plan if there is a need.
- Reporting problems to superiors, e.g., directors, committee personnel, the Board members of the organization.
This involves assessing a firm's effectiveness which may happen at the end and beginning of the planning cycle since the information provided is the input needed for the next cycle.
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