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Making Strategy Execution a Competitive Advantage

By Dr. David P. Norton

July 12, 2006

Editor's note: The following is an excerpt from Making Strategy Execution a Competitive Advantage, an original research paper sponsored by Cognos, an IBM company, and conducted by the Balanced Scorecard Collaborative. The findings were presented by the author, Dr. David P. Norton, at the recent Cognos Finance Forums. Dr. Norton is an advisor to the Cognos Innovation Center for Performance Management™

In too many enterprises, the Strategy Management process – which is intended to integrate the organization's many activities – has become a set of siloed disciplines that suboptimize performance within each function. Little wonder, then, that 9 out of 10 organizations fail to execute their strategies.

Best practice in strategy management

To implement strategic initiatives effectively, a firm must communicate the strategy to everyone in the organization – so that each part of the enterprise (HR, IT, marketing, and so forth) can develop its own strategies that align with the high-level strategy. All of this requires a formal Strategy Management process. And the companies that achieved outstanding results in our study have established just such a process.

Among companies that have achieved outstanding performance, 76% report managing a limited number of key strategic initiatives, while just 46% of companies that have not achieved outstanding performance manage their strategic initiatives in a disciplined way. There are similar differences between winners and losers on six additional Strategy Management processes:

1. Strategy measurement
2. Strategy updating
3. Strategy review meetings
4. Strategy communications
5. Support-unit alignment
6. Best-practice sharing

The message? Successful companies have established these seven Strategy Management processes roughly twice as extensively as less successful enterprises.

Technology: the potential and the reality

Of the barriers to Strategy Execution generally faced by organizations – including inadequate leadership, organizational silos, disjointed processes, and misaligned technology – the companies we surveyed identify technology is the least formidable. That's good news for firms seeking to use technology to strengthen their execution ability. However, many of the firms we surveyed acknowledged that they're not yet using IT's full potential to support Strategy Execution.

For example, only 25% of our respondents said they use an integrated Corporate Performance Management platform to report strategic performance. Most use simpler tools such as spreadsheets and presentation software. In addition only 17% of them said they use technology to integrate strategic reporting with budgeting.

Yet these same companies maintain that they intend to make greater use of technology in the future. For instance, 75% of them see themselves operating in an integrated CPM platform within the next year or two. And 25% anticipate moving to more sophisticated networking of spreadsheets. Moreover, 83% of them understand the importance of linking budgeting to strategy and financial forecasting to analytic feeders.

Getting started

For companies just beginning their journey toward Strategy Execution mastery, it's vital that leaders understand that the process takes time – and that it must begin with the mobilization stage. Though mobilizing is the most obvious starting point, it can also prove the most difficult part of the journey. For this reason, we recommend laying a solid foundation for mobilizing before tackling the later stages. The following steps can help:

• Build executive awareness: Enterprise leaders expose the executive team to a "new way of managing" – building awareness through conferences, assigned readings, in-house training, and visits to other organizations that have advanced farther toward effective Strategy Execution.
• Assess the company's strategic readiness: Leaders take stock of the company's current Strategy, Resource, and Key Process Management-asking, "What formal management processes do we have in place for each of these arenas? What processes should we change, remove, or add? What supporting technologies are we currently using? How well are these technologies working for us? Which technologies should we consider jettisoning, changing, or adding?"
• Lay out a roadmap: Leaders clarify strategic themes and assign a team to be accountable for each. They also identify strategic initiatives and required investments, define metrics and targets for each strategic initiative, and design mechanisms for reviewing progress and harvesting benefits.
• Create a Strategy Execution team: Leaders assemble a team dedicated to Strategy Execution. The team comprises members from different functions who are accountable for strategic themes that cross varied parts of the organization. The team establishes mechanisms for formulating, reviewing, revising, and communicating strategy.

By establishing a firm foundation for mobilization through the above four practices, organizations can improve their chances of progressing successfully through the phases of the Strategy Execution maturity process. As many companies have discovered, the benefits make the wait more than worthwhile.

Find Out More HBR Exceprt: The Office of Strategy Management, by Kaplan and Norton Free online assessment from Cognos and Deloitte Cognos Innovation Center for Performance Management™

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