Strategy Execution – Techniques for Managing the Future

By Bill Barberg, President, Insightformation, Inc.

The role of strategy and the importance of strategy execution grow more important with each passing year. The rapid pace of change, increasing competition, globalization, and new opportunities made possible by technology all contribute to the need for executives to be able to effectively develop, communicate and manage the execution of organizational strategy.

Studies have shown that even when strategies are well-defined, most organizations fall short when it comes to execution. One key reason for this, I believe, is that organizational leaders are usually not equipped with the appropriate tools for strategic management. While tools for managing operational performance are certainly useful, they are fundamentally different from tools optimized for strategic management.

Managing Strategy is Different from Managing Operations
Michael Porter, Harvard’s highly-respected strategy guru, notes: “Operational effectiveness and strategy are both essential for superior performance… but they work in very different ways.” Dr. Robert Kaplan and David Norton, co-creators of the Balanced Scorecard methodology, start their fifth book, The Execution Premium, with the statement that “Managing strategy differs from managing operations.” Because of the differences, it should not be a surprise that the performance management tools for operations are different from those ideally-suited for strategic management.

Operational performance management is generally characterized by monitoring, detecting exceptions and analyzing data to gain insights for improvement. The common metaphor of a “dashboard” is well-suited to operational management. A dashboard in a vehicle tells you things like how fast you are going, how much fuel you have in the tank and the speed at which your engine is running. Operational management systems are often tied into large quantities of data generated by the operations of the organization. Tools to easily query and analyze this data can enable leaders to better understand the past, but relying on operational analysis and monitoring as the only lens for viewing performance is like trying to drive while looking only through a rear-view mirror.

In contrast, strategic management puts the emphasis on making choices about the future and aligning changes to achieve the desired objectives. To continue the automotive analogy, strategic management tools are like a GPS navigational system and the steering wheel. You enter your desired destination into the navigation system, and it helps map out the journey to get you there. The steering wheel then allows the driver (the executive) to implement the strategy by guiding the direction of the vehicle (or organization) to follow the strategy.

Different Questions and Capabilities
The question of “How are we doing?” is a sensible operational question to ask. Answering that question can require access to a wide variety of data sources to give a complete answer. Analytical questions, such as “How did we perform last month?” or “Where were the problem areas” or “Which were our most profitable customers?” can require even more sophisticated data integration to yield valuable insights. For these types of operational performance management questions, the key capabilities of software usually focus on the ease and power for accessing, integrating, displaying and analyzing data.

The questions at the heart of strategic management are usually not calculated from historical data, nor are they answered by real-time operational monitoring. Instead, they focus on the future, asking “Where are we going?” and “What changes will we need to make to get there?” The major challenge in strategic management is not data integration and presentation, but the alignment of people, decisions, innovations and process improvements that will allow the obstacles to be overcome and the dependencies to be addressed so that the organization can get from its current state to the desired state. C. K. Prahalad and MS Krishnan in their recent book, “The New Age of Innovation” remark that in this dynamic environment, “foresight, not hindsight, is of value.” (p. 84) The foresight of an individual is valuable. But, an even more valuable collective foresight can emerge when an eclectic mix of people understand and refine a roadmap for the future.

The capabilities needed to support strategic management are not primarily technical. Instead, they are softer skills and processes for engaging employees at all levels to collaborate, identify obstacles and opportunities and collectively map out the myriad of changes that will result in achieving the desired outcomes. A leader’s ability to orchestrate these changes will become a critical factor in the long-term success of the organization. Art Kleiner, the Editor-in-Chief of Booz Allen Hamilton’s magazine, Strategy+Business summarized it well in the Fall 2007 issue: “In both the public and private sectors, the ability to put disparate pieces together has been undervalued in the past, but henceforth it will probably be one of the most important skills for executive leaders to have.” The role of technology should be to support that process and provide an efficient way to share and refine the information.

Making Complexity Manageable
If you look at strategy at a high-enough level, it can appear simple and elegant. The CEO of a manufacturing company may declare that the company is shifting from manufacturing commodity products to creating customized solutions. Or, a hospital executive may inform the employees and doctors that the new strategy is based on establishing three Centers of Excellence where the hospital will provide measurably superior outcomes and higher efficiency. Even if these strategies were brilliant and even if we can assume that the employees understand and agree with the strategies, there is still a great deal of complexity in executing those changes.

Consider the many different changes that the hospital would need to address to achieve the strategic transformation to the envisioned Centers of Excellence:

• New process flows;
• New IT capabilities;
• Accounting changes;
• New leadership roles;
• New clinical protocols;
• Changed vendor relationships;
• Facilities remodeling;
• New job descriptions;
• Different partnering relationships;
• Resource allocation and budgeting changes;
• New recruiting strategies;
• Public Relations and marketing changes;
• Changes in employee development and training; and on and on.

If you look at the “softer” changes like attitude and culture, the list of changes could be much longer. For each topic in that list, there would be multitude of more specific changes that would ideally occur. To achieve the potential that the strategy – the improvements in clinical outcomes, efficiency gains, and market penetration – the number of detailed changes that would ideally take place is staggering. The number of interdependencies is vast. For change in one area to be successful, several others may be required. It is probably safe to say that the complexity of most large organizations is such that no single person really understands all the details that transformational strategy execution would entail. Good strategic management tools structure the collective understanding of an organization so that each person can view the subset of the strategy that is most relevant to them at a level of detail that is not overwhelming.

Strategy Maps and Cascading Objectives
One of the most powerful strategic management tools for enabling and managing strategy execution is the “Strategy Map.” This tool grew out of Kaplan and Norton’s work around the Balanced Scorecard methodology as a way to visually depict the core logic of a strategy. A strategy map is typically structured with four or five “perspectives” that are organized to show a cause and effect logic going from bottom to top. The classic Balanced Scorecard perspectives suggested by Kaplan and Norton are Financial, Customer, Internal Process and Learning & Growth. These can work for most for-profit organizations. The themes consist of the primary areas of change that make up the strategy. Each theme should consist of a series of strategic objectives linked though cause and effect logic. (See Figure 1)

Strategy Maps become even more powerful when they are cascaded down multiple levels to further identify the objectives that will contribute to the accomplishment of the higher level objectives. Through the process of cascading, the details of strategy execution can be defined in a structured – yet flexible – way. The cascaded objectives then provide a framework for strategic measures and a rationale way to prioritize projects based on the way they contribute to the execution of strategy. As the cascading continues, and as supporting detail for the objectives is added, along with measures, targets, and initiatives, the amount of information contained in a strategic management system can grow significantly. Software designed to manage this information can greatly streamline the process of developing and deploying a strategy map-based Balanced Scorecard system.

The Role of Technology
When the Balanced Scorecard (BSC) is seen as a measurement tool, then the role of technology is often seen primarily as the mechanism for integrating data, crunching numbers and displaying results in visually appealing ways. When the BSC is seen as a framework for harnessing and aligning the energy, creativity and insights of an engaged organizational team, then technology plays a different role. The value of the technology doesn’t come from flashy three-dimensional gauges or animated bar charts. Nor is the value primarily about analyzing large volume of clinical or financial data. (That is a valuable capability to have, but not at the heart of the process of improving alignment to improve strategy execution.) Instead, the role of the technology is to support the collaboration and communication that is central to the process we’ve describe in this article. To best accomplish that, the software should be well-aligned with the state-of-the-art practices of the BSC approach, and should include templates to help stimulate, structure and capture the valuable conversations that occur at each step of the journey. Those conversations help ensure clarity of intent and help enhance ownership that is needed for execution.

Having the Right Tools for the Task
A Chief Financial Officer wouldn’t dream of running the finances of an organization with out software that was specifically designed to support advanced financial management. The Human Resources leaders wouldn’t attempt to manage all the employee information without a well-designed Human Resources software package. Strategic management is a complex and information-intensive process. Having software that supports best practices in strategic management can allow organizations to significantly increase the likelihood of successful strategy execution.

Scott Heintzeman was CIO of Carlson Hospitality during a time when they implemented a highly-successful transformational strategy using strategy maps and the Balanced Scorecard methodology. He led the deployment of Insightformation’s InsightVision software as part of this process. Heintzeman explained the role of the software in an interview: “The software is very helpful because it allows us to manage all the numbers and all the information in a manner consistent with sound performance management processes. It provides us the opportunity to further refine our discipline. It would simply be impractical to manage all of this, manually through spreadsheets.”

Too often, leaders who want software to help with strategy execution end up selecting an operational dashboard and analysis tool. While these data-centric tools can provide valuable capabilities, they are not well-suited for supporting the processes and the strategic management practices that help organizations manage the future. Bob Beale, the President of Premier Property Management, LLC, explains his experience.

“We struggled for over a year trying to deploy another scorecard system. We got so focused on wrestling with data and technology that we lost sight of our strategy. Working with Insightformation has been an incredibly different experience. Strategy was at the heart of the discussions, and their processes and software are bringing the strategy to life. Our organization has never been so excited and energized about our future”

To learn more about strategic management practices and software, visit www.insightformation.com

About the Author
Bill Barberg, President of Insightformation, Inc., is a respected speaker, author and consultant in the area of strategic management and technology. He frequently at large national conferences sharing with CEOs, government leaders and IT leaders on how to improve alignment and strategy execution using leading-edge techniques and technologies. He is also a hands-on practitioner, working with city, county and state governments as well as healthcare, non-profit and corporate clients.

Click here to read the article by Bill Barberg that appeared in the first issue of Business Management in November 2004: "Powerful Information: the Importance of Business Intelligence and the Balanced Scorecard"