The job of strategy implementation and execution is to convert strategic plans into actions and good results. The test of successful strategy execution is whether actual organization performance matches or exceeds the targets spelled out in the strategic plan. Shortfalls in performance signal weak strategy, weak execution, or both. In deciding how to implement a new or revised strategy, managers have to determine what internal conditions are needed to execute the strategic plan successfully. Then they must create these conditions as rapidly as practical. The process of implementing and executing strategy involves:
Building an organization with the competencies, capabilities, and resource strengths to execute strategy successfully.
Allocating ample resources to strategy-critical activities.
Ensuring that policies and procedures facilitate rather than impede strategy execution.
Instituting best practices and pushing for continuous improvement in how value chain activities are performed.
Installing information and operating systems that enable company personnel to carry out their strategic roles proficiently.
Tying rewards and incentives directly to the achievement of strategic and financial targets and to good strategy execution.
Shaping the work environment and corporate culture to fit the strategy.
Exerting the internal leadership needed to drive implementation forward and to keep improving on how the strategy is being executed.
In implementing and executing a new or different strategy, managers should start with a probing assessment of what the organization must do differently and better to carry out the strategy successfully. They should then consider precisely how to make the necessary internal changes as rapidly as possible.
Like crafting strategy, executing strategy is a job for a company's whole management team, not just a few senior managers. Top-level managers have to rely on the active support and cooperation of middle and lower managers to push strategy changes into functional areas and operating units and to see that the organization actually operates in accordance with the strategy on a daily basis.
Building a capable organization is always a top priority in strategy execution; three types of organization-building actions are paramount: (1) staffing the organization— putting together a strong management team and recruiting and retaining employees with the needed experience, technical skills, and intellectual capital, (2) building core competencies and competitive capabilities that will enable good strategy execution and updating them as strategy and external conditions change, and (3) structuring the organization and work effort—organizing value chain activities and business processes and deciding how much decision-making authority to push down to lower-level managers and frontline employees.
Selecting able people for key positions tends to be one of the earliest strategy implementation steps. No company can hope to perform the activities required for successful strategy execution without attracting capable managers and without recruiting and retaining employees who give it a suitable knowledge base and portfolio of intellectual capital.
Building core competencies and competitive capabilities is a time-consuming, managerially challenging exercise that involves three stages: (1) developing the ability to do something, however imperfectly or inefficiently, by selecting people with the requisite skills and experience, upgrading or expanding individual abilities as needed, and then molding the efforts and work products of individuals into a collaborative group effort; (2) coordinating group efforts to learn how to perform the activity consistently well and at an acceptable cost, thereby transforming the ability into a tried-and- true competence or capability; and (3) continuing to polish and refine the organization's know-how and otherwise sharpen performance such that the company becomes better than rivals at performing the activity, thus raising the core competence (or capability) to the rank of a distinctive competence (or competitively superior capability) and opening an avenue to competitive advantage. Many companies manage to get through stages 1 and 2 in performing a strategy-critical activity but comparatively few achieve sufficient proficiency in performing strategy-critical activities to qualify for the third stage.
Strong core competencies and competitive capabilities are an important avenue for securing a competitive edge over rivals in situations where it is relatively easy for rivals to copy smart strategies. Any time rivals can readily duplicate successful strategy features, making it difficult or impossible to beat them in the marketplace with a superior strategy, the chief way to achieve lasting competitive advantage is to beat them by performing certain value chain activities in superior fashion. Building core competencies, resource strengths, and organizational capabilities that rivals can't match is one of the best and most reliable ways to achieve a competitive edge based on operating excellence.
Structuring the organization and organizing the work effort in a strategy-supportive fashion has five aspects: (1) deciding which value chain activities to perform internally and which ones to outsource; (2) making internally performed strategy-critical activities the main building blocks in the organization structure; (3) deciding how much authority to centralize at the top and how much to delegate to down-the-line managers and employees; (4) providing for internal cross-unit coordination and collaboration to build and strengthen internal competencies/capabilities; and (5) providing for the necessary collaboration and coordination with suppliers and strategic allies. Building an organization capable of proficient strategy execution entails a process of consciously knitting together the efforts of individuals and groups. Competencies and capabilities emerge from establishing and nurturing cooperative working relationships among people and groups to perform activities in a more customer-satisfying fashion, not from rearranging boxes on an organization chart.
A company's culture is manifested in the values and business principles that management preaches and practices, in the tone and philosophy of official policies and procedures, in its revered traditions and oft-repeated stories, in the attitudes and behaviors of employees, in the peer pressures that exist to display core values, in the organization's politics, in its approaches to people management and problem solving, in its relationships with external stakeholders (particularly vendors and the communities in which it operates), and in the atmosphere that permeates its work environment. Culture thus concerns the personality a company has and the style in which it does things. Very often, the elements of company culture originate with a founder or other early influential leaders who articulate the values, beliefs, and principles to which the company should adhere. These elements then get incorporated into company policies, a creed or values statement, strategies, and operating practices. Over time, these values and practices become shared by company employees and managers. Cultures are perpetuated as new leaders act to reinforce them, as new employees are encouraged to adopt and follow them, as stories of people and events illustrating core values and practices are told and retold, and as organization members are honored and rewarded for displaying cultural norms.
Company cultures vary widely in strength and in makeup. Some cultures are strongly embedded, while others are weak or fragmented. Some cultures are unhealthy, often dominated by self-serving politics, resistance to change, and inward focus. Unhealthy cultural traits are often precursors to declining company performance. In adaptive cultures, the work climate is receptive to new ideas, experimentation, innovation, new strategies, and new operating practices provided the new behaviors and operating practices that management is calling for are seen as legitimate and consistent with the core values and business principles underpinning the culture. An adaptive culture is a terrific managerial ally, especially in fast-changing business environments, because company personnel are receptive to risk taking, experimentation, innovation, and changing strategies and practices—there's a feeling of confidence that the organization can deal with whatever threats and opportunities come down the pike. In direct contrast to change-resistant cultures, adaptive cultures are very supportive of managers and employees at all ranks who propose or help initiate useful change; indeed, there's a proactive approach to identifying issues, evaluating the implications and options, and implementing workable solutions.
A culture grounded in values, practices, and behavioral norms that match what is needed for good strategy execution helps energize people throughout the company to do their jobs in a strategy-supportive manner, adding significantly to the power of a company's strategy execution effort and the chances of achieving the targeted results. But when the culture is in conflict with some aspect of the company's direction, performance targets, or strategy, the culture becomes a stumbling block. Thus, an important part of managing the strategy execution process is establishing and nurturing a good fit between culture and strategy.
Changing a company's culture, especially a strong one with traits that don't fit a new strategy's requirements, is one of the toughest management challenges. Changing a culture requires competent leadership at the top. It requires symbolic actions and substantive actions that unmistakably indicate serious commitment on the part of top management.
The more that culture-driven actions and behaviors fit what's needed for good strategy execution, the less managers have to depend on policies, rules, procedures, and supervision to enforce what people should and should not do. Healthy corporate cultures are grounded in ethical business principles, socially approved values, and socially responsible decision making. One has to be cautious in jumping to the conclusion that a company's stated values and ethical principles are mere window dressing. While some companies display low ethical standards, many companies are truly committed to the stated core values and to high ethical standards, and they make ethical behavior a fundamental component of their corporate culture. If management practices what it preaches, a company's core values and ethical standards nurture the corporate culture in three highly positive ways: (1) They communicate the company's good intentions and validate the integrity and above-board character of its business principles and operating methods, (2) they steer company personnel toward both doing the right thing and doing things right, and (3) they establish a corporate conscience that gauges the appropriateness of particular actions, decisions, and policies. Companies that really care about how they conduct their business put a stake in the ground, making it unequivocally clear that company personnel are expected to live up to the company's values and ethical standards—how well individuals display core values and adhere to ethical standards is often part of the job performance evaluations. Peer pressures to conform to cultural norms are quite strong, acting as an important deterrent to outside-the-lines behavior.
To be effective, corporate ethics and values programs have to become a way of life through training, strict compliance and enforcement procedures, and reiterated management endorsements. Moreover, top managers must practice what they preach, serving as role models for ethical behavior, values-driven decision making, and a social conscience.
